I would like to say that debate on the Second Stage of this Bill should be along the lines of a budget type debate in the Dáil. It is confined to taxation, general expenditure and financial policy and other matters in so far as they are connected with financial policy. Matters of administration and details relating thereto should not be raised. Opportunities for debating the latter subject will arise in due course on the Appropriation Bill.
Finance Bill, 1980 [ Certified Money Bill ]: Second Stage.
Question proposed: "That the Bill be now read a Second Time."
The Bill before you gives statutory effect to the various taxation changes which I announced in the budget and it also incorporates a number of other changes designed to achieve a more equitable and more effective system of taxation. The principal elements of the Bill are the arrangements for income splitting, the package of farming taxation and the introduction of a 10 per cent rate of corporation tax for manufacturing concerns. In addition there are provisions dealing with the administration of the taxation system, the application of excise duties and the implementation of new allowances and reliefs.
Before turning to the Bill itself, I would like to refer to the aims and objectives of this year's budget and the economic background against which it was framed.
At the present time we are facing a difficult and discouraging external economic outlook. It seems certain that international growth this year and in 1981 will be markedly lower than last year, and lower still than the average of the sixties and early seventies. Oil price increases have almost stopped economic growth in its tracks; as recently as last week the OPEC countries have decided to raise prices once again. The oil-importing world as a whole is significantly poorer because of the movement of wealth to the oil-producing nations and our economic prospects are diminished as a consequence.
In 1979 our oil import bill was just over £500 million. For 1980 the latest estimate is that this bill will rise to about £800 million, in other words a massive increase of virtually 60 per cent in one year. This, I hope, illustrates dramatically the scope of the problem which we have to face because of the changing energy environment.
There is a general shift towards more restrictive economic policies in the western world generally and this obviously has undesirable consequences for us. Export markets will grow only slowly this year and international competition will be extremely tough indeed. Because we are a small open economy and because we must make exceptionally rapid progress in employment creation, we must have a buoyant and rapidly increasing export trade. We must, therefore, maintain our existing outlets in adverse trading conditions and at the same time win new markets. The slow down internationally will also hamper our efforts to attract foreign industry here.
This in brief is the discouraging external background against which the Government had to devise their budgetary policy. Added to this was the necessity for domestic reasons to set about bringing greater balance to the public finances and to the balance of payments position. The remaining important budgetary parameter was the need to maintain momentum in the Government's pursuit of equity in the taxation system.
In the event, we have made a significant start this year towards bringing our finances into balance. As I indicated in the budget statement, the Exchequer borrowing requirement for 1980 has been calculated at 10.4 per cent of GNP compared with borrowing last year equivalent to 13.7 per cent of GNP. Such progress, however, will have to be continued and built upon in the coming years. We have not attempted to remedy our balance of payments in one move; such a radical course of action would mean forcing the economy into marked recession, with adverse effects on output and employment, and this the Government were not prepared to do. Our economy, like others, needs time to adjust to the direct and indirect effects of the huge increases in oil prices.
The Government's decision to adopt a phased approach to balancing our finances had regard to the continuing pressing need for economic development as a means of increasing employment and adding to the potential for a sustained development. In determining Government expenditure, priority has been given to investments which will expand the productive capacity of the economy and also to the development of national infrastructure. Of a Public Capital Programme of £1,154 million—15 per cent above the 1979 outturn—the proportion devoted to infrastructural development has increased from 29 per cent in 1979 to 33 per cent in 1980 while some 42 per cent of the programme expenditure will go to improving the productive capacity of the economy, including an increase of £30 million or 22 per cent in the provision for industrial promotion. The bulk of this increase is being made available to the IDA to enable it to achieve its job approval target of 30,000.
The level of expenditure on the non-capital services for 1980 was set at £3,367 million—up by 16 per cent on the 1979 outturn—before adding on the additional provisions made on budget day. This level of expenditure was set following lengthy deliberations by the Government, the aim of which was to ensure that taxpayers would be called upon to contribute only to absolutely essential expenditure, concentrating on the areas of greatest need and potential so that the maximum economic and social benefit is derived from it. The process of curbing expenditure, however, is not painless and involves making difficult decisions. Because of virtually fixed commitments in the short-term on such substantial expenditures as pay and debt service costs and because of the overriding need to protect the less well-off, the scope for curtailing expenditure is much more restricted than people may generally realise.
When speaking on the budget and the Finance Bill in Dáil Éireann, I emphasised the crucial importance of successful policies in relation to incomes if we are to surmount the economic difficulties which surround us and to continue to make adequate progress. As I have already stated, we still have a worrying balance of payments position and an Exchequer borrowing requirement that needs to be reduced. We are being faced with increasingly high bills for imported energy and the slow down in international trade has added to the problems of exporting. Despite our best efforts, we are not achieving the progress we would like to make in providing higher employment and this is perhaps the most difficult problem facing us in the immediate future.
Given this background, we must be ready to make some sacrifices now if we are to continue to make progress and all sections of the community must contribute to this. It is no use if those of us who are already reasonably well provided for—whether in business, in agriculture or in employment—insist above all else that we must sustain and improve our own standard of living no matter what the consequences are for others and for the community in general. Unfortunately this tends to be the starting point for debate on incomes and it is an entirely unrealistic approach in the longer term. If we are honest with ourselves, we must recognise that we cannot at this time improve living standards for those of us who are relatively well positioned already and at the same time provide more employment or improve the lot of the lower paid and of those who must rely on the social services.
The creation of more employment is of crucial importance for us. We are in a unique position in that nearly 50 per cent of our population is under 25 as compared with 36 per cent for the EEC generally. This provides us with a great potential but it also makes extra demands on us which we must fulfil if we are to exploit this great advantage. We have to provide for an expansion of jobs and we have to move at a faster pace then other western countries generally. This is a great challenge and our young people will not thank us in future years if we do not succeed. An essential precondition for success is that we do not overprice ourselves by insisting on a higher standard of living than we can afford.
The negotiations for a further national understanding provide an opportunity for reasonable agreements on pay and related matters which will take account of our difficult economic position and acknowledge that there must be some trimming of individual expectations in the interests of the more vulnerable and needy sections of the community. I sincerely hope that this opportunity will not be missed and that we can conclude a further national understanding that will provide a realistic basis for higher growth and greater equity. I must stress, however, that we cannot succeed and that we cannot have an understanding if the parties concerned refuse to recognise that we have to keep a very tight rein on income increases. There is no virtue in arriving at an understanding which leaves the way open for excessive rises in incomes and does nothing to correct the unsatisfactory trend of leap-frogging with claims and counter-claims for special treatment. I appeal, therefore, for moderation on this occasion. I also ask that the parties give due recognition to the generous reliefs in personal taxation announced in the budget when they are determining a new pay policy.
I have focussed attention on the national understanding because it is an active issue at this moment. In calling for moderation I want to make a similar appeal to those other sections of the community who are not parties to the understanding and are not immediately affected by the outcome. All sections of the community must appreciate that we have been paying ourselves too much, and that, if we continue in this direction, we are behaving irresponsibly. It makes no sense to be critical of undue demands by wage earners if at the same time we turn a blind eye to excessive gains by other groups.
I should like also to refer briefly to the overall taxation strategy in this year's budget. The Government saw an immediate necessity to move towards greater equity in personal taxation through measures which would also support economic growth to the maximum possible extent. Given the need to reduce the Exchequer borrowing requirement, any reliefs in the interests of greater equity clearly had to be at least balanced by increasing taxation in other areas. This was the only realistic course open. In the event, the Government took innovative and imaginative decisions. They went well beyond the requirements of the Supreme Court in relation to the taxation of married couples by introducing full income splitting for all married couples, which was not required by the Supreme Court.
Taxation bands were widened, tax exemption limits were introduced for low earners, and a special allowance was introduced for the PAYE taxpayers who had been obliged to bear more than a reasonable proportion of the overall tax burden. In short, the personal tax changes in the budget mean that 83,000 taxpayers are placed outside the tax net and nearly two-thirds of those who were liable previously to higher rates of tax will now be paying tax at the standard rate. The total package will cost the Exchequer £227 million in a full year and this has to be made good by other tax receipts. The Government decided that the bulk of this should be borne by indirect taxes on oil products and discretionary items of expenditure.
There have been some criticisms that indirect tax increases raise the cost of living and that this is undesirable. However, the increases in this year's budget added less than 4 per cent to the cost of living index and this increase must in fairness be seen in the context of the exceptionally generous improvements in take-home pay generally as a consequence of the income tax concessions. The CPI increase consequent on the budget changes does not take account fully of any consumption fall-off that may arise but is in strict numerical proportion to the increase so that an increase of 20p for instance on a pint of beer would be four times that of 5p even though the level of consumption and therefore effect on the cost of living would be very much less. The income tax concessions on the other hand apply to every taxpayer and while they represent a real increase in pay, do not show up at all in the CPI.
As I mentioned in my budget statement, it may appear that the distribution of tax relief resulting from this year's budget unduly favours married couples with higher incomes. This aspect, however, is an unavoidable consequence of observing the Supreme Court decision and of implementing income-splitting in full.
In drawing up the budget proposals, the Government were faced with a situation in which the income of the average single male industrial worker had in many cases brought him into the 45 per cent tax band. To remedy this, it was necessary to widen the standard rate tax band for single people, with a consequential double benefit for married couples. In addition, the exemption limits and the special PAYE allowance will be particularly significant for young people just starting work. For example, a young person earning £2,000 per annum will obtain a reduction of over 45 per cent in his income tax liability; if the earnings were £3,000 the percentage reduction would be over 23 per cent. The net result of the budget proposals will be that the burden of income tax for the vast majority of single people will now be less than it was in 1977-78. In the case of all married couples on PAYE, the burden will now be less than at any time since 1974-75.
I would now like to turn your attention to the specific provisions in the Finance Bill before you. For the most part they deal with the taxation changes which were announced in the budget. Before I deal with them individually I would like to highlight a number of provisions which were not included in the budget. On the income tax side provision is made for implementation of the Supreme Court judgment of 25 April 1980 on the operation of single assessment for married persons. The court ruled out repayments for 1979-80 and earlier years except in cases where constitutional proceedings had been initiated. To preserve equity, provision is contained in the Bill to ensure that those who had not paid their taxes for those years will not now be put in a more favourable position than those who had paid in time. The limit on interest relief for married couples has been raised from £2,400 to £4,800. This extension of relief will reduce income tax payments by an estimated £1.3 million in 1980 and £2 million in a full year. It means that for married couples interest on loans up to £33,000 approximately will be offset against tax liability.
The exemption limit on interest paid on deposit accounts with the Post Office Savings Bank and the trustee savings banks is being increased from £70 to £150. Provision is made whereby widows will be eligible for the married allowance for the year of bereavement and the limit in interest relief for widowed persons is being raised from £2,400 to £3,500. The tax exemption limit on lump sums paid on termination of an office or employment is being raised to £6,000, with a further exemption of £4,000 for first-time claimants who are not entitled to any tax-free superannuation capital payment, and loopholes whereby persons in receipt of very substantial "golden handshakes" could avoid tax are being closed.
A number of adjustments have been made in relation to the taxation arrangements for farmers and I will deal with these at some length later.
There are a number of other new provisions as well to which I would like to draw attention. In accordance with the intention expressed in the budget statement an excise duty is being imposed on dances and discos and late night drinking generally. There is a concession in relation to VAT whereby the minimum limit for compulsory registration for traders supplying services will now be £3,000 in respect of a 12-month period rather than £500 for a two-month period. This will be especially welcome to those who operate a seasonal business such as bed and breakfast for tourists for the summer period on a small scale.
The Bill is long and complex and I do not intend to deal with each section individually. I propose to comment briefly, however, on the more important sections.
Sections 1 and 2 exempt from income tax those with low incomes and the elderly. The limits are £1,700 for single and widowed persons and £3,400 for married couples. For those aged 65 years or over but under 75 years the limits are £2,000 for single and widowed persons and £4,000 for married couples. Persons aged 75 years or upwards will qualify for exemption from income tax if their income does not exceed £2,500 in the case of single and widowed persons and £5,000 in the case of married couples. Marginal relief is available for those whose income does not greatly exceed the appropriate limit.
Sections 3, 4 and 5 contain amendments to the personal reliefs. They (a) adjust the personal allowances to take account of income-splitting for married couples, (b) increase the one-parent family allowance to £500, (c) grant widows, in the year of bereavement, the married allowance of £2,230, (d) implement the special PAYE allowance of £400 as announced in the budget, and (e) reduce the child allowance to £195. As I mentioned in my budget statement, this reduction is taking place in association with improvements in the social welfare children's allowances and will ensure that resources are directed to those most in need.
These sections also improve the allowances granted in respect of handicapped persons. The incapacitated child allowance is being increased to £390. The allowance in respect of blind persons is being doubled and the allowance for a housekeeper taking care of an incapacitated person is being increased from £165 to £330.
Section 6 increases for married couples who opt for assessment on their aggregate incomes the limit on life assurance premiums which qualify for relief from £1,000 to £2,000. Section 7 refers to loan interest. Where a married couple elect to be assessed on their combined incomes the maximum amount of interest which may be claimed for income tax purposes is increased to £4,800. The limit for widowed persons is increased to £3,500. Section 8 contains the income tax rates and rate bands announced in the budget. Married couples who elect to be assessed on their aggregate income will be entitled to rate bands which are twice those applicable to single persons.
I have already drawn attention to the provision in section 10. This effectively increases the exemption limit for certain lump sum payments made as compensation for loss of employment. Changes are also being made to correct a defect which allowed tax to be avoided on very substantial compensation payments. The provision in section 13 increases the exemption limits in respect of deposit interest with the savings banks.
Chapter II of the Bill deals with taxation of married couples. These will now have the choice of— (a) assessment of each spouse as a single person, (b) assessment of the aggregated incomes of both partners, and (c) where the option of aggregation is exercised, the couple will have the further right of separate assessment so that each spouse may be separately responsible for his or her share of their total tax liability.
Section 18 provides that a husband and wife, unless they both otherwise elect, will each be taxed as a single person. Where they elect for aggregation the husband will be charged to tax in respect of their combined incomes. An election for aggregation may be made at any time in the year of assessment and will apply for subsequent years unless it is withdrawn by either spouse. As aggregation will be to the advantage of most married couples, including couples where both partners have separate sources of income, it is provided, to facilitate these couples that, unless notice to the contrary is given by either spouse, married couples will be deemed to have elected for aggregation.
Section 20 provides, in line with the Supreme Court judgment of 25 April, to which I have already referred, that there will be no general repayment of tax, in response to claims of overpayment in earlier years, as a consequence of the aggregation of the incomes of husband and wife. The purpose of section 21 is to provide for the full payment of taxes for 1979-80 and earlier years by those who have not yet done so. Where assessments are made for those years, the amount of tax payable under those assessments will correspond to the amount which would have been payable if the taxpayer had been assessed for the relevant years at the proper time. This will ensure equity of treatment as between those who have already paid their taxes and those who have not yet done so.
Chapter III provides for the changes in the taxation of farming profits which I announced in the budget. Since then the Government have had useful consultations with the farming organisations concerning the present state and future development of agriculture. Arising out of follow-up discussions between the farming organisations and the Revenue Commissioners, I have decided that there should be some modifications to my original proposals. The necessary amendments were made to the Finance Bill in its passage through the Dáil.
Firstly, in order to help farmers increase their livestock numbers 100 per cent relief is provided on the amount of the increase in stock values over 10 per cent of profit rather than the existing 75 per cent relief for increases over 20 per cent of profit. Also, the normal claw-back of stock relief which operates where stock values fall will not apply where stock is disposed of because of disease. Another amendment which I introduced will exempt fixed plant from the 30 per cent restriction on capital allowances. This is in addition to the exemption of farm buildings and farm works from the restriction which was announced in the Budget.
A further modification which should provide an incentive to farmers concerns the farm buildings allowance. Expenditure on farm buildings may now be written off over four years, rather than over eight years, with up to 30 per cent being claimed in any one year.
Section 22 lowers the threshold for liability from £50 RV to £40 RV. Marginal relief will apply between £40 RV and £49 RV. Section 23 allows the option of assessment on the basis of the current year's accounts rather than the previous year's accounts to farmers between £40 RV and £50 RV who become liable for the first time and section 24 abolishes the notional basis of assessment. From this year those liable to income tax will be assessed on their actual profits as shown in accounts. Section 25 amends section 28 of the Finance Act, 1974, which restricts the personal allowances of a farmer between £20 RV and £40 RV where there is non-farm income. It now provides that where the non-farm income is that of the farmer's wife she will be assessed as a single person. The wife will, of course, be able to claim child allowances which will not be claimed by the farmer since his farm profits are not chargeable to tax.
Section 29 amends section 17 of the Finance Act, 1974, in the light of the Supreme Court decision on the taxation of married couples. That section was introduced to prevent the division of holdings for the purpose of avoiding liability to tax. The present section provides that, where land is owned and occupied by a wife in her own right or is leased by her to a third party at a commercial rent, it will not be aggregated with that of her husband for threshold purposes. In the case of joint ownership each joint owner will be deemed to occupy all the land for the purposes of the threshold although the actual tax charge will be determined by each party's share of the profits.
Chapter IV provides for the resource tax. This tax will apply at a rate of £3.50 per £RV on all holdings of £70 RV and over with marginal relief to apply between £70 RV and £79 RV and will be payable on 1 October. The tax will not be deductible as an expense against income tax. I have also provided that charities will be exempt from resource tax. As I have said before, it is not the Government's intention that this tax should be a permanent feature of the farm tax system. It will be reviewed at the end of the year in the light of the operation of the farm income tax system and the yield from that system.
Chapter V contains one section and this provides for the continuation of the special 25 per cent corporation tax rate for manufacturing companies which achieve certain employment targets. As announced in the budget, the scheme is to continue to end-December 1980 after which the new 10 per cent rate of corporation tax will come into operation for manufacturing generally.
The new scheme of industrial incentives, introduced in Chapter VI, is broadly intended to replace our principal existing incentives of export sales relief and Shannon relief which, under EEC requirements, must be phased out. The scheme consists of a new rate of corporation tax of about 10 per cent in respect of income to companies from sales of goods manufactured by them within the State. In contrast to export sales relief and Shannon relief, the new scheme will be applicable to goods sold in both export markets and the domestic market. It is intended to operate from 1 January 1981 until 31 December 2000 and, while continuing our very attractive package of incentives to foreign industrialists, will also provide Irish entrepreneurs with a climate most favourable for further investment in our manufacturing sector. It goes well beyond what our competitors generally offer in the way of tax incentives for industry and emphasises the determination of the Government to provide the best possible incentives for a vigorous expansion of industry.
Section 39 defines goods for the purposes of this chapter and brings manufacturing activities which do not include the actual sale of goods within the scope of the relief. Following the existing practice in regard to export sales relief, it is proposed that sales into intervention be excluded. Intervention is only a second-best solution and, if we are to have a flourishing food industry, we must establish and maintain more export markets.
The technicalities of operating the new scheme are incorporated in section 41. It provides for a reduction of seven-ninths—that is, from a rate of 45 per cent to a rate of about 10 per cent or, in the case of the "small companies rate", from 35 per cent to about 7.78 per cent—in the corporation tax arising from income from the sale of goods. The relief will be subject to an application being made within a specific time limit. The section also prescribes the method by which the relief is to be computed. The principal feature is that tax falling to be reduced is to be quantified as the same proportion of the corporation tax payable by a claimant company on its total profits, exclusive of capital gains, as its income from the sale of goods, arrived at by reference to its sales, bears to its total chargeable income.
Sections 42 and 43 terminate the existing industrial incentives of export sales relief and Shannon relief with effect from 1 January 1981. However, a company which has already benefited from those reliefs, or which, by 31 December 1980, establishes an entitlement to them, may continue to benefit until 1990 or until their allotted span of relief expires. Such a company can at any time up to 1990 opt irrevocably to avail of the new 10 per cent scheme. In this section I am also making provision for the granting of assurances in relation to eligibility for export sales relief and Shannon relief in certain cases where the conditions relating to such relief have not been fulfilled by 31 December 1980.
Section 45 provides that a reduced tax credit will attach to distributions out of income which has borne tax at the new reduced rate of about 10 per cent. It also specifies the manner in which relevant distributions are to be identified. Where distributions by a company exceed the aggregate of a company's income which has borne tax at the new reduced rate, less the reduced tax thereon, and of relevant distributions received by it, the excess will be treated as a separate distribution carrying the tax credit, normally three-sevenths, applicable under the existing law. That aggregate will constitute what is to be known as the primary fund. Provision is also made in this section for a reduction in relief granted to a company if the amount of a tax credit is overstated by the company in any statement accompanying a dividend warrant or cheque.
Chapter VII contains a number of miscellaneous income tax and corporation tax measures. The present taxation arrangement for building societies, whereby they pay income tax at a special composite rate, will be continued for a further two years. As I announced in the budget statement, the deduction for tax purposes allowed in respect of business entertainment is being limited to 50 per cent.
Chapter VIII deals with tax evasion. Section 59 re-writes section 516 of the Income Tax Act, 1967, to ensure that it will apply to a person who knowingly and wilfully aids or induces another to evade tax. Section 60 extends the power of inspection of business records to professions. The Revenue Commissioners' power in this respect is limited to an examination of the financial records only and the person carrying on the profession will not be obliged to disclose information of a confidential nature which passes between himself and his client. He will be required to produce only such documentation as is relevant to his own liability.
As a consequece of the changes in the income tax treatment of married couples, the capital gains tax legislation is being amended in Chapter IX to allow married couples an annual exemption of £1,000 for their net gains instead of £500. In addition, each spouse will be able to qualify for the relief granted in the case of a dwelling house occupied by a dependent relative and owned by that spouse. These changes were not included in the budget.
Part II of the Bill deals with customs and excise matters. The individual sections 64 to 70 confirm the budget increases in excise duties on beer, spirits, tobacco products, wine and made wine, cider and perry, table waters and hydrocarbon oils. Section 71 increases by 5 per cent the rate of excise duty chargeable on motor cars and motor cycles. As I indicated in my budget statement, this represents an increase of the order of 3½ per cent in the retail price. Sections 72 and 73 provide for increases in the excise duties on televisions and gramophone records.
Section 74 confirms the increases in the rate of excise duty on gaming machine licences. The main rate has been doubled to £100 a year for each machine. The reduced rate licence has been increased to £66 a year but it now allows the machines to be operated on Saturdays as well as Sundays and public holidays.
Section 75 imposes a new excise duty of 20p on mechanical lighters and provides the legal and administrative framework, including penalties, which are required to implement the duty. Sections 76 and 77 increase the rate of duty on various licences. I referred to these in my budget statement when I said that I was having them examined with a view to increasing the duty, where appropriate, in order to bring them up to a realistic level in present-day terms or, at least, to cover the present-day cost of administering them.
In my budget statement I said that dances, discos, cabarets, dinner-dances and the like comprise one area which could bear an additional element of taxation. Section 78 imposes new excise duties accordingly. The duties are structured to tax public dance halls and after-hours drinking which is more often than not associated with dancing.
Parts III, IV and V of the Bill relate to value-added tax, capital acquisitions tax and stamp duties.
Section 80 provides for the increase to 25 per cent as and from 1 May 1980 in the 20 per cent VAT rate previously applying to certain goods and services. Section 81 eases the requirement to register VAT in the case of small traders with an annual turnover of not more than £3,000 a significant element of which is accounted for by services rather than goods. I have referred to this earlier and pointed out that it should be of considerable benefit to those who are engaged in tourism on a very small scale.
Section 82 places beyond doubt that the exemption from VAT for betting is restricted to bets liable to excise duty and to bets placed at race meetings which are subject to a levy. Section 83 increases by 50 per cent the maximum limit for agricultural relief in capital acquisition tax.
The last part of the Bill, Part VI, contains several miscellaneous provisions. Sections 90 to 92 are concerned with increases in various motor vehicle duties. Section 93 increases the rate of interest on unpaid estate, legacy and succession duties to 15 per cent per annum, which is the rate generally chargeable on other outstanding taxes.
As I said at the outset the Bill is long and complex. I hope that the explanations which I have given will help Senators to have a better understanding of the various provisions. I commend the Bill to the House.
I intend to speak at enormous length not necessarily on Second Stage but certainly when we get to Committee Stage. At this stage I intend to be rather unpleasant to everyone. I regard it as my duty to take up—and I thought it was the Minister's duty to take it up on behalf of the Executive in the other House or in his address on this complex Bill to this House—the question of the implications of the Supreme Court decision in the well-known Murphy case. There is no one in either House with a greater respect for the institution of the Supreme Court, with more regard for the desirability of its total independence, than I. I am as friendly with all members of the court as anyone in this House or in the other House. Nonetheless, and because I am a Member of this House, I feel obliged to refer to their judgment in this matter as constituting a very dangerous intervention.
Legislation by decision is always suspect, and I always suspect it, but legislation by a decision which puts at question the taxing power of the people's representatives should be looked at by the people's representatives with very anxious care. I am not going to address myself at this point or, indeed, at any point, to the question of the social merits of the Supreme Court decision in this matter of the taxation of married women. I am concerned with the fact that the Supreme Court is choosing to determine a matter of social merits which primarily is a matter for the representatives elected to Dáil Éireann with regard to taxation.
The Minister and the Government were wrong in reacting as the Government and the Minister did by going beyond what the Supreme Court decided. At the time the budget was introduced in Dáil Éireann by the Minister, all the court had found, and found in a manner which I shall have to criticise, was that sections 192 to 198, inclusive, of the 1967 Act in so far as they provide for the aggregation of the earned incomes of married couples, are repugnant to the Constitution. I would have thought it the Minister's duty and the Government's duty to defend very energetically the decisions of parliament and, very particularly, they should not have gone beyond what the Supreme Court had determined with regard to this matter. A conclusion of any body, whether it be a council, the Pope, the Supreme Court, or anyone else, who pronounces on a matter is as good and only as good as the arguments which support it. Because I cannot make my points unless I do so, I have to read the last part of the judgment of the court delivered on 28 January by Mr. Justice John Kenny. He quotes Article 41 with regard to family and he points out that it has three sections. Section 1.1º reads:
The State recognises the Family as the natural primary and fundamental unit group of Society, and as a moral institution possessing inalienable and imprescriptible rights, antecedent and superior to all positive law.
He said it is because of those fundamental features that the State gives the guarantee in Section 1.2º which reads:
The State, therefore, guarantees to protect the Family in its constitution and authority, as the necessary basis of social order and is indispensable to the welfare of the Nation and the State.
Judge Kenny said the section stresses the importance of woman in the home and pledges that mothers shall not be obliged by economic necessity to engage in labour to the neglect of their duties in the home.
Section 3.1º must be read not only in the context of the whole of section 3 but of the whole Article. It says:
The State pledges itself to guard with special care the institution of Marriage, on which the Family is founded, and to protect it against attack.
The judge said this means that the pledge I have just read is a guarantee that this institution in all its constitutional connotations, including the pledge given in Article 41.2.2º as to the position of the mother in the home, will be given special protection so that it will continue to fulfil its function as the basis of the family and as a permanent, indissoluble union of man and woman. He proceeds:
The onus is on the plaintiffs to establish that the higher income tax liability which may fall on the husband is a clear breach by the State of its pledge to guard with special care the institution of marriage and to protect it against attack.
Counsel for the Attorney General conceded that in some cases, but not in all, marriage, as a result of s.192 of the Act of 1967, could have the consequence that the husband could become liable for more than the total sum of income tax which husband and wife would have to pay if they were assessed separately on what each of them earned. They argued, however, that to decide whether the State had failed in its pledge, the whole of our law in relation to married couples should be looked at and that when this was done, it would be found that in many respects, numerous benefits are given to the husband, wife and children. They submitted accordingly, that when the court took account of the many advantages and privileges given by the State to married couples and their children, they outweighed the disadvantage of the increased income tax liability of the husband created by s. 192 of the Act of 1967.
The court accepts the proposition that the State has conferred many revenue, social and other advantages and privileges on married couples and their children. Nevertheless, the nature and potentially progressive extent of the burden created by s. 192 of the Act of 1967 is such that, in the opinion of the court, it is a breach of the pledge by the State to guard with special care the institution of Marriage and to protect it against attack. Such a breach is, in view of the court, not compensated for or justified by such advantages and privileges.
It then declared as it did. I would like to say that the court, in pronouncing on this matter, makes an assessment where it has not the capacity to reach the conclusion which it has reached. It has no apparatus or system of calling evidence which would enable it to make this judgment as to whether a section or group of sections which have been on the Statute Book of this State for 22 years were to be regarded as unconstitutional.
Let us look at how they are regarded. They are regarded as injuring the ability of the woman to spend her life within the home. Sections which are going to aggregate her income with the income of her husband are supposed to damage her ability to spend her life in the home. This is the subsection to which they referred. The State has pledged itself to guard with special care the institution of marriage. Yet these sections which had been there for 22 years were to be regarded as an attack on the home. I am perfectly entitled, in this place more particularly, but in any place, to express my dissent—and I shall appropriately —with a conclusion of this kind.
My particular point at the moment is that the Government ought to have seen the extreme importance of this matter in terms of the balance of power within this State. I rate the independence of the Judiciary as enormously important. I submit that the Judiciary may abuse its powers every bit as much as the Oireachtas may abuse its powers, every bit as much as the Executive can abuse its powers. I am not going to call this abuse of power but I would say that the Government's duty was to give the court every opportunity for further reflection on this matter of reversing itself on the whole affair.
Consider what we have suffered. In a year in which some people are of the opinion, and at least the Minister will accept it, that the budget deficit is too large, the Minister has told us that the measures he has taken in reaction to the Supreme Court decision will cost us £220 million. It is extremely dangerous that the position is that every time the Minister for Finance presents a budget he has got to sit down with his last word on the words "subject to the Supreme Court's approval". How can a State be run on these terms? It cannot be run on these terms. It is obviously wrong, and there are a whole lot of consequences which are embodied in this Bill which are costing this country, immediately, considerably. There is the very greatest doubt, a doubt which I shall express when I come to deal with it, as to whether these provisions are in fact just. Just immediately, for example, let us take the case of a man whose wife is dead. He is not merely faced with that grievous experience, but he finds, after he has taken benefit that the Minister has included in the Bill for the year of his widowhood that not merely is he without his wife, the partner of his life, but, when he was the person who was earning all the income, has to pay thereafter additional thousands of pounds more tax. That kind of consequence coming from the finding of a Judiciary seems to me of a kind on which the Government has a duty and this Parliament has a duty to consider their position.
Debate adjourned.
An Leas-Chathaoirleach
When is it proposed the House should sit again on the Finance Bill?
I understand it will be 10.30 in the morning.
An Leas-Chathaoirleach
The debate is adjourned until 10.30 in the morning.