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Seanad Éireann debate -
Wednesday, 30 May 1979

Vol. 92 No. 3

Finance Bill, 1979 (Certified Money Bill): Committee and Final Stages.

Question proposed: "That section 1 stand part of the Bill."

Previously an amount was specified which determined what the allowance was to be and now the basis is specified in general terms. One does not have to change the amount because it goes up according to the allowance for people over 80 living alone. The allowance seems a very modest sum of money to be making a fuss about. Is it £95?

That has been unchanged for some time?

No. Up to last year there was a provision like this except that it limited the figure to the maximum of the old age non-contributory pension. Last year I changed that to the maximum of the old age contributory pension but had to do it by reference to the figure. This section now is amending that and is intended to provide the formula whereby whatever the maximum old age contributory pension, payable at the personal rate to persons of 80 years and upwards living alone, is fixed at each year will automatically be the figure under this section.

This will automatically give an allowance of £95.

The allowance will depend on the amount of the maximum contributory old age——

As I understand it, you could have any status you like but you come in at the income flowing out of this formula and you then get an allowance which happens to be £95.

That is correct.

Question put and agreed to.
Question proposed: "That section 2 stand part of the Bill."

Are we dealing with the tax bands, or maybe I should leave that for another day?

I would suggest another day, but that is a matter for the Senator.

There were points made that may have to be dealt with at some time.

Question put and agreed to.
Section 3 agreed to.
Question proposed: "That section 4 stand part of the Bill."

On section 4, the Minister referred to this section in his reply and I would agree with him that it is a welcome provision in that it grants additional relief for single parents, including widows and others, in respect of children. The amount of the allowance is entitlement to a deduction of £250. This still does not bring the widow into a comparable position with the married person. It still does not give a family allowance, which is what the widows' association is basically looking for as a minimum. The widow is in at least as difficult a position as she was when her husband was alive.

The point I am making is a very serious one, because if one looks at the table under section 3, the amount to be deducted for 1979-1980 as allowance for the widowed person is £1,185, so if you add £250 to that if the widow has a child it still does not bring her anywhere near the married tax allowance. This is one of the very strong points of the widows' association. It is one they have been campaigning on for a long time, and it is one for which they are getting increasing support. I wonder if the Minister could reply generally on the approach of the Government. This is not a propaganda point, it is a point for successive Governments. We have always treated widows very unfairly in our system. We have never really understood the very sharp financial and emotional impact and the general problem not only with coping with being a single parent with children but also the sudden loss of the income, and at times the apparent savagery of the deprivation of the full married allowance where that applies.

First of all I want to deal with the factual position under this section. The increase of £250 in the personal allowance and the new one-parent family allowance of £250 means that the increase in allowance where there is one child will be £478 after taking account of the reduction of £22 in the child allowance, which is compensated for by the increase in the social welfare child allowance. The fact that the allowance is in addition to all other allowances means that a person who qualifies for relief for what is called the housekeeper allowance of £165 will also be entitled to the new allowance. As I indicated in introducing the Second Stage there are circumstances in which two parents, the father and the mother, could get the benefit each of the special new allowance of £250.

On the general issue of widows, on last year's Finance Bill in the other House I spoke in considerable detail on this matter. I am not briefed at the moment to go over all of that, but I spoke in considerable detail of the various views that can be expressed in this matter and the historical development in relation to it. If Senators are interested I would refer them to the debate on the Finance Bill last year in the other House on Committee Stage.

In general, all I can say at this stage is this that frequently I get representations from single people and from an association representing single people, who object strenuously to a differentiation between their allowance and a widow's allowance. They do not object to the allowance in respect of children but they contend very strongly that there should be no differentiation between the single person's allowance and the widow's allowance as such, on the ground that they have to maintain a home just as a widow and have the same expenses. They say that the question of having children and dependants is another matter for which provision should be made in the income tax code, but they object strenuously to the difference.

I have resisted that approach for a number of reasons but I mention it to indicate that it is not universally accepted by any means that the allowance in respect of a widow should be the same as the allowance in respect of a married person as such. I am excluding dependants' allowances in all of this. I cannot undertake as an aim to reach a situation in which the widowed person's allowance would be the same as the married person's allowance. The reasons are complex and I do not want to go into them at this stage. As I have said, I tried to refer Senators who are interested to where they can find a very detailed discussion, not only by me but by other people on this whole issue, which I think they would find very interesting.

Question put and agreed to.
Question proposed: "That section 5 stand part of the Bill."

I would like to welcome this for a particular reason. I do not know what administrative difficulties there are. I know that administrative difficulties got rid of earned income relief. In so far as the PAYE problem has got to be dealt with by treating it as a separate kind to other incomes arising out of employment—I do not know what the intention is with regard to the timing—I would like to welcome it for that particular reason. I will make the point which I intended to make on Second Reading which is directly related to PAYE. Part of the trouble with regard to the pinching of PAYE is that you pay the rate which is applicable throughout the year until your income goes into the new rate, and then the adjustment comes to your aid. Very often this is bunched so that for a month or two when you move into a higher rate your income goes down in the very year that you got an actual income increase. A suggestion in regard to that would be when a person moves from one particular band to another, perhaps that element in his income should be subject to separate assessment and should lie outside the PAYE code. I take it this applies to all emoluments including Ministers, TDs, Secretaries, Senators and civil servants, that we are all going to get an allowance of £175 if the Minister makes this order.

That would be correct if the order is made. The section is conditional on an order being made to bring it into effect. In general, an effort is made to operate the PAYE system to avoid the kind of bunching that the Senator was referring to. This is not possible for technical reasons in regard to people who are on the high rate of tax. What happens there is that PAYE is applied but because the system cannot cope entirely with it there is a separate assessment on the amount of the income or emoluments that are not capable of being dealt with under the PAYE system. I do not regard this as satisfactory and, indeed, the people who are in receipt of the assessment, having thought that all their tax had been deducted, do not regard it as satisfacory either. It applies in the main only to people on the top rate of tax.

The Minister referred to this section in his opening speech and made the point that it was conditional on the national understanding or on some similar agreement. I made the point in my speech that, in fact, it would be a very significant stance if this special PAYE allowance were introduced now as a recognition of the very deeply felt sense of grievance of unfairness toward PAYE earners. We can argue and spend a lot of time on it and discuss to what extent this is justified. The fact is that it exists, that it is very understandable, and that a quarter of a million people are prepared to come out and march about it. I think it is undesirable to pass a section like this without having an idea of whether it will be implemented this year or whether or not the Minister will make an order. I would like to ask the Minister what his present intentions are in relation to this section, whether it is going to be introduced in this particular year and also what the cost to the Exchequer would be of introducing this provision.

On the last point, the cost of granting the allowance is estimated to be £39 million in 1979. Senators will recall that in the national understanding it was stated that this allowance will operate in December provided, first, that the budgetary position is reasonably in line with the expectations and, secondly, that any funds needed for employment creation, which is a first priority, have been made available. That latter reference is primarly to the provision in the national understanding about a guarantee against a shortfall in the employment targets to which the employers and the Government were to contribute a sum of up to £10 million each.

The first condition, that the budgetary position is reasonably in line with expectations, is a basic one, because clearly if there were substantially excessive pay claims being pursued and obtained it could so disrupt the budgetary position that the money would not be available to make this allowance to the PAYE taxpayers. Similarly, an excessive amount of industrial strife and unrest could also have a similar effect. However we may feel about equity or otherwise in PAYE or any other form of taxation, there is a basic matter with which we are faced, and that is that for any allowances or assistance of any kind the money has to be found. It would be quite unrealistic to think in terms of an allowance of this kind in a situation in which the budgetary expectations were totally out of line. There is no reason why the budgetary expectations should be out of line, certainly out of line to the extent that this allowance would be in doubt, unless we had either excessive pay claims being pursued and obtained and/ or an inordinate amount of industrial unrest.

The national understanding was designed to control both these items and, provided it is reasonably adhered to in the letter and the spirit, then these conditions will be satisfied. We have now a new situation, the national understanding having been rejected, and all I can say is that the conditions which were laid down in the national understanding, and in particular in the first one, still have the same relevance. The position arising since the national understanding was rejected is being considered by all the parties concerned. As the House is aware, the Government will have a meeting tomorrow with the employers' organisations and on Tuesday next with the Irish Congress of Trade Unions. I cannot say, at this stage what will emerge in the vacuum created by the rejection of the national understanding. I cannot say what exactly will happen in regard to an order being made under this section to activate this allowance. I can only indicate the conditions that were envisaged and why they were envisaged. We are faced with a different situation now and we shall have to consider the matter further.

Question put and agreed to.
Question proposed: "That section 6 stand part of the Bill."

It is unfortunate that the social insurance system has grown up as an altogether separate stem of taxation from the income tax code. This section, instead of trying to bring them together, is further separating them. I tried to understand the provisions in the Social Welfare Act which affected it. I am told that the contributions which by this section are to be disallowed have been determined under the social welfare code as the net of the tax benefit which would result from their allowance, if this section were not enacted. I should like to know how that was done. By disallowing these contributions—widows, orphans and old age pensions—under the original section 224, we are depriving a particular taxpayer of the relief at the highest applicable rate of tax in respect of the contribution. If he were being allowed them under the income tax code, they would come off his top-rated tax. How does the Minister for Social Welfare know the applicable rate in respect of every income taxpayer? These rates must be all different and they may change next year. I know there is some administrative advantage. I believe that there should be a consequential effect on the social insurance fund, but it does not seem to be apt, on Committee Stage of this Bill, to go into that. I would like to know if it is quite certain that no taxpayer is suffering loss, if he is entitled to get the largest contributions under the social welfare code in respect of these particular pensions, at the fullest rate, if we did not make this amendment.

The changes, which were effected as a result of which this section is introduced, arise out of the Social Welfare (Amendment) Act, 1978. In the course of the passage of that Bill through the House, the Minister for Social Welfare spelled out, in some detail, what was being done. Broadly, the position is that, whereas heretofore there was an income tax allowance in respect of part of the social welfare contribution, that allowance is being done away with, but there has been a compensating reduction made in the contribution to social welfare. I should explain that this arises because up to this year we had a flat rate social welfare contribution system. We have now introduced a pay-related system and— because one cannot anticipate what people are going to earn—when their contribution is pay related it is not possible to operate the kind of system we operated before. Therefore, we have to do it in this way.

I should say that, under section 224 of the 1967 Act, income tax relief was granted in respect of part of the former flat rate contributions. That part of the contribution which was referable to the provision of widow's contributory pension, orphan's contributory allowance, retirement pension, old age contributory pension and death grant, was allowable, the income tax deduction in the ordinary case being £64. Under the new scheme, the pay-related contribution has been calculated on a net basis, the contribution being 3.4 per cent rather than 3.9 per cent as it would have been on a gross basis. Since the contributions are now on a net basis the provisions for deductions for tax purposes are being discontinued.

Senator FitzGerald has raised the point of how you ensure that somebody who is on the top rate of tax gets compensation by way of reduction in his contribution to social welfare. The short answer is that you do not. The reduction in contribution from 3.9 to 3.4 per cent was worked out on an average basis. I should point out that the consequence is that there is greater relief for the less well-off and for the person who is not liable to tax at all, there is the maximum relief; the degree of relief is tapering to its lowest point at the level of the person who is in the highest tax bracket. I do not contend that there has been total and absolute compensation for each taxpayer. It has been done on an average basis.

Why was the deduction not made on the gross, the income tax payer making his deduction? His income may vary, or he might be paying into a private pension scheme.

It might be of some assistance if I refer the Senator to the report on this matter from an interdepartmental ad hoc working group representative of seven Departments and set up to study the introduction of fully pay-related social insurance, health and redundancy contributions. I quote from their report:

Under a pay-related scheme, the amount of the contributions, and in consequence the deduction for income tax purposes, would vary with income and the deduction could not be determined in advance. It would be very difficult for employers to give effect to a variable deduction. Accordingly, the group considers that direct tax relief should not be allowed in respect of any part of the pay-related social insurance contribution. However, the group recommends that the saving to the exchequer from not allowing relief on that part of the contribution referable to benefits which are chargeable to tax should be taken into account in determining the rate of contribution, thus in effect providing the appropriate relief indirectly.

That is, in fact, what was done.

Question put and agreed to.
Question proposed: "That section 7 stand part of the Bill."

I am not going to go on about this. What has been achieved is masterly, to the intent of the draftsman. Would it be possible to put into the fifth line after "on", "or in" a residence of the individual?

Sorry, would the Senator repeat that? In the fifth line?

Yes. "...proves that he incurred expenditure in respect of the labour cost of qualifying work carried out by a registered person in the qualifying period...." We must face the fact that there are a lot of people who would be delighted to work for a lot of other people and get incomes that they would be paid honestly by these other people. The people paying them would claim the allowances for paying them and get deductions, or the people receiving payment would pay tax on it. I would not flinch at that. Perhaps the Minister would think about that for next year.

The Senator raised a point in his Second Stage speech to which I did not refer. There are certain difficulties about that, which I am sure are obvious to the Senator. I think it is clear that if one were to provide, as suggested by the Senator in his Second Stage speech, that we would be providing primarily for either the well off or the very well off.

Well, this is going to be for the well off and the very well off.

Not necessarily. I admit it is not going to be for the very poor but it could be for people who certainly would not be regarded as very well off. Such people have, on occasions, to have certain improvement works and things like that carried out on their homes and they could benefit under this scheme. I am not ruling out completely the Senator's suggestion, but my immediate reaction is the one I have just said.

I just cannot see what particular virtue there is in encouraging a fellow to go and plant tulips in the garden when, if he went into the house, the woman could have a rest for a few hours. He could look after the baby. Why has he to be out dolling up the house or beautifying the garden and not doing simple human things like assisting—we must remember the spouse situation—the unfortunate man who is stuck for the day trying to look after the children. He would love to pay somebody but he cannot afford it. If he could get it off his tax he would do it and the person would be delighted to take the job. I think we could draft this one.

I shall give some thought to it, Senator.

Could I ask a question on this? If people doing a repair job amounting to £1,050 on their house apply for local authority and environment grants of £300 each and get the maximum, leaving a net payable of £450, will they be allowed that deduction of £450?

Would that be solely related to labour? I presume it would not. This relief is confined to expenditure in respect of labour, not materials. In the case that the Senator is speaking of, I presume that the total cost would include both labour and materials. Is the Senator's question related to that?

No. Take a total amount of more than £1,050, would there be an allowance of £450 for his proportion of the labour involved?

If I give the Senator an example, it might help to clarify the issue. Say the total expenditure on qualifying work is £1,500 and the grant from the Department of the Environment, being a maximum grant, is £600. The labour cost is 60 per cent of total expenditure, that would be £900. The proportion of the grant attributable to the labour cost would be nine-fifteenths of £600, which is £360. The net labour cost would be £540. The amount of that over £50 would be £490, £50 being the minimum. Therefore, the relief allowable is on a maximum of £450 in that case. Does that help the Senator?

Might I ask the Minister to define "a registered person"? Must the improvements be carried out by a firm of building contractors, or does this section apply to repair work carried out by a handyman?

Yes, it does apply to work carried out by a handyman. Indeed, quite a number of inquiries have been made by people who want to become registered persons and most of them are either very small businesses or single individuals. I would expect that they would be mainly the people concerned, although it is not confined to them. In general, larger firms would not be interested in this kind of work. The only object in the registration is to ensure that the persons who are receiving the money from the householder are accounting to the Revenue Commissioners for their income. If the Revenue Commissioners are to give an allowance in respect of the expenditure, naturally we want to ensure that those receiving the money are contributing their fair share to the exchequer. Might I also say that I did refer earlier to the point raised by Senator Lambert on this, in regard to the details in the schedule which look formidable but, in fact, will not be very formidable for the genuine householder and the genuine registered person or handyman.

Question put and agreed to.
Question proposed: "That section 8 stand part of the Bill."

The allowance for the contribution is very welcome. It is right that there should be some limitation on it, just as there is a like limitation in relation to life insurance. When you introduce these things, the same section affects the taxation of the receipts. It is a hard situation for somebody who is, at the moment, in a position of having made contributions which were not allowed and is in receipt of a pension, or annuity, which is now going to be taxed. I take it that a pre-1979 situation cannot be coped with in any way, because these deal with very difficult human situations. I do not actually know of any such cases.

There almost certainly are some. There have to be some.

There must be some. There cannot be too many, and in all those cases there must be difficulties. Might they not in some way be allowed to escape if, before the publication of the Bill they were in receipt of this benefit, or if a disability occurred, or whatever? In that connection, could I mention that, while obviously, some avoidance would arise if we did not put a limitation on the income, perhaps there is not a great deal in this. In the case of insurance premiums where there is a similar limitation—7 per cent on the capital value is the maximum which is allowed—there is provision for a case of special terms where somebody's premium is loaded. In other words, at 7 per cent it prevents the avoidance, but if you exceed 7 per cent because of the health condition of the person who is insuring, that does not disallow the premium. If you have a case of somebody with a poor health record, who now persuades one of these companies to give him a permanent disability insurance and that poor health record element is the only reason for pushing the 10 per cent over the margin, should that not be allowed? There is language in section 152 which might be apt for this. Is it section 152? Perhaps I am thinking of the wrong one.

I take the Senator's point.

There is a definition of special terms there. That point can be dealt with in a later Act. The more important point is subjecting to income tax a receipt which, if I understand it correctly, is not at the moment subject to tax and where the contributions for it are not allowable, and where we have an actual situation of permanent disability which, at the moment, is being covered by this income. There must be cases, but I do not know of any. To suddenly impose an income tax in that situation is to impose it in a situation which is an unhappy one and where there could be no question of avoidance or anything else.

At the moment, as the Senator knows, benefits under permanent health benefit schemes are not taxable, unless they have been received for a full year prior to the year of assessment. In such circumstances, they are taxable at the moment.

So we are talking about a period of not a full year, a period which precedes the full year.

Yes. That, to some extent, limits the situation. Nevertheless, I can visualise that there could be hard cases. I want to point out, however, that this does not operate until 6 April 1980. It is intended, in the meantime, to have discussions between the Revenue Commissioners and the various insurance companies concerned. If we have such discussions, we would hope to operate this in a way which will take account of the genuine problems of people concerned with this, and at the same time, be able to avoid, or prevent the avoidance or use of this for tax avoidance purposes. That is the object of the discussions. I feel sure that, in such discussions, cases of difficulty will be highlighted by the companies concerned and I can assure the House that I am quite sympathetic to the problems that can arise here, although I do not profess to have an answer.

Whatever way we do it seems to produce anomalies, and I think that what we have done in the section, which is, broadly speaking, to say that any premium or any benefit received after 6 April 1980 will be, on the one hand, allowable for tax and, on the other, subject to tax. I do not suggest that that answers all the problems, but it seems to be less difficult than any other approach that has emerged so far. Nevertheless, I want to make it clear that I am quite sympathetic to the problems that could arise. If such problems appear, and they are highlighted for us and we can see that there are people affected adversely, I shall certainly try to ensure that we find a solution which will be in ease of people who would be suffering in this way. We have time to examine it and take that approach.

Question put and agreed to.
Section 9 agreed to.
Question proposed: "That section 10 stand part of the Bill."

This has been considerably improved since the original section was introduced. I just wondered whether the companies are happy with the language. I have underlined certain words here in the definition of "preferential loan":

made loans at arm's length to persons other than employees for the purpose of purchasing dwellinghouses for occupation by the borrowers as residences.

I take it the general intent of the refined definition is to exclude the cases of employees getting no better facilities than the company was making available to its customers——

Yes, that kind of thing.

——where the company is engaged in this kind of lending business. Does it take care of the insurance company situation, of which I am personally aware, where there is annexed to an insurance policy which I took out about the year 1902, something which entitles me to borrow from them at 6 per cent. That particular company is not in the business of lending money to companies for financing houses at all, but no doubt, has the practice of making loans to its employees. According to my view of this definition, any loans they would make to the policyholder would not be for the purposes of purchasing dwellinghouses but simply on the security, or on the footing, or in discharge of an obligation of the policy itself, entitling a policyholder to take a loan whenever he wants to, at 6 per cent. I just wonder whether, in companies, this business has been cancelled.

The intention was that, in such a case, where, on the face of it, a loan of that kind would be a commercial arm's length transaction, it would not be affected by this. We will have a look at it to see if it is. I am not sure whether the point the Senator has raised may, in fact, disclose that it would be caught. That was not the intention.

In regard to loans advanced by employers?

Yes, amongst other things. I should say that in such a case the person who has a loan at a preferential rate of interest will not be affected by this, unless the loan exceeds £20,000.

Question put and agreed to.
Question proposed: "That section 11 stand part of the Bill."

What kind of money are you going to get out of this? Senator Lambert referred to this as eliminating the poverty trap. I believe the Minister may have used such words today.

I will not deny the use of such words.

I have never had the courage to ask somebody what "poverty trap" means, but I take my courage in my hands and ask. Can somebody tell me what "poverty trap" is and how this helps people to get out of it if we are taxing them? It seems a funny way of stopping somebody from getting into a poverty trap.

I did not use the words "poverty trap" in relation to this, but I will endeavour to answer the Senator's question. In regard to the yield, I understand that some commentators have suggested that the yield might be about £50 million. That is not so. It is anticipated that the yield will be of the order of £13 million. Of course, it does not operate until April 1980. As I understand the use of the phrase, "poverty trap" in this context it refers to a situation in which people find themselves somewhat better off to be in receipt of social welfare benefits, with certain concomitant benefits that can arise, rather than to be working. I understand the phrase to mean that they are trapped into this category of poverty, depending on social welfare, and inhibited from getting out of it by going out to work because they are worse off if they go to work.

All the categories mentioned there, apart from maternity allowance, seem to be disasters of one kind or another, disability, unemployment, pay-related, deserted wives, injury and so on. Has this been thoroughly examined? I know £13 million is very nice to get in.

That is not the object of the exercise.

That is why I am asking the question. I presume that the £13 million is not the tax but the combination of the tax and the benefits which will not be taken up because people will go off those benefits?

It is the tax.

Then there will be claims on the Exchequer in consequence of the fact that these benefits will now be taxed?

There will be another figure added on to that £13 million? What will that figure be?

I cannot give the Senator that figure at the moment.

The characters involved, disabled, unemployed, deserted wives and mothers, will all be, as it were, whipped back into economic activity by virtue of this section.

Nobody whose income is below the tax threshold will be subject to tax. I will outline some of the things that have developed which have led to this, and that might help the House to understand it. Serious anomalies have resulted from the practice of disregarding for tax purposes certain short-term social welfare benefits. These anomalies are likely to be exacerbated following on the introduction of fully pay-related social welfare. For example, the maximum rates of unemployment and disability benefit, the flat plus pay-related rates, will now amount to almost £55 a week for a single male and £65 a week for a married man. As matters stand at present these payments are not regarded as income for tax purposes and no tax would be payable, whereas a single person on this level of income from any other source—for example, wage pension or investment income—could be paying almost £10 a week in tax. A married man, with a wife not working and no children, with an income similar to his social welfare recipient counterpart could be paying almost £6 a week in tax. There are other aspects of it, but that alone would probably indicate why we have to do something about it.

Question put and agreed to.
Section 12 agreed.
Question proposed: "That section 13 stand part of the Bill."

On the question of the taxing of farming profits generally, could the Minister tell the House what the revenue from this source was last year and what the anticipated revenue will be for this coming year?

The lowering of the threshold, together with the increase in the multiplier from £90 to £125 which is provided for in section 15, is expected to yield an additional £6 million out of a total increase in yield of £14 million. The balance of the additional yield is expected to arise from certain other factors. The other factors concerned are related to an increase in farm incomes. The carry forward of losses and capital allowances should now be at an end in a number of cases where they operated before. The purchase of unessential plant and machinery in order to avoid the tax charge presumably has some limitation. The multiplier used on the notional basis has been substantially increased. There is now a higher percentage of farmers on the accounts basis, and we have strengthened the staff of the tax district services and this should enable inspectors to scrutinise accounts to a greater degree. Of the £6 million I referred to attributable to the proposed changes, about £2 million is expected to come from the lowering of the threshold and about £4 million from the raising of the multiplier.

In gross terms what is the difference in the revenue from this source between the current year and the year we are dealing with 1979-1980?

Unfortunately, one has to remember when speaking of a yield from income tax that the income tax year is different from our financial year, which is the calendar year. The yield from farming tax in the calendar year 1978 was £8 million and in 1979 it is expected to be £16 million. The House will be aware of the fact that the Government have announced another system in relation to farming taxation which will operate in respect of 1980.

It is certainly easier from my point of view if the Minister is prepared to talk about the taxation of farmers generally rather than try to relate it to specific sections which are very technical. I should like to ask the Minister for an assessment of the position on the 2 per cent levy. I note that in today's Irish Independent there is a question about whether or not there is a loophole, if one likes to call it that, in relation to the food grain harvest and that perhaps as much as 70 per cent of this may escape the levy entirely because it is being retained by the farmers at home or stored in co-ops. Therefore, it is not coming within the system. I read that report in the Irish Independent and I wondered whether the Minister has had a chance to look at it and would like to comment on it?

I have not seen the report to which the Senator referred, but it would be better to raise that point on section 46 which deals with the levy. I will deal with it then.

Question put and agreed to.
Sections 14 to 16, inclusive, agreed to.
Question proposed: "That section 17 stand part of the Bill."

How does one set off a loss against general tax more than once?

We are trying to close a loophole but, at the same time, we are giving some relief in regard to setting off losses, something which does not exist at present.

Question put and agreed to.
Question proposed: "That section 18 stand part of the Bill."

This seems a funny one. Does this not cut out section 308? What does section 308 mean now with this proviso?

Section 308 of the Income Tax Act, 1967, provides that a person carrying on two or more trades may set off against the profits of one trade any loss incurred in the other. Where a new trade is set up the position is that under the commencement provisions the results of one year's trading forms the basis of assessment for more than one year. Where a loss is incurred in that situation and the trader is carrying on another trade or trades, that loss can be used as a set off for more than one year. This possibility is now being closed off by providing that section 308 will not operate in respect of a loss incurred in 1979-80 or any future year of assessment. Full relief in respect of the loss is, of course, available under section 307 which is being amended by section 17 of this Bill to provide for the granting of more immediate relief than would otherwise be the case.

Should section 18 be in the anti-avoidance section?

It is a chapter dealing with losses really, and some are closing loopholes and some are liberalising the situation. I should point out though that in addition it is open to the trader, under section 309, to carry forward the loss or any unrelieved portion of it against profits of future years.

Question put and agreed to.
Sections 19 to 21, inclusive, agreed to.
Question proposed: "That section 22 stand part of the Bill."

To repeat the question I asked last year on the equivalent section—I do not know whether the Minister was here; I am inclined to think he was not—how much tax is this section costing us? How much money is it costing the Exchequer to get what number of people into employment?

I cannot remember, but I have some recollection of a discussion on that point.

It would seem to be interesting to compare the cost by way of tax relief, how much employment comes out of it as distinct from the employment generated by giving out tens of thousands of pounds through the IDA, and so on.

I am afraid the answer is that we do not have any statistics on this yet.

Question put and agreed to.
Question proposed: "That section 23 stand part of the Bill."

I have a brief question which is more provoked by the Minister's explanation of this section when he was introducing it. He said that this change takes account of the fact that the inflationary pressures which gave rise to the introduction of stock relief have diminished considerably. I would have thought that the inflationary pressures, generally, are increasing. It is possibly my lack of understanding of the provision, but the inflation rate is going up alarmingly this year. Would the Minister like to clarify the position and say what his estimation of the present inflation rate is? It certainly is very substantially up on last year and on the beginning of this year. I, therefore, cannot quite understand how the inflationary pressures are lessening.

I have here the details of the inflation rate with reference to the Consumer Price Index. The relief was introduced as a temporary measure in 1975 and when it was introduced the CPI increase from February 1974 to February 1975 was 23.81 per cent. This section is extending the stock relief for accounting periods which ended in the year from 6 April 1978 to 5 April 1979. The rate of inflation for that year was 10.83 per cent, that is February 1978 to February 1979, which is less than half the rate which applied in 1974-75. The rate of inflation this year is not relevant for that reason. Since the Senator asked the question I should say that, as I indicated in my Second Stage speech, I believe that the targets we have set are attainable, subject to what I am about to say. The target in relation to inflation is to have it down to a 5 per cent rate at the end of the year. The qualification I want to add to that is that I think that the increase in the price of oil is going to make that very difficult of attainment. If one could exclude the effect of the oil price increase for calculation purposes at the moment, the target is attainable.

Before we wish it down to 5 per cent at the end of the year, can the Minister give me an indication of his assessment of what the inflation rate is running at at the moment, or the latest figures?

It depends. A person on one side of the House will take the quarter with the highest figure and annualise it. On the other hand, a person on the other side of the House, or, perhaps, outside it, might approach it somewhat differently and take it that the highest rate of increase is likely to have been in the first quarter.

Is it despite the oil price increase coming through now?

No, for this purpose I am leaving out the oil price. The second quarter should show some reduction and the second half of the year should show a downward trend. The Central Bank Report confirms the view that the underlying trend in inflation is not adverse. The factors which contributed to the increase in inflation in the first quarter were largely one-off situations. However, there is the consequence of the oil price increase. As I mentioned earlier, it is not possible to be quite accurate about this because the position has not been fully clarified. It would be reasonable to say that the consequence of the increase in the price of oil of itself, plus the consequence of its working its way through the economy, should lead to an increase over all in the consumer price index of something in the region of 1¼ per cent, roughly 1 per cent in respect of the oil itself and ½ per cent in respect of the consequential effects. That is all the information we have. Of course, I cannot say what is likely to be the ultimate situation in regard to oil prices by the end of the year.

Question put and agreed to.
Section 24 agreed to.
Question proposed: "That section 25 stand part of the Bill."

It is absolutely extraordinary putting in the definite article "the" where, perhaps, the indefinite could mean such a difference. I went back on the section and I could not see what it was for. I recognised that there is a difference between the definite article and the indefinite.

The Senator probably proposed it.

Question put and agreed to.
Section 26 agreed to.
Question proposed: "That section 27 stand part of the Bill."

Is this how this is done in Finance Acts, substituting sections for other sections; we do not repeal sections like we do in other statutes? If one substitutes section 25 for section 25, presumably one intends repealing section 25. If one repeals section 25 where is one in regard to payments made by the Minister for Labour under section 25, or which are preserved by the section from taxation, which is being repealed? Section 25 states that, payments under the Employment Premium Act, 1975, shall be disregarded for all purposes of the tax Acts and the enactments relating to corporation profits tax.

If one shoves that out the window, what is there to protect payments received under section 25 from taxation under the tax Acts? The Employment Premium Act, 1975 is not referred to in section 27 which is substituting a new section 25.

Section 25 of the Finance Act, 1976 provided for exemption in respect of payments made under the Employment Premium Act, 1975. That scheme no longer operates and the payments referred to were received out of that.

But payments were received under it.

I want to explain why there is a substitution. That section 25 was dealing with a similar scheme but that scheme has gone and a new scheme is substituted for it. That is why it was thought appropriate to put this section in, in place of the other one, dealing with a broadly similar situation. I am advised that under the Interpretation Act where a section is substituted in this way any rights acquired under the substituted section survive although the section is gone.

What is the section in the Interpretation Act?

I was afraid the Senator would ask that question.

Do we do much substitution of this kind?

I must confess that I am not familiar with this practice. I do not recall it off-hand.

If there are other provisions in the code entitling the Revenue Commissioners to send in officers to widows of deceased employers to get them to make statements and deliver information about all sorts of transactions, it is very important that any sums that were received and which were provided under the section as not to be taxable, should clearly retain that quality and character when a new section is substituted for that section.

I agree with the Senator.

Why not simply say: the following section shall be added to section 25 or 26? Why do we need to substitute it at all?

It could cause considerable confusion.

What state are we in at the moment?

Apart from any provisions of the Interpretation Act, the Senator would agree that any attempt to collect tax on payments made under the 1975 Act which have been declared to be free of tax would get a very short shrift in the courts.

Al Capone went to jail finally for breaking a posts and telegraphs law.

I am sure he broke it.

This might be the only thing that the Revenue Commissioners could get the unfortunate deceased widow under——

Surely the relevant section is that which applied when the payment was received.

I am sure there are cases of people who received moneys under that Act and who have not made a return yet. I want to be absolutely sure in regard to this. We are saying that we are substituting one section for another, but when I substitute one book for another, the other book is gone. Is that not usual?

Is the Senator suggesting that the previous section is completely wiped out as if it never had any effect?

As I explained, it is done in this way because the previous section was dealing with a somewhat similar scheme and therefore people may have become used to referring to that section when looking for the law on the subject. It is, in effect, the equivalent of a repeal of a section. The substitution of this section for the other one is the equivalent of repealing section 25.

That is what I thought.

Section 21 of the Interpretation Act provides:

Where an Act of the Oireachtas repeals the whole or a portion of a previous statute, then, unless the contrary intention appears, such repeal shall not—

(a) revive anything not in force or not existing immediately before such repeal takes effect, or (b) affect the previous operation of the statute or portion of a statute so repealed or anything duly done or suffered thereunder, or (c) affect any right, privilege, obligation, or liability acquired, accrued, or incurred under the statute or portion of a statute so repealed,

We are not repealing.

The force of the 1975 Act is spent.

But the last returns may not have been assessed yet.

I really think that the Senator——

I have made my point.

Question put and agreed to.
Sections 28 and 29 agreed to.
Question proposed: "That section 30 stand part of the Bill."

I should like to know what is the position of the precedent partner? What additional obligations is he under? It requires the agreement of all partners to agree the accounts; that is a normal partnership requirement. We already have section 70 of the Income Tax Act, 1967. I am not clear as to what additional obligation is cast. Is this endeavouring to put a partner in the same position for the purposes of going after the partnership as somebody in charge of a company would be?

It is really trying to put a partnership in the same position as a person, but there is a little more to it than that which perhaps I had better mention.

Section 174 of the Income Tax Act, 1967 deals with the situation where a person carrying on a trade or profession either fails to furnish an inspector with a statement of his profits or furnishes a statement with which the inspector is dissatisfied. In that situation an authorised officer is entitled under the section to call for the production of the accounts, books and records which would enable him to test the validity of the amount of profits returned. Because section 174 speaks of a person it can be argued that it does not extend to partnerships, and the present section is designed to remedy this. In 1965 special provisions dealing with the taxation of partnerships were introduced, and these are contained in Chapter III of Part IV of the Income Tax Act, 1967. Section 70, which is in that chapter, to which the Senator referred, imposes on the precedent partner of a partnership the obligation of furnishing the return of income on behalf of the partnership. It is proposed to amend that section by inserting two new subsections the first of which deals with the statements to be delivered by the precedent partner and the second of which imposes on him, the precedent partner, the obligation of furnishing the accounts and records so required under section 174 of the 1967 Act.

Question put and agreed to.
Question proposed: "That section 31 stand part of the Bill."

We are all wishing to import the usual protections of personal liberties in the eventual evasion. What is so very striking about this? It seems to me that most of this stuff the Revenue have already. Is it to deal simply with the case of spouses or is it death situations?

Is this quite an extensive new power?

It is a new power which would be applicable in respect of anybody carrying on a trade, profession or business other than banking business. As the Senator realises, that can extend across quite a wide spectrum, including farmers. Where the Revenue are dissatisfied with the accounts lodged it would give power to seek information from the taxpayer's business suppliers or business customers so as to check the accuracy of the accounts submitted. According to the experience of the Revenue Commissioners the absence of the information from independent sources encourages tax evaders to understate their profits and also the extent of their business transactions. These evaders proceed on the basis that the Revenue will be unable to check the accurary of their statements or accounts. It is expected that, apart from the use of the power, the mere existence of it will help to improve the accuracy of accounts being submitted.

Question put and agreed to.
Question proposed: "That section 32 stand part of the Bill."

What is the threshold for consumption of avoidance by the Revenue Commissioners? Is it £15,000 a year according to one's standing in society? At what stage are we faced with retrospective legislation such as we are faced with here? At what point does the thing become so intolerable that they decide that this is so outrageous that we are going to make the law what it was not during the years in question by changing it retrospectively? What criteria are applied in determining, for example, if one's total income was £14,000 then one is all right but if one's total income was £15,100 one is not all right? What is the basis for deciding that this particular piece of avoidance is so outrageous that it has got to have retrospective legislation to deal with it? While the Minister is thinking about that I would like to say that various people seem to think that I am, although not in favour of evasion, all with the avoiders. I am not with the avoiders.

From time to time I have recommended changes in the law which have been made to cope with avoidance and I hope to continue to do that. It is difficult to assess the thing, but in general there is certain rationale and a certain reasonableness in all the circumstances.

Professionally I may have to give advice to a client that this is the situation and he can do what he wants to but that is another matter.

This particular thing of changing the law and making it other than what it was seems to me to be very dangerous in principle. I do not know what makes this so outrageous when we all know of different cases in times past where companies were arranged and all sorts of sums went tax free and nothing was done about that, and I think it was right that nothing was done about that because it is very upsetting from the point of view of the organisation of enterprise to think that the law is going to be changed on a retrospective basis. I an extremely unhappy about it. I do not know what sums of money are involved in this. I do not even know what the particular trick was and what made it so bad.

Let me say that I made an announcement giving notice of my intention to introduce this section. I made that announcement on 18 September last. I want to point out that the reason that the figure of £15,000 is provided is that if one's income was less than that one's marginal rate of tax would be such that one would not benefit under this exemption. Also let me say that I am almost as strongly opposed as Senator FitzGerald to the whole idea of retrospective legislation. He inquired what was the point at which one decided that retrospective legislation could be justified. I would be very hard to satisfy that retrospection in legislation is ever justified but I must say that it is, in my opinion, justified in this case. I would point out that this exploitation that is going on was exploiting a relief that was designed in 1954 to help people with very small incomes, which did not exceed £240 a year or slightly more; it was a relief for people with small incomes of that kind and it was going to be used by people with incomes in excess of £15,000 a year because with anything less than that they would not benefit from it. The people who have been doing that really have no merit if they complain because I am closing it off retrospectively. There is something involved in this; I have to confess that I am very reluctant to deal with anything of this kind retrospectively but this is an outrageous thing to do, it is so outrageous that it justifies me in dealing with it on a retrospective basis.

I do not know how the thing is done. I do not know the professional people involved or any individual involved. I know nothing about it or how much money is involved. But in principle I am very much against the law being changed retrospectively and I object to the section. My own decision would be the same as the Minister's. Since I became aware of the section I wanted to get it changed straight away and professionally I would be unhappy if I were to find myself in a situation where I had to tell somebody of its existence and the advantage he could take of it. There is a responsibility for some moderation in this matter. It is difficult to state it in an objective way. It is a judgment we must make taking all the circumstances into account but I am opposed to the retrospective nature of this legislation.

Perhaps I was wrong in referring to it as retrospective. It might be more accurate to say that the 1954 provision was always understood, when it was introduced and subsequently, to be related to and for the benefit of those with very small incomes. In effect that is what the section is saying. One view of it may be that it is simply clarifying the position as it was always believed to be; the other is that it is operating retrospectively. I would prefer to take the first view but the amount of revenue being foregone or lost in respect of this was about £2 million a year over three years.

Question put and agreed to.
Question proposed: "That section 33 stand part of the Bill."

I do not know whether this was agreed in the other House. I did draw attention to the fact that I was in favour of what was being done here. I have operated the section myself and I am suffering as a result of the amendment which is being proposed but I am sure that in general it is right. I wonder what is the situation in separation cases? I am told that this covenant has been found very useful in marital breakdown situations where the spouse is persuaded to take up the law making such provision as enables extended education for the child to take place by virtue of the fact that the covenant is available. I fear that this limitation means that it will be costing him more because tax would have to be paid on it. I note there is an exception in the case of handicapped people but what of the situation to which I refer? When these covenants are in existence from a taxing point of view, is there going to be double taxation now in that the covenantor cannot subtract a sum in excess of 5 per cent? Is the recipient to include the sum as a taxable item of his income?

On that basis one can take an employer who pays an employee who is liable for tax on the wage. The employer can claim on the money that he is paying but to claim that he is paying tax on what he earns cannot reasonably be called, double taxation. The first thing to bear in mind in regard to this is that we are dealing with a child who is aged over 21, not under 21. Once we are dealing with such a person it takes on a somewhat different complexion. In the case of a person who, as the Senator mentions, is making provision perhaps for a child of a broken marriage—the child being over 21—presumably what is in mind is that there is some kind of disposition made in favour of a student attending a university where the parents are separated or divorced.

This section does not prevent the parent from making a covenant in that kind of case. It merely restricts the extent to which the State is called upon to subsidise his doing so. It is fair to say that the execution of covenants has relevance mainly in the case of better-off members of society. The less well-off person in a similar situation would have to depend for what he could do on the income tax child allowance. Indeed if a person with an income attracting tax liability at the top rate of 60 per cent following separation of the parents were to get tax relief in respect of a convenant of £1,000 to a student son the parent would have a tax liability reduced by £600. On the other hand a parent with a modest income attracting tax liability at the 35 per cent rate who also had a son attending university whom he had to support and provide for will get tax relief of £75 through operation of the child allowance or, if he covenanted to pay his son, say, £500 which is probably as much as he could manage, he would have a tax saving of £175. So it would be difficult to justify a special provision which would give such favourable treatment to high income taxpayers.

This all applies to all allowances. All allowances benefit the higher taxpayer.

I accept that.

I do not think this is relevant to the particular point. We are proposing to save in this section covenants where there is the unhappy situation of the permanently incapacitated child. We are still allowing this favourable treatment for up to 5 per cent of the total income. I am suggesting that there should be a favourable treatment also given to the separation situation and it may be a grandfather whose daughter is separated from her spouse and who is now able to come in and assist in that situation and who may not be able to do it because, in all the circumstances of his retirement and in relation to the life he lived before he retired, it may be difficult enough for him to provide the money and any assistance he may get by way of tax relief will come in aid of a human situation which seems to me to justify treatment. I can report to the Minister that in fact in these unhappy situations these covenants are being used. They are being used in the sense that they are facilitating the further education of the children of these unions. This is persuasive of one of the parties in the particular situation having to pay to continue to make the payment of a particular order under an obligation which relieves him of taxation. That receipt enables the continued education of the child. So there is a real situation here for consideration. Admittedly, in relation to all these allowances, it is something which is beneficial to the higher taxpayer but high tax payments come quite early here.

I accept the Senator's point in regard to all tax allowances benefiting people on the higher rate more than those at the lower rate. Nevertheless, in so far as the case is put forward on the basis of hardship—and we are talking about the case of a separation with children of the marriage aged 21 or over—giving tax relief in respect of a covenant for such children over 21, say, as students in excess of the 5 per cent limit would make it difficult to make a case on the basis of hardship. I do not think we can talk of hardship in the circumstances.

I made my point.

I am not discounting the Senator's point.

Question put and agreed.
Section 34 agreed to.
Question proposed: "That section 35 stand part of the Bill."

This is a UK provision. I hope we are not going to encourage more people to buy more dwelling houses and engage in more speculation.

They would have dependant relatives who were getting accommodation rent free. Paragraph A of the new subsection 9 (a) of the Interpretation Act provides a definition of a dependant relative. Basically this conforms to the meaning given to dependant relatives for income tax purposes in section 142 of the Income Tax Act, 1967 which, as amended by section 1 of this Bill, provides for a deduction for income tax purposes for individuals who at their own expense maintain certain dependant relatives. The term covers a relative of the individual or of his spouse who is incapacitated by old age or infirmity from maintaining himself, and a widowed mother.

Question put and agreed to.
Question proposed: "That section 36 stand part of the Bill."

I welcome this and I am grateful to the Minister for delivering on the promises made when I made the point in regard to the illegitimate child when we had the last amendment to the capital gains tax. But I am not happy that it goes sufficiently far to take into account the situation which I wished to have dealt with where we have a father who has recognised paternity of the child in question and who wishes to make provision for the child by way of gift and where, because the child is illegitimate, there is not the same relief in respect of the transfer to him that there would be if the child were legitimate. It may be that the answer that would be given on this is that the proper treatment of such a case awaits a change in the fundamental law. I find myself changing on this subject of the treatment of the illegitimate situation and I certainly feel that everything should be done that can be done without injury to other people such as equally innocent children. Everything should be done to help such people.

If there is a father who may even have the illegitimate child in his house—and there are such cases—and who recognises this child as his responsibility and as his child, the situation should not be that capital gains tax should be levied on him if he wants to take advantage of a section which is designed to encourage him, when he is over 55, to make transfers over to his children; that child ought not to be in this way distinguished from other children. It may be that he would leave it to him by will in the ultimate way, but that is another matter.

This is a very difficult area. I am hoping that in due course, the Law Reform Commission will provide a full analysis of all the factors involved in extending greater rights to the illegitimate child. There are a number of difficult and unsatisfactory areas of the law in this regard.

Even if we take a case where the father admits paternity or where an affiliation order has issued, the law does not give any succession rights to the child on the father's intestacy, nor does section 117 of the Succession Act, 1965 give to that child the right afforded by that section to a legitimate child to sue for provision out of the father's estate on the ground of the father's failure in his moral duty to make proper provision for the child.

If section 27 applied to the father of an illegitimate child I do not think it is beyond the bounds of possibility that a disponer might claim paternity of a donee without being exposed to any publicity due to the secrecy attaching to tax returns in order to avoid capital gains tax. It would be very difficult to resist such a claim if relief depended solely on the father's admission of paternity. If relief under section 27 was extended to a case in which an affiliation order had been made so that proof of paternity might be available, section 27 would rarely, if ever, be availed of, since it is most unlikely that a father who had to be forced to pay maintenance to the mother would later make substantial transfers of property to the child. It is not impossible, but it seems very unlikely that it would happen.

Surely, what the Minister is saying is that we do not have a provision that we should have in our law for a natural father to declare paternity in a formal way. Paternity is established under our present situation either because affiliation proceedings are taken out and he is forced, compelled or required to make payments for his child or also there is an informal recognition. I am discouraged on this subject by the fact that the Government turned down the proposal in the Labour Party Bill on adoption to remove the status of illegitimacy and give full rights, including succession rights, to a child regardless of the status at birth or parentage. That is where we have to move.

I have heard Senator Alexis FitzGerald speak on the subject before, and am aware of the fact that he is the person who encouraged the presentation of this amendment, which is a very welcome step. However, it is technical but important. The Minister cannot really decline to accept the argument put forward on the moral aspect of it on the grounds that we do not have a proper facility for a declaration of paternity under Irish law. Let us have that facility for a declaration of paternity. Let us improve the whole status of the natural father, let us encourage natural fathers, and let us also include them in a provision such as this.

The question of the position of the natural father is one that is not simply dealt with by abolishing the concept of paternity or simply providing facilities for him to declare his paternity. There is much more to it than that. The matter certainly requires analysis by the Law Reform Commission because of the various possibilities that open up and have to be considered. It is not for the Minister for Finance in the Finance Bill to make a change in the general law of this nature, even if there were no other complications involved. I have pointed out that a simple acceptance of a declaration of paternity in a case such as that under section 27 could well be used as a method of avoiding capital gains tax without any risk of publicity for the man making the declaration. Before this kind of facility is granted I would prefer to see that a declaration of that kind would operate for all purposes and with full publicity. That would be one condition that would be needed.

Question put and agreed to.

It has now gone past 10.30 p.m., the time fixed for the Adjournment. Will somebody report progress?

What is the wish of the House? It is possible that if we went on for half an hour we might finish, but I am in the hands of the House. Is it agreed that we should continue?


Sections 37 to 44, inclusive, agreed to.
Question proposed: "That section 45 stand part of the Bill."

Why is this mortal blow being delivered to those who want to import antiques?

Basically, the reason is that people resident in this State may purchase antiques, say from a dealer abroad, and not pay any VAT on them as the law stands. Their alternative source, normally, of purchasing would be a dealer resident within the State and, consequently, the dealer resident within the State is at a disadvantage as against the dealer, say, in Britain. The effect of this will be to even out the competition between them.

The section which we are repealing is a section which exempts articles more than 100 years in existence from customs duty. Does that not mean that dealers are taking advantage of that section and are now no longer getting the benefit of the exemption?

Dealers would be registered for VAT. That being so they would not pay VAT in the normal way on importation, only on sales within the State. They can at the moment, therefore, import without paying VAT but they have to pay VAT on the sales. A purchaser who may import from a dealer in Britain, an unregistered person, pays no VAT and is, therefore, more inclined to purchase from a dealer abroad than one at home in order to avoid VAT.

He will pay no VAT if he buys it from a London chap but he will pay VAT if he buys it from a local?


Question put and agreed to.
Question proposed: "That section 46 stand part of the Bill."

This is the section which the Minister asked me to wait for for further information about the operation of the farm levy. There were amendments to tighten up some of the problems with the farm levy. I referred the Minister to a report in The Irish Times of today to the effect that it appears that as much as 70 per cent of the year's food grain harvest which would be retained on farms or stored by cooperatives of farmers, could quite legitimately and legally avoid the levy under present circumstances. This prompted me to ask the Minister whether he intends to try to cope with that situation if that is the case and, secondly, what way the operation of the levy is working out. There appear to be a number of difficulties at different stages and I would like the Minister to make some comment.

I had a note on the report to which the Senator refers which suggests that cereals passing from a farmer to a miller merely for drying and/or storing until after 31 December next but not being bought by the miller will not be liable for the levy. It seems unlikely, assuming this is correct, that the economics of storing grain for some months and of the delay to the farmer in getting paid for his produce would warrant circumvention of a 2 per cent levy. The matter is being looked at, and if there is any basis for it can be dealt with by amending the Government order which, of course, can be readily amended. I understand that the report suggested that this could cost an estimated £1 million but, in fact, it would cost a maximum of £500,000, that is assuming that nothing was done about it, of course.

On the general question of the operation of the levy, I can say that it is operating satisfactorily. The only area of difficulty is in relation to butchers. I should explain that for butchers the area of controversy arises where they are bidding at marts for animals, where they are in competition with other people.

The principal difficulty arises where they are in competition with a farmer who is bidding for the same animal which he wants to buy to fatten and sell later. The farmer purchasing in such circumstances is not liable for the levy and the butcher is liable. The butcher is, in such circumstances bidding against exporters, in many cases bidding for the same animal, and they are in the same difficulty and are operating the levy without any known difficulty.

The meat factories are also operating the levy. They are bidding at marts but they do not normally bid for the same animal as the butcher. They are bidding in circumstances where there can be competition with people who are not paying the levy. In particular, the problems that have arisen because of the very serious shortage in the national herd, which arose for reasons I will not go into now but which were very important some few years ago, plus the very bad winter and late spring we had—all these factors have combined to produce a shortage of animals and a shortage of meat with the necessary increase in price which follows the inevitable law of supply and demand.

Butchers take only 15 per cent of the total cattle slaughtered or exported. Some butchers are operating in accordance with the arrangement prescribed. Others are still protesting. I think the matter will sort itself out in due course. I hope it will be clear from what I said that, as far as butchers are concerned, they take only 15 per cent of total cattle slaughtered or exported, and of course cattle only form a proportion of the various items subject to the levy. We are not talking about any major area of difficulty.

Are the marts collecting the levy at the moment? My information from butchers at the moment is that the marts are not collecting the levy but when they take their beasts to the abattoir they have to pay the levy there.

And they pass it on to the consumer?

The payments do not arise until the end of June, so the problem would not have arisen as yet in the sense that the Senator has in mind. But the liability arises at the point of slaughter or at the point of export. It does not arise in the mart. What I was referring to when I referred to the mart was that exporters or meat factories buying in the mart know that at the point of export or at the point of slaughter in the factory, the liability for the levy will arise. Therefore, the price that they bid at the mart has to take account of the fact that they will have to pay the levy. Similarly with butchers, they have to take account of the fact that they will have to pay the levy. What they say is that if they have to do that they cannot compete to get the animal. In so far as they are competing with an exporter, he is in the same boat and is going to have to pay the levy at the end. The difficulty primarily arises in bidding against a farmer who is purchasing for fattening purposes, not for slaughter or export. This applies also to exporters, but they seem to be able to operate it. The levy is going to be collected and the butchers are liable for it. If they do not make provision for it in their bidding they will have the difficulty of having to account for it to the Revenue.

As for the suggestion that it is being paid by the consumer, any slight look at the situation in regard to meat, supplies of animals and the price of animals because of shortage would suggest that the consumer cannot and will not bear the increase.

Some people will have to give up meat.

A number of people have given up meat, at least the dearer cuts of meat, because of the price. This is not the first time it has happened. It is some time now since it has happened, but it happens on occasions that there is a glut of animals. I do not recall the price going down quite as fast as it goes up when there is a shortage but there was some drop in price. It is a regular feature that if there is a shortage, and if the price goes up then consumer resistance operates and people just will not buy the dearer cuts or buy meat at all. They will turn to alternatives. This has happened before and it will happen again. It has nothing to do with the levy and it is only a racket to suggest that it has. If there were no levy we would have the shortage, we would have this situation of the high price and people refusing to buy dearer cuts, and that situation would be remedied later on when the grass comes on and the supply improves. That would happen whether there was a levy or not.

Question put and agreed to.
Sections 47 to 49, inclusive, agreed to.
Question proposed: "That section 50 stand part of the Bill."

I note the words "conveyance or transfer of a piece of land" are exempt here. I take it that transfers of shares are already covered. I assume the intention is to cut out tax.

Shares are not covered because, as the Senator knows, there are two rates, 2 per cent and 1 per cent, depending on whether they are Irish or foreign. Government securities by and large are not subject to stamp duty on transfer.

I am in favour of it.

So far as the Revenue Commissioners are aware, there has been no demand of any significance that transfers of securities to charities should be exempted.

Question put and agreed to.
Question proposed: "That section 51 stand part of the Bill."

This may have a bearing on section 53 which interests me very much. The amendment of section 70 is intended to limit the charge to tax in these cases. The cases are, in effect, a coming together of companies in one form or another, acquisition situations. It is intended to limit the charge to tax to the nominal value of the shares which are passing rather than the actual value of the shares. Is that correct? Does this follow from some EEC directive?

Yes, it does.

One way or another the view has been finally taken that the proper basis for this is to fix stamp duty by reference to the nominal value of the shares?

That is the floor.

So when one knows that, one does not necessarily know the amount of stamp duty which will be payable, which was my first impression of this section. I had thought that it might have been as I just stated. But if it is not and if my first impression is correct, it lends a little more strength to the worry I have with regard to section 53. To aid everyone I am prepared to agree section 51 and the next section to get to section 53.

Question put and agreed to.
Section 52 agreed to.
Question proposed: "That section 53 stand part of the Bill."

This is a rather important amendment. This was originally a section which provided for the charging with stamp duty of a statement which is required to be delivered. In the subsection which is there, it is provided that, in the case of neglect to deliver within 30 days after the date of the transaction the statement required to be delivered the company concerned shall be liable to pay to the Revenue Commissioners interest at the rate of 1 per cent for the amount of duty chargeable and a like sum for every month after the first month during which the neglect shall continue. Under that subsection, if there is not neglect and there is compliance with the requirement to deliver, under the existing subsection, there is duty required to be paid. The basis for the charge of interest does not arise. As I understand the subsection, there is only a basis for charging the interest if there is neglect in the first place to file the statement. If the statement is filed then they can take the rest of their lives before they pay the actual duty. If the Revenue had to proceed to court they would not be able to recover interest because there is no provision for interest under the subsection. I understand why that is required to be changed.

Now we have a situation where there is a transaction and the statement is signed. The nature of the transaction is such that it takes, with all the good will in the world both on the part of the taxpayer and on the part of the stamps office and on the part of any people who have to make any valuations, time before it is known by the taxpayer what is the amount of duty that he has to pay.

At present in affairs and transactions with the stamps branch, months may have passed from the time of the transaction, where there has been compliance with the requirement to sign the statement within 30 days, before the taxpayer knows what his liability is. On the one hand, we agreed that the Revenue should be given the power to recover interest from a taxpayer who, when he knows what the amount is, goes slow on the matter of paying duty which he knows is due from him. On the other hand, it is not conceived as proper and just that interest payment at 1.25 per cent per month should be exigible on payment of an amount which the taxpayer does not even know until perhaps months have passed. Questions of partial exemptions or valuations may arise. It is not an open and shut situation. We are talking about not just a number of Irish groups who can be told the Revenue are the nicest people in the world and they take no advantage of you. We may be dealing with people who are not as familiar with our situation as we are and who want to know what are their rights and who do not like to be told that they are in the position that they are going to have to pay whatever 12 times 1.25 per cent is annually under the statute, which may be at 1 per cent on a very large sum of money. We could be talking of many, many millions of pounds for consideration. The sum could be marginally important in the transaction.

The Senator has noted, of course, that interest is being charged in this case by way of penalty. The reason for this is to bring the section within the ambit of section 15 of the Stamp Act, 1891, which imposes penalties generally by way of stamp duty. Paragraph (b) of subsection (3) of that section provides that the Revenue Commissioners may if they think fit remit any penalty payable on stamping. There would seem to be two possibilities here; one is that the delay is due to the Revenue Commissioners and the other is that the delay is on the part of the company or their agents or agent. The first case is that if it is due to the Revenue Commissioners I am putting on the record here that interest will not be charged. In circumstances in which the delay is due to the company or their agents the circumstances in which that delay arose would be considered by the Revenue Commissioners. Obviously I cannot anticipate what would happen in any individual case because it would depend on the circumstances, but in so far as there are circumstances which would be regarded in the normal way as extenuating circumstances that would be taken into account by the Revenue Commissioners in the exercise of their powers under the provision I have mentioned so as to remit the liability for interest depending on the circumstances of the case. I cannot, obviously, lay down a hard and fast rule.

Question put and agreed to.
Sections 54 and 55 agreed to.
Question proposed: "That section 56 stand part of the Bill."

What is the exemption? Perhaps the Minister told us in his speech.

This is the revocation of an order. The two preceding sections, 54 and 55, are incorporated in the section so we now revoke the order.

Question put and agreed to.
Sections 57 to 59, inclusive, agreed to.
First, Second, Third, Fourth, Fifth and Sixth Schedules agreed to.
Title agreed to.
Bill reported without recommendation, received for final consideration and ordered to be returned to the Dáil.