Vol. 94 No. 10
In the printed list of recommendations which Senators received in their post this morning, the recommendations are not in the correct sequence because of a printing error. The list has been reprinted in the correct sequence and has been circulated to Senators in the House. Senators will also have received a neo-styled list of additional recommendations.
SECTION 1.
This is the section which provides exemption from income tax for those individuals with incomes below certain amounts. Exemptions are granted where the total income of the individual for the year does not exceed £1,700 in the case of a single or widowed person, or a married person who is assessed for tax purposes as a single person. Where the taxpayer is a married person and he and his spouse have opted to be assessed on their combined incomes, exemption from tax will be granted if the taxpayer's total income for the year does not exceed £3,400.
In addition, marginal relief is available for those whose total income does not greatly exceed the appropriate exemption limit. In the case of a single person who is entitled to the PAYE allowance of £400, marginal relief will be available on income up to £1,832 per annum, for widowed persons on incomes up to £1,782 per annum, and for married couples, where one of the spouses has income that is taxed under PAYE, on incomes up to £3,950 per annum. A total of £113,000 taxpayers will benefit from these provisions, of whom 75,000 will be taken out of the net.
In addition, the cost of these exemptions and the associated marginal relief will amount to £10.8 million in 1980, and £18.6 million in a full year. As a consequence of this, the total number of taxpayers to be exempted under this provision in 1980-81 is estimated at 727,000. The pre-budget estimate was 810,000 but, as a consequence of this and another exemption section, 83,000 will be taken off the tax rolls as a result of the reliefs provided in the Bill. The House will be glad to know that this is the lowest number of taxpayers since 1972-73. I commend section I to the House on that basis.
The Minister's statement and the information given are very welcome indeed. It is useful for us all to have on the record precisely how the marginal relief impacts. I find it difficult to work out the 60 per cent of excess, and so on. It is very welcome. Despite the cost given by the Minister, and when I said on Second Stage I did not think people should be going around feeling chirpy as a result of the budget this type of thing certainly was not on my mind. I take it it is understood by everybody that one of the types of poverty that is most difficult to reach is the poverty which arises from low incomes and where there is not a system of discovering how these incomes can be supplemented under our existing procedures. Certainly I welcome the section and the Minister's explanation.
This is another exemption section. In this instance, it is the age exemption section. It provides higher exemption limits for those persons who are aged 65 years or over, and even higher limits still for those who are aged 75 years or over. For those aged between 65 and 75 years, the exemption limits are £2,000 for single and widowed persons, and £4,000 for married couples. For persons who are 75 years or over, special exemption limits are also introduced: £2,500 for single and widowed persons and £5,000 for married couples. Marginal reliefs in the way in which I have described already will apply here as well. The number of taxpayers involved here will be approximately 12,000, of whom 8,000 will be taken out of the net altogether. The costs are £1.8 million this year and £3.1 million in a full year.
My remarks on the first section are applicable without repetition to this section. I could make a point which I failed to make on the first section with regard to this as well. I do not really see why, in the case of this section where the benefits are being given under the earlier section, the particular beneficiaries, as I shall call them, the taxpayers if you like, have to wait for refunds in particular situations if my understanding is correct. If my understanding is incorrect the Minister might tell me how to correct it.
I can assure the Senator that there will be no question of refunds. A scheme has been drawn up on the basis that the actual income will be estimated at the beginning of the year and the exemptions will apply from the beginning and throughout the year.
I totally accept what the Minister is saying. I just wonder why technically we have the language of a claim; the earlier section I think is reappearing in this one. An individual makes a claim——
The Senator will appreciate that most of the people covered in section 2 are on record already whereas, in respect of the others, we have actually had to advertise and notify them of their rights in the matter. We have had notifications in the public press for some time to employees who would qualify for exemption under section 1. In this instance, we would actually have the record in any event.
From earlier years.
I welcome the provisions in section 2 as I do those in section 1. The Minister has made a very genuine effort to meet the difficulties people have when they get to the age level of 65 to 75 years. The cost is fairly significant, but it is in an area where people have a problem and a fear for the future of how they will provide for themselves particularly with the changes in the rate of inflation. Could the Minister explain the exact meaning of subsection (3) of section 2? I am not too clear about its impact.
I am advised that it does not have any immediate impact. It is to provide for any possibility of avoidance in the future where we have had marginal relief applying over certain areas. The figure mentioned here is £10,000. It will not have any immediate impact at this stage. It is to ensure that, should the occasion arise in the future, we will have the necessary resources to seal off any avoidance.
I move recommendation No. 1:
In page 12, to delete lines 8 to 10 and substitute:
"(b) emoluments paid, directly or indirectly, by an individual (or by a partnership in which the individual is a partner) to the spouse or child of the individual other than emoluments paid directly to such spouse or child whose terms of employment and conditions of work are similar to the terms of employment and conditions of work of other individuals not being a spouse or child of the individual employed and paid by such individual (or by a partnership in which the individual is a partner);".
I mentioned on Second Stage—I do not know whether the record bears me out —a problem in this area which is very real. I know I am no financial legislative craftsman and I do not pretend that the language I have used is necessarily apt to achieve what I want it to achieve. The Minister has those close to him who will be well able to make the necessary improvement in it, if required. In case the matter was not taken up on Second Reading let me say—I know of a case where there are a number of professional people carrying on a professional practice together. They have in their employment, and have had in their employment for a year or so, sons of partners of theirs who are being paid. They are salaried persons. They are not sharers in the profits of the firm in any way. They are salaried persons and they always have been salaried persons.
In another case, I am aware of an apprentice who, likewise, is in receipt of a salary. The Minister will be aware of the new arrangements with regard to apprentices. At a certain stage they now get, by right as it were, a remuneration. If I know of three persons, as I do, without inquiring whether there are more than three within my own personal range of experience who would be deprived of this relief through the language being used without the kind of recommendation I proposed to this House, there must be very many more. Equally well am I aware that, unless you have control in this area, there are those who will exploit it to snatch this relief where they would not be entitled to it. I tried to use such language as would put people on proof in these circumstances. I hope the Minister will accept it.
I understand the basis of the Senator's proposal as he has indicated it clearly just now. The purpose of this PAYE allowance is to provide special relief for the ordinary worker who is taxed on a current year basis, has his tax deducted from earnings as they are paid, and obviously is not entitled to the various reliefs or various expense deductions under Schedule D.
On the face of it, there might appear to be something to recommend Senator FitzGerald's proposal. The fact is that there is a difference, as he will appreciate, between the people he has outlined and what one might loosely call the ordinary worker to whom I referred initially. They are both in employment, both earning a salary. The other conditions which attach to normal employment might not attach in the same way here. I am speaking about recruitment, security of tenure, and a whole range of issues which would distinguish the situation between partners, sons of partners or wives of partners as the case might be.
The opportunity for tax planners to ensure that there would be a reduction in tax liability, in my view, would be extended further as a result of Senator FitzGerald's recommendation. Senator FitzGerald said he does not claim any particular expertise in the area of draftsmanship. That is open to argument. The tax planners certainly have shown considerable expertise across a whole range of areas here. This could be availed of to open a loophole which would circumnavigate what we have in mind. Therefore, I could not accept it.
The Senator will appreciate that it is impossible to estimate accurately what the cost of this would be until such time as one could estimate how many would present themselves under the terms of his recommendation, if it were adopted, as being genuinely entitled, or how many others would make arrangements to ensure that they too would come within the scope. The information I got from the Revenue Commissioners is that in their view, adopting this could cost up to £5 million. If this kind of money were to be expended on any income tax relief, I could think of other categories that could be considered to take precedence over the categories Senator FitzGerald mentioned. I see the case he makes but I regret that, in view of the experience so far, and the perceived consequence of this, I cannot accept the recommendation.
I am afraid I have to press the Minister on this because I would have the very greatest difficulty in being convinced of the accuracy of calculations which would lead to a conclusion of the kind the Minister suggested as to the cost of this recommendation, that is to say, £5 million. I would have to examine such calculations to see where the error had been made. You can assume that this is so drafted that it could be used by persons other than those for whom it is intended, in which case you can make it £50 million or anything you like. Within the knowledge of the Revenue Commissioners there is alternative language to defend them against planning of that kind.
I should like to tell the Minister that in the particular cases I mentioned there are people with a sense of rankling injustice with regard to this. In one case, two out of 30 and in another case one out of 12 are in absolutely the same circumstances and have the same conditions as the others. No doubt they were taken into the apprenticeship because of their relationship, but that was not the sole test applied. They had to pass all the very difficult examinations en route to final admission and acquire qualifications for the apprenticeship stage. That is all past. They have paid for all that and they have worked for all that.
In large partnerships there cannot be fiddles whereby particular individuals are getting paid out of rank. The loss which results from that kind of carry on circumscribes any possibility whatever of that kind of thing. The Minister is putting himself behind the proposition that there is no such person as an individual who, being a child or a spouse, can be in a fixed salary position in like circumstances with other people. This is just not true. I can only offer those facts and those circumstances of which I know. There may be more. Whatever they would add up to, I suggest very strongly to the Minister that it is only the price of justice because they are truly on Schedule E. There is no question of their being on Schedule D. If there were any question of their being on Schedule D. then there should not be any question of their ranking for this claim.
Senators enjoy Schedule D income and they are also Senators. They get this relief despite the fact that they have Schedule D incomes. We in this House get this £400 allowance if I understand it correctly, notwithstanding the fact that there may be Schedule D profits taxed under the rules appropriate to the Schedule in question. Here, we may have people with nothing at all but what they are earning as employees with, perhaps, all sorts of circumstances which will forever keep them employees and will mean that they will never become partners. Twenty-five years ago the then leading firm of chartered accountants in this city had a senior partner who was extremely well known. His son was in that firm and he never became a partner. Eventually he faded out of the scene. The senior partner had other partners and these other partners had to be satisfied that the interests of the firm were satisfied. These limitations are there on recruitment and on reward. It is not your own money you are paying out. It is the shared income of the partners in question.
I would press the Minister in justice on this recommendation. I tried to make it a recommendation which would put people on proof of the kind that one has known to be done in regard to covenants, for example, on proof that the payments have truly been made. Let them make the claim in the prescribed form. Let them swear affidavits or anything you like so that it is limited to the people who are genuinely involved in it. This is Committee Stage. We will have Report Stage. While we are talking on Committee Stage the Minister's officials can be considering what they might introduce on the Report Stage to catch this.
No doubt when one talks of putting people on proof this could mean looking at the contract of employment, or a scheme, or whichever. I am not saying there is no such person as the person Senator FitzGerald has in mind. There may be. Indeed, there probably is. What I am saying is that the kind of people he has in mind are not those I had in mind when I introduced the Finance Bill because in terms of recruitment, in terms of their status, in terms of their position within the partnership, they are in a different position. That in itself is not the full argument. It is one factor only. The real argument is the argument in relation to the way this could be abused.
From the experience hitherto, unless human nature were to change utterly, as a consequence of this proposed recommendation one could envisage a wife or a daughter being presented as a working secretary when in fact she was not a working secretary and making a claim in this area. Experience has shown that these kinds of arrangements are made to extend the scope of something. We want to cover genuine complaints. Unfortunately to attempt to apply it to the genuine cases Senator FitzGerald has in mind would leave a gate wide open to be exploited very fully by people who could not be described as genuine cases.
As to the cost of it, I can only go on what the Revenue people said. Their estimates generally have impressed me as being very accurate in the consultations I have had with them at all stages pre-budget and post budget. When you think that the consequence of this could be to extend it to sons or daughters or wives of people in partnerships, the cost could be very considerable. I am not recommending to the Senator that he should extend the scope of his recommendation which, in any event, I am not in a position to accept, but he seems to distinguish also between partnerships and close companies which, the Senator will appreciate, are quite a feature of family businesses. I could not see any basis on which in equity one could make such a distinction. If one were to extend it into that area it would even be more considerable.
I regret that I am not in a position to accept this recommendation. The experience we have had in this area obliges me to come to the conclusion that I could not accept the recommendation at this stage. I acknowledge that there may be some limited genuine cases such as those referred to by Senator FitzGerald. However, even for those limited genuine cases there are characteristics of their relationships within the firm that distinguish them in some way from the general category of employees that I have in mind. I hope that Senator FitzGerald will appreciate that, particularly in so far as he is not anxious to see the loophole being exploited by those who have no entitlement to them, and that he can accept my reasoning in the circumstances.
I am afraid I cannot. It is as simple as that. I would have hoped that the Minister would at least note it for survey during the year in some fashion. Modern offices are just not as the Minister described the position. It just is not possible for a firm to succeed if they deny talent by giving advantages to blood relations. The Minister made a good point and it was wrong of me not to have thought about it. So concentrated was I on the injustice that I see, resulting from the application of paragraph (b), that I did not appreciate of course concealed under the slightly pejorative language of paragraph (a) are simple, old-fashioned family companies. For that reason the cost might extend beyond what I had conceived.
In view of what the Senator said, I would-be disposed to ask the Revenue Commissioners to have a look at the operation of this section during the course of the year. I perceive that the circumstances in partnerships such as he has mentioned have changed considerably and obviously merit has to be recognised. I am not suggesting that merit does not reside within certain distinguished families, far from it, and I would be disposed to having a look at it. I do not want to suggest that I will be able to make firm proposals but I am reasonably sensitive to what the Senator has referred to and he has now acknowledged that it would be difficult to confine it to this area. I will ask the Revenue Commissioners to see if during the course of the year they can come back to me with some formula which they would regard as being such as to embrace the genuine cases and to ensure that there can be no abuse or avoidance by others who would use this in a way that it was not intended they should use it.
I thank the Minister.
This section sets out in the usual tabular form the adjustments being made in the personal reliefs. Part I of the First Schedule makes the necessary textual amendments in the basic sections governing the grant of the allowances, and this year the usual approach has been modified in some respects. Some of the basic sections, as the House will appreciate, had to be rewritten in their entirety because of the new statutory provisions relating to the taxation of married persons. The new PAYE allowance of £400 is not included in the Table since there is as yet no provision relating to it, but the allowance is provided by the new section 138B dealt with in section 3 of the Bill. The allowances in the Table which were not dealt with in the separate sections of the Bill are the allowances for children and the allowance for a person employed to look after a taxpayer whose wife is incapacitated.
I will give some indication as to the allowances referred to here. The ordinary child allowance has been reduced from £218 to £195 in association with the increase granted in social welfare children's allowances but the allowance for an incapacitated child has been increased from £320 to £390, that is double the ordinary child allowance. The allowance in respect of a person employed to take care of an incapacitated person is being doubled and will now be £330 as compared with £165 previously.
While I welcome the provision in section 4 which doubles the child allowance to one-parent families, I must regret that in the same section, rubbing salt in the wound, the Minister reduces the same allowance for children of married couples by £23 per child. When one considers that the allowance is now only £195 in 1980 and that it was £170 in 1972, one must agree with the comment of the National Economic and Social Council in their booklet Alternative Strategies for Family Income Support, where they say that the value of income tax allowances for children has declined in real terms and is now at its lowest level since the foundation of the State. That is a true statement and this, therefore, is an area where equity, justice and consideration for the family suggest a real need for adjustment and I cannot accept that the 25 per cent increase in children's allowances meets that need. This report, among other things, suggests that we might do away with children's tax allowance altogether and that we might increase the children's allowance. This has been called “the wallet-to-the-handbag transfer” in countries where it has been done. This would be a very welcome development because the children's allowance in this country, whatever it was originally intended to be, has now become the most carefully budgeted and most carefully spent money in the country. Our children's allowance is the lowest in the EEC countries. It would be very tempting to compare the allowances that are paid in other countries but I do not think that would be a fair comparison because we would not be comparing like with like.
The basis for the family allowance in European countries such as France and Germany is that it is designed to encourage the working mother to stay at home and increase her family.
The thinking behind successive Finance Bills really worries me. This Finance Bill is designed to introduce equity into the method of paying income tax, and this is a very laudable idea.
Of the sections of the community who received concessions in this Bill, the ones that immediately spring to mind are the PAYE sector and working women. I am not concerned at all with the validity of the claims of these sections of the community. What does concern me is that they have one thing in common: they are sufficiently well organised to be able to translate political muscle into political punch to get what they want. Married men pay a great deal of income tax; they are hardly likely to take to the streets.
Is it equitable, for example, that a married man should get an allowance for entertaining his business friends while he does not get any tax allowance for educating his children, even though he is subsidising the education of other people's children? Is it equitable that young people who are starting to work for the first time should pay income tax at all if they are not able to support themselves? After all, their parents have to subsidise them and therefore, all through the income tax code it seems to me that the married couple with a large family are underwriting the whole system. We have to look at this and be quite clear that justice must be done to all sections of the community and that equity is not to be doled out on the basis that the wheel that squeaks the loudest gets the most oil.
It is useful to draw the attention of the House to the National Economic and Social Council report Alternative Strategies for Family Income Support. In paragraph 4, which deals with the consultant's study, it states that she had considered alternative strategies for aiding low income families with a working parent, large families and single parent families and it goes on in the next paragraph to say that the tax threshold for families with children has fallen, particularly large families. The threshold for a childless married couple has risen 25 per cent in real terms from 1969 to 1970 while that for a couple with two children has fallen to 90 per cent of that level and that for a couple with six children has fallen to 68 per cent of it. The tax allowances for children have fallen not only in real terms but also in relation to other personal tax allowances. The present value has very little relation to the relevant costs of maintaining children and adults.
I do not want to embarrass Senator Cassidy by what I have said and I certainly do sympathise greatly with the points she has made.
Going back to the beginning of children's allowances there is an anomaly which is not consistent with the equities that Senator Cassidy referred to in the sense that the administration who introduced children's allowance originally decided to apply it to everybody whether it was needed or not. It was based on the approach that if you were going to tax people then they should benefit. In practice it has worked out that a fair number of individuals have been benefiting from children's allowances which were intended to help in the bringing up of the family when in fact they did not need that money at all. It may be that the Minister in one sense has tended to redress this slightly by the marginal change in relation to allowances and a balancing up effect on the income tax side. However it has had a needling effect on people, not because of the amount so much as the sense that one was getting something and found that it was being taken back again. That is the impression that people have got.
I do not altogether go along with Senator Cassidy's point about parents providing for the education of their children and businessmen being allowed expenses, depending, of course, on the nature of the use of the expenses. There is a great difference. Even if one takes into consideration the present 50 per cent permissive, the principle of allowing for expenditure in the development or expansion of business in relation to the expenses area is in order to generate development in employment and additional tax to the Revenue. That is a principle that has always operated in business, but it does not have anything to do with the question of equity in relation to the education of children.
This clawback, as Senator Brugha said, has been in operation for some considerable time. That in itself could justify it because we all recognise that social circumstances change and legislation has to take account of that. It is to ensure that the benefit of the increased children's allowances would be hived off to those who are most in need. In the final analysis we are dealing with the same pool, so that in order to increase the children's allowances to the maximum extent it is necessary to ensure that this clawback would apply. I use that expression for convenience, although one would not use it if one were trying to gain sympathy for one's case.
Taking this issue itself in isolation—and one should not when one makes comparisons with other countries—the combined effect of the reduction of the income tax child allowance and the increase in the social welfare children's allowance in this instance is to grant an increase in take-home pay of, say, £25 a year for a family with three children in this area alone. This year particularly, having regard to the provisions that are being introduced in this Bill in relation to married couples and income splitting, it is clear that the situation for married people with children is very much in advance of the situation obtaining hitherto. For a variety of reasons, including the rather tight situation in the revenue, this certainly is not the year when one would depart from what has now become a pattern.
Regarding the reference by Senator Cassidy to EEC countries, the income tax scheme that we will be discussing later is very much in advance of what applies in EEC countries, as I learned from inquiries I made in Belgium, the Netherlands and places like that. One must view this in its total context and see what the net effect of all the provisions will be, and this is but one element in the whole area. Even when I made my budget statement I asked that the budget itself should be seen in toto and that people would not isolate one part or another. I am not suggesting that Senator Cassidy is doing that but it is possible to do it. Mention of France and Germany prompts me to say that the situation there is very different and I think you would Find the same in the Netherlands. One could say that they nearly have to get into the incentive bonus scheme in that the average family unit has been dropping so drastically that it represents something like one and a half per family. They have, for that reason, seen it to be very necessary, in view of what they perceive as being a drastic demographic trend, to encourage people to take the necessary action to ensure that this pattern will not continue.
A problem that we do not have.
We do not seem to have that problem. In relation to young people coming into employment, in this Bill one provision we have just dealt with has in mind to a considerable extent those young people who will be coming into employment for the first time. Many of them will certainly benefit from the exemption proposal of £1,700, not all of them. Many of us here would recognise that if even in equivalent terms we had a tax exemption when we started employment of whatever the appropriate figure would have been then, we would have welcomed it. All of those would make the justification for maintaining this situation quite clear.
On the question of business entertainment it is important to note that that is for entertainment wholly and exclusively for the purposes of business for the claimant. I have reduced the total amount that may be claimed by businesses generally to 50 per cent. I am not saying that this is the last word on it. Changes are occurring. For instance, I would imagine that the Commission on Taxation would be looking at this. You can define income in a variety of ways. I do not think that the argument is ended. What I have done this year is to achieve a measure of having the right balance at the right time.
This section provides for the increases announced in relation to special tax allowances for blind persons. The existing allowances have been increased to £330 from £165—they have been doubled—where the taxpayer is blind, and to £660 from £330 where both spouses are blind. The cost is not particularly significant. I can say I have received representations which indicate that for those to whom this applies it will be a very welcome extension of the allowance and the House obviously will support it for that reason.
Naturally, I welcome these provisions which I know blind people's associations and those involved in various ways are very pleased to see. They have been making representations regarding them, and I am sure that right across the House we would agree fully with these.
One point which the Minister might care to bear in mind for some future occasion is that there is an enormous difference of degree in those situations—fortunately, there are not many of them but they do occur—in which both the husband and wife are blind. Although it may seem arithmetically fair that one in effect doubles the allowance to £330 for each partner, under the circumstances in which both husband and wife are blind the difficulties, including the financial difficulties, with which such people are faced, are very considerable indeed and of a far greater order than when one, the husband or wife, is not blind and the other is.
It is not often that a Minister brings in reliefs to unfortunate categories without being asked to. I welcome the provisions by the Minister in the case of blind persons in particular because, unfortunately, we do not give enough attention to those who are unable in a sense to speak for themselves. In that sense the Minister's good news is very welcome.
Senator Conroy has made a very valid point. The problem which a couple both of whom are blind would face is not just twice that which a couple one of whom is blind would face. I can tell Senator Conroy that Revenue implications here would be of no consequence whatsoever to the extent that it would somehow alleviate the problem which such couples have. I will certainly look at it very favourably in the course of the year. Unfortunately, there is nothing I can do about it now. I have made provision as far as it seemed I could go at this time but I am conscious that perhaps there is a case for increasing the allowances even further in the situation where both couples are blind. Certainly I will look at that very favourably.
This section gives effect to the proposal announced in the budget that where a husband and wife were assessed as single persons the existing £1,000 limit on life assurance premiums would apply to premiums paid by each spouse on life assurance policies on the life of either spouse. This pattern is found right through this Bill, incidentally, and I am sure Senators will be aware of that. Where a married couple elect to be assessed to tax on their aggregate incomes a limit of £2,000 will apply. I cannot give any reasonably accurate estimate as to what this would cost but it is estimated tentatively that it might be of the order of £0.2 million or £0.3 million in 1980 and that approximately 1,000 or 2,000 married couples would benefit from it.
I welcome this provision. As the Minister said, it forms part of a pattern that goes through the Bill, but this provision is specifically in relation to life assurance and the protection of families and the family income. It is of fundamental importance. The effect of depreciation in the value of money over a period of time causes a great deal of anxiety to people who are seeking to provide for their future and their family's future, and the problems created are such that as people advance in years insurance becomes more expensive and may not be a practical proposition—even though it is desirable —because of the fall in the value of money. Section 6 provides an important relief in so far as it provides for families to assess their cover in a way in which they can get relief from income tax. It has the advantage too, that, coming at this time with the increase in the bands of income, where it is availed of it is almost certainly going to be for genuine cases and not simply for abusing tax provisions. The number of people falling out of the higher tax bracket now will find probably that the relief they get will be at the standard rate, perhaps even the lower rate. This is a very welcome extension of relief and almost certainly will not give rise to any abuse of the tax provisions by simply using higher rates of tax against additional insurance taken out. I welcome very much the relief in the section.
I have one very small point. Would the Minister care to indicate why, under section 6 (1) (a) it is intended to substitute in paragraph (b) of subsection (2) "spouse" for "wife"? I am sure there is an excellent reason.
There is. Up to now the husband could claim for premiums in respect of his wife but now, as I have indicated, the wife can in addition claim for a premium in respect of the husband and, therefore, we have that included.
This section deals with the amount of loan interest which is to qualify for income tax relief. In deciding this approach, regard was had to the implications of the recent Supreme Court decision. The Supreme Court did not deal with the question of interest relief to married couples. Nonetheless, one could surmise reasonably that if this Bill did not take action of this nature one might find a case being brought to the Supreme Court. I was not obliged, in terms of the Supreme Court decision, to make this provision but, having regard, so far as one can, to trends that emerge in Government and also in social thinking, at least it was arguable that one should not be forced to take action subsequently where one could perhaps reasonably take action in legislation. That is one of the reasons at least why this action was taken. Therefore, this provides now that a married couple who elect to be assessed on their combined incomes may claim interest relief up to a limit of £4,800. It provides also under an amendment that I introduced in the Dáil, that a widowed person may claim interest relief up to a limit of £3,500.
I introduced that in the Dáil because I agreed with some of the points made there, although I had been contemplating it before I introduced it in the Dáil. There are some circumstances where a widower in particular if he had been making the mortgage repayments in the course of a particular year, if his wife died, would find himself with only half the interest relief another married person would have, even if he had the same number of dependants as far as children would be concerned. The need for introducing that extension for widowed persons was more obvious in the case of widowers than it would be for widows who normally have mortgage protection policies in the event of their husbands' deaths. I do not think they provide for protection for a husband in the event of his wife's death. For that reason I thought it appropriate to introduce that extra exemption for widowers. The House will agree that it was appropriate in the circumstances to do that.
The Minister is wise to introduce such a provision in case there might be a High Court action. Such actions are becoming quite fashionable. Nevertheless this is a good one. Under section 7 (1) (a) where the husband is not employed, does a wife come in on the same basis? The section refers to the husband, a widowed person and another person, but it does not refer to a wife.
Yes, it does. There is no distinction made between wife or husband, and whether the husband and wife are employed. I am sure the drafting takes account of that. There is a consistency there all the way through. I can assure the Senator it is specifically intended to extend to that case also.
How could it be? We have deleted "husband" in one case and put in "spouse". We have not deleted "husband" this time. A husband could never become a wife, or a wife become a husband unless they went to North Africa for a while.
The total incomes are assessed on the husband in respect of both, unless they indicate—and these would be a minority of cases because there is no financial advantage to be gained—that they want separate assessments. I am assured—I have not looked at the fine print on this—that this applies in the cases referred to and it would not be necessary to have the sex change Senator FitzGerald feels might be necessary when we are to extend the benefit. I will have it looked at.
In the case of a husband, that is the end of it. In any other case over £2,400, or is it skipping the widowed person——
I am told it is not necessary because the provisions in respect of the interest payable by the husband can take account of whatever interest is payable by the wife. That is the short and, perhaps blunt answer. Meantime I will have it looked at. I will have to acknowledge that I have not gone into the formulation of this in the drafting sense, but I am assured that it is not necessary in view of the provisions of the Bill generally.
I was looking ahead at section 18. However, we will have the Report Stage later.
I might have further information for the Senator at that point.
This section gives effect to the new tax rates and the rate bands announced in the budget. The rates and the bands are set out in Part I of the Table. They apply in the case of a single or widowed person and a married person who is assessed for tax as a single person. The doubled rate bands are shown in Part II of the Table and they will apply in the case of a married couple where they have opted for assessment on their combined incomes, whether each spouse has income or not.
The doubled rate bands give effect to what is known as income splitting. Different views were expressed when we discussed this Bill last week. Senator FitzGerald said we had gone too far and others said—I do not think Senator FitzGerald was here at that time—that I had been reluctantly obliged to do this by the Supreme Court. As Senators appreciate, income splitting is very different from anything the Supreme Court had in mind. Their judgment confined itself to earned income, whereas this extends to unearned income. In addition, income splitting means that that unused portion of the allowances which either spouse might have can be transferred to the benefit of the other spouse. This was not covered in the Supreme Court case. I want to stress again that that only extended to earned income as distinct from unearned income.
There is a distinction between these proposals and the Supreme Court decision. As far as I recall, that decision would have cost us something of the order of £30 million by comparison with the actual cost under this scheme of something of the order of £130 million. Under this scheme, the tax bill of a married couple is the same as it would be if each spouse had half the total combined income, and each was assessed on that half as a single person. This was necessary because otherwise there could be a discrepancy or distinction between couples who had the same total income, but where the manner in which the income was divided varied. That would obviously introduce discrimination in respect of those who would be lucky enough to have almost equal shares of the total income and those who would not. For this purpose the tax bill of the married couple is the same, whether one spouse only has income, or each spouse has income but the division of income between them varies from case to case. It does not matter at this stage. That roughly indicates the provision in relation to this particular section. We will be dealing with some further aspects of this matter in other sections. I hope what I said so far has been of some assistance to the House.
It is only roughly the same because presumably if the wife is working she gets the PAYE allowance which will not be lost by the——
Subject to that, I agree.
The position is that while there is no advantage in getting married, there is no disadvantage either.
That is about it, as far as tax is concerned.
There is an advantage if you are not working.
There was always an advantage if you were not working.
It is doubled now, if you are not working.
The tax paying public and their families would see very great advantages and advances arising from this section. We debated on Second Stage the precise effects and certain examples were produced for the benefit of the House. I do not intend to go over them again at this point, except to note that there is a very clear immediate advantage for taxpayers arising out of the operations of the new bands but what is even more important is that it is now possible for workers and the self-employed to know that they can increase their earnings and productivity without being subject to the higher rates of tax applying for relatively modest increases in their earnings. This is one of the effects of this section, not just socially but for the whole economy. We will have the opportunity to plan for advance within the family structure throughout the economy knowing that increases in remuneration from whatever source will not be subject to the higher rates of tax in the way that applied, and probably in a way never intended when the rates were fixed. This section brings more relief and more sense into our finding and our taxing than any other section.
I welcome this provision which was mentioned on Second Reading. I will give the history of this matter. There were so very few people approaching the higher income rates that it was not considered important. Over the past ten to 12 years the situation has been reached where many categories in all sections have moved into the higher bracket and it has become a disincentive. For that reason I welcome the change which, for a single person increases the higher level from £6,000 to £9,000, and in the case of a married couple that figure is double. In a sense this section has removed the disincentive and I welcome it.
To be specific, we are dealing with the section which deals with tax rates and tax bands. The income splitting which will follow means that in respect of these extended bands they are doubled for married couples. That is why I thought I should make reference to it at this stage.
A point was raised on Second Stage and I had some inquiries made about the level of tax payable here by comparison with elsewhere, also whether there was a bias in this scheme generally in favour of the middle and upper income groups as distinct from the lower income groups. The consequence of doubling or extending these bands which was a major issue, is that all those with earnings in the lower income sector have a lower tax liability in this country; the lowest rate of tax in Britain is 30 per cent, while here it is 25 per cent. I will give an example which is not unrepresentative. For a married man without children who is earning £5,000 a year, the tax liability here is £227 less than that of his counterpart in Britain. Let me remind the House that people have moved so quickly through the bands—I think I made some reference to that on Second Stage—that it caused terrible problems in many areas, particularly in absenteeism from industry at a certain level of wage and salaries, which was brought to my attention soon after the budget. That is the kind of habit this country cannot afford at this time. The extending and doubling of these bands in respect of married couples should, apart from having an immediate impact on the taxpayer himself, also have the consequential beneficial effect in terms of attendance at work and productivity generally at a time when this is very vitally necessary.
This is a definition section.
What is this section?
Section 3 of the Income Tax Act, 1967, provides that in any enactment passed after this Act, the Income Tax Acts shall mean this Act—meaning the 1967 Act—and every other enactment relating to income tax. This definition did not provide meaning for the expression "the Income Tax Acts" in the 1967 Act itself, because the expression was not used in that Act as originally enacted. Reference to "the Income Tax Acts" are now being made in the new chapter 1 of Part I of the 1967 Act. This is the chapter containing the special provisions relating to married persons which is being inserted into the 1967 Act by section 18 of this Bill. The definition needs to be modified in view of the fact that section 3 of the original Act did not provide a meaning for the expression "Income Tax Acts" and the amended definition is set out in the Table.
Have we been referring to the "Income Tax Acts" in the Income Tax Acts over the years?
We have.
We suddenly became wise.
Better late than never, but it was particularly necessary in view of the extensions this year.
On section 10 there is a recommendation. Might I remind the House that recommendations Nos. 2, 9 and 10 are related and should be discussed together? Recommendation No. 2, Senator Alexis FitzGerald.
Would you and the House approve if we took not merely recommendations Nos. 2, 9 and 10 but also recommendation No. 11 together?
The House or the Chair has no objection.
Are they all dealing with the same questions?
They all deal with the change in the law with regard to lump sums.
Recommendations Nos. 2, 9, 10 and 11 will be taken together.
I move recommendation No. 2:
In subsection (1) (b), page 16, line 31 and in the Table, page 17, lines 7 and 21 to delete "£6,000" and substitute "£12,000".
First, let me explain very simply why I proposed the figures of £12,000 instead of £6,000, and £8,000 instead of £4,000 where these figures appear. I took the Finance Act, 1968, I think I should have taken the Finance Act, 1964, but my side note to the Income Tax Act, 1967, made me think the amendment came in 1968. I am taking a date which is actually favourable to the tax gatherer, not that I would like to put the Revenue Commissioners with their sense of justice in that category—but taking the November 1968 index figure of 100, according to the most recent cost of living figure it would be £409.7 and in 1968 the figure allowed free was £3,000. That explains why I suggested 12 should take the place of six in the Act. I do not know where the Minister got four, because I did not find that figure in the existing paragraph, but I took four and gave it the same proportion to 12, making it eight, as four bears to his six. That is on the basic suggestion if one sees the direction of these recommendations with regard to that.
I am not sure how aware the Minister is of the actual situation with regard to the proposed change. I have a very strong wish to have the recommendations in my name accepted as just provisions. According to information made available to me, there is one company at this moment which is closing down. Payments were negotiated by the union for 300 employees who, for age reasons and otherwise, will not be re-employed. I am informed that there are no management executives involved. The unions negotiated compensation payments which run from £5,000 to £40,000. The formula used as a basis for these sums and which was agreed, was nine weeks' pay for each year of service. You get the idea of the number of years service involved in the case of somebody getting £40,000 compensation. According to the general statement made to me in one case by a very highly regarded professional firm—the name of which would be known to everyone in the House—over half these will be seriously and adversely affected by the repeal of the top slicing relief in the existing schedule.
Could I remind the Minister of the circumstances in which this went through the other House? There was some technical reason for which I am looking forward to hearing an explanation in relation to another recommendation. On the morning of the Report Stage a resolution was first introduced which was technically requisite to take the proposed new Schedule. When that resolution was put down the Deputies had not in front of them, as far as I could understand through reading the proceedings, this new schedule. I am fortunate enough to have been trained in the law and I sweated with towels around my head trying to strain the precise meaning out of the new Schedule, but that I believe I did, with my training, after due sweating. What the Deputies were able to make of the provisions of the new Schedule I just wonder. At any rate having understood the basis for the new provisions I have put down these recommendations.
Let us turn to the Schedule. The simple heart of the matter is in paragraph 8, the relief is increased by the enlargement of the diviser of the payment. The diviser (i) in this case is the aggregate of the taxable incomes whereas I suggested the diviser should be enlarged to the aggregate of the total incomes which would bring right back into and add to the taxable incomes all the allowances of one kind or another that the persons received over five years and thereby increase the fraction to be deducted from the relief, and thereby increase the relief. Let the Minister not waste time if he is addressing himself to me on the matter of how advantage has been taken of the existing top slicing provisions in particular cases. I know well about it and I know well about the planning involved.
May I address myself to those others who do not know about it, or who do but do not want to——
Perhaps I should illustrate the point more precisely. If that is the Minister's approach to my recommendation, is it the approach to all my recommendations? Are we having a Committee Stage where we are really and truly in Committee, considering and debating what truly ought to be in the Finance Bill, with a view to reporting the view of the House in the performance of its duty, and whether it makes any recommendations to Dáil Éireann with regard to the Finance Bill, or are we tripping around a piece of print saying anything we like, or what we judge is necessary for us to say, or being silent until we go through a bloody farce which means that there is nothing to be done to the Bill that has come to us? It would be very useful if there was some piece of human machinery whereby a wink or a nod could be given to other people from which they could learn so that they need not be wasting their time trying to improve Finance Bills and go off to do something else they will get top sliced for in due time. I am going to continue to make the assumption that——
I do not know whether I am being invited to wink or nod at this stage.
——the Minister will listen to me and then realise he should do something about his Bill. I remember one of his predecessors, not of my party but of the Minister's party, who at midnight in this Chamber went off with the Finance Bill to Dáil Éireann, having accepted recommendations from here, and had them accepted and embodied in the Finance Bill, 1973.
The Minister seems to be ready to reply to anything I am going to say. He does not know what I am going to say. It may be a complete repetition of all I have already said but he appears to be starting into a race—a 100 yards sprint—no matter what I say. He does not actually know what I am going to say. I might actually begin to talk sense in a moment.
It is only a habit I have.
That does not trouble me——
Recommendation No. 2 is worrying the Chair. Recommendation No. 2 is under discussion.
I would not like the Chair to get as worried as one Senator is at the moment. I give an example of the effect of the change in the case of a married man with four children who receives a lump sum of £18,000. For all the Minister or I know, that man has absolutely nothing else in the world; all that he has is a memory of a job that is gone and he is at an age when he has no hope of another job. He has just got his £18,000 negotiated for him by his union.
What the Minister is proposing to do by the change in this Schedule is to make that man pay out of that £18,000, 35 per cent of £8,000. Because the man has no capital he gets the full relief on the £10,000. There is an excess now of £8,000 which is chargeable at what is in his case the applicable rate of 35 per cent. That 35 per cent, under my recommendation, would be reduced because the applicable rate which arises from the Minister's formula relates to his taxable income over the five years, which will be a very much lower total than his total income over the five years. A married man with four children would have been getting allowances as a married man, allowances for his children, and allowances, no doubt, for interest on his mortgage payments. Such a man has not been receiving and is not in the line of receiving the benefit of tax planning of any kind. In his case under the new Schedule, which is thought to be dealing with golden handshakes, the revenue authorities are going to jump on the man whose only bit of money is this sum of money which the union has negotiated for him.
I do not know whether the other situations I shall mention are actual situations as is the one I have mentioned. They may be actual situations. I only received the material at about 1.30 p.m. today and I made it available to the Minister.
I should like the House to consider two examples. The first is the case of a married man who has two children and who is retiring on 31 March next. It is obvious now as I read it that these are not actual cases but illustrations. This man receives a lump sum of £20,000, has a salary of £10,000 and pays bank interest of £1,000. Under the existing method of taxing, that man receiving the £20,000 will pay tax of £1,893. Under the proposed method, the tax payable will be £6,437, an increase of £4,544 or approximately two-and-a-half times the existing tax. In the second situation the lump sum is £25,000 and the sum payable under the existing tax system will be £2,593; under the proposed system of taxation the tax will go up to £9,355 or rather more than double the tax payable now.
I do not think there is anything necessarily perjorative about planning—that is something for discussion perhaps on a later section. Planning did occur in relation to redundancies. Such planning is really only possible in the case of senior executives and directors but relatively speaking these were few in number. I do not think and I strongly submit to the House that these few cases do not justify a blanket attack on an existing system which now, alas, would operate on all too many people, not necessarily senior executives and directors but people who have to be organised to protect their interests and in situations where there is no question whatever of their holding up the community to ransom by an unjust strike, where we are talking about the closing down of businesses that can no longer continue in operation.
I am aware of three such companies at the moment. In all these cases lump sums will have been negotiated for the workers by their representatives on the basis of the existing system of taxation. In some of these cases it may be that the men are so trained or are of such an age as to be available for re-training or to take up other employment. However, I believe there are very many of these cases where the people concerned will not be re-employed, will be going on to a market already sustained by the supply of a lot of better skill, if you like, younger and more active, more flexible and adaptable, easier to educate in new skills and training. In many of these cases the only thing that these people will have, who have been enjoying relatively good incomes over the years in good industries, incomes which will have gone, will be these lump sums, all worked out in a formula common in application to all the people concerned.
It is an extraordinary thing that we should change a system which has been allowed to operate for years when it applied to members if you like of one class and which is now going to be changed because it applies to members of another class. I believe it is as simple as that. We can all understand and sympathise with people we may frequently meet if their situations are met by lump sums and if people come to their assistance in protecting them against the impact of taxation but we are prepared to allow that system to be changed without any debate of a real character. I suggest to the Minister that this is a very grave matter and I am very serious about this.
This Bill was published in April. We got pretty good notice of it this year; it was published relatively early. It is a complex Bill, not an easy Bill to grasp. After it was circulated it was considered by accountants, solicitors, by the Institute of Taxation, and by different confederations and representatives of the different interests. It contained quite a number of afterthoughts, provisions that were not in the budget that had to be absorbed and considered. The Minister got the benefit of a lot of representations, from many different bodies. I got most of the representations that the Minister got but I did not have in my pocket the skills at the disposal of the Minister. But on the morning of Report Stage in Dáil Eireann it was proposed to change this matter.
As far as I know no advance notice of any kind whatever was given of what is a radical change in the law with regard to compensation being paid to people who are losing their jobs. I accept that the Minister is as much concerned as I am and as everybody else in the House is to treat people fairly; to treat fairly those who are now redundant or who are, alas, going to become redundant this year and next year. How can they be treated fairly if there has been no special consideration of the provisions, no criticism brought to bear upon these provisions, no dispassionate study made of these provisions, no consideration in public made of the number of people who are going to be affected, of the sums of money that are going to be involved and of the lives that are going to be damaged by adverse change?
Will there be no consideration given even to the argument which there may be for changing the top slicing of the existing provisions, a change which, incidentally, has not been made in the United Kingdom after many years of Labour Governments? They let top slicing provisions stand and they stand to this day. We have not even the benefit of textbook criticisms of these new changes. The only place where we can consider what is proposed is in Seanad Eireann, where it is possible only under the operation of a resolution which we passed setting out that the debate is to end at 8 o'clock tonight. It is only here, between 4.30 p.m. today and 8 o'clock, that we with such skills as we have and, God knows, they are not enough, can change a law which has been in the Statute Book for the last 16 years, a law which, in the first instance, deems something to be income which is not income and which always must be looked upon and understood in that light, because the 1964 provisions had to deem capital funds as income to bring them within the range and the fire of taxation.
In so far as these have operated over the last 16 years, they have operated on people who could get the benefit of advice that they could pay for, top class people who pay top class money for top class advice. They are now going to be swept away with such consideration that is only a joke, the consideration that is being given by the Department of Finance and the Revenue Commissioners. Who else has considered it, apart from those people who have talked to me and imparted to me their thoughts with regard to the effects of the new change?
I propose modest alterations to the scheme. I see no point in opposing it although I think that is what should be done. The Schedule should be thrown out until we all have had an opportunity to consider its full effect. If we are not going to throw it out, let us at least adjust the existing reliefs with due regard to inflation. In 1968 £3,000 would buy what you pay £12,000 for now. That at least is an acceptable change. Where the Minister has proposed four, I have taken the due proportion and proposed eight. The heart of the change in the Schedule is to enlarge the divide of what will be taken from the relief, by enlarging taxable income.
When I come in due course to write my memoirs, I will write notes of approval of Ministers and the Ministers who will get my approval will be Ministers who proved to me that they had ears that were open in Seanad Éireann and were not bullied by the system, who had the courage to adjust to a reasonable argument. The Minister is able to open his ears. He can open them here today to hear what I am saying. This change was not indicated in the budget and was not contained in the Finance Bill which was circulated. It appeared for the first time, not on Committee Stage in Dáil Eireann but on the day the Report Stage started and finished in Dáil Éireann.
No body of skilled people examined that change. The Minister may have had a lot of representations with regard to it. I received the information that I have tried to make available to the House. I strongly urge the Minister to make the adjustments I propose. Frankly, I would prefer if he let the existing schedule stand.
These sums paid in compensation may seem large. People may say that £40,000 is a tremendous amount of money. This is a case of a well-off company shutting down its business in Ireland because it is not making enough money. This is being negotiated for them. In the vast number of cases the individuals who are receiving these sums believe they are not going to be subject to taxation or, if so, only to taxation of the size in the illustrations I have given. The vast number of people in these cases will have nothing but these sums to complete the education of their children. In many cases they married late in life and have to pay for their children's education for many years.
I will put this in its context, and then we can deal with the examples Senator FitzGerald has given. In the first instance, the House should be aware that, as far as the opportunity to discuss this was concerned, I indicated on Committee Stage in the Dáil that I intended to introduce an amendment to this effect. That is the first point I would like to make. It was not as if I introduced it by way of resolution that morning in the Dáil, I did give notice the previous week of my intention to introduce an amendment to the effect that I did introduce. That is point one. Therefore, it is not as if there was only that short period in the House on that date to deal with it. It was not like that at all.
The second point which may not be immediately relevant but which nevertheless Senator FitzGerald has touched on and which I should deal with to remove one of the bricks—I am not saying it is the foundation stone upon which his argument is based, but it is one of the bricks—is the fact that this scheme still operates in Britain. He implies from that, that because it was operating under a Labour Government, or for so long under a Labour Government, that there is no reason why we should deal with it here. I can tell the Senator that a Conservative Government have indicated that they have found that the scheme as it operates is very unsatisfactory, that there are major loopholes in it and that they intend to introduce appropriate amendments perhaps along the lines that we are introducing here.
Up to this year only £3,000 of lump sum compensation was exempt from tax. In the Bill I increased that figure to £6,000. That was seen to be a significant increase by many workers, particularly employees who found that the existing limit of £3,000 was insufficient, having regard to inflation and the arrangements they made on redundancy or otherwise. The consequences of the amendment which I introduced on Report Stage which, obviously, does not seem to have found favour with Senator FitzGerald, was to add a further £4,000 to that £6,000 in the case of redundancy and retirement benefits for the first time. The exemption limit became £10,000, not £6,000. The people now becoming redundant for the first time will have an exemption of £10,000 in comparison with £3,000 last year. If they resume employment and again become redundant, then for each subsequent time they are redundant the limit under the terms of the Bill will be £6,000. While one looks at the impact of this, it is fair to put that background to it.
I do not know whether I am going to figure in Senator FitzGerald's memoirs. Some of his colleagues in the Dáil have the same disposition and capacity as he proposes to exercise. I might figure in some of theirs, because I did make many significant amendments during the course of discussions on the Bill. Therefore, while I heard Senator FitzGerald loud and clear I noted that the pattern of his tone was not quite in accordance with his usual style of delivery and I do not want to have it assumed that I had my earphones turned off and was predisposed to reject his arguments.
Let me give some of the background. The top slicing relief was designed to ensure the taxpayer would not have to pay tax at an unacceptably high marginal rate on a large payment received in a single year but it is fair to say that over the years planners have exploited various weaknesses in the existing formula. They have created a situation whereby directors and executives in receipt of very substantial golden handshakes have escaped tax altogether. What the new formula proposes is that on the taxable portion of the income, that is, putting it simply, excluding the first £10,000, one would pay the average rate of tax which one was liable for over the previous five years, so even if one takes the case of the £40,000 that Senator FitzGerald has referred to, whether it is an example or a fact I am not quite sure——
I understand it is a fact.
The situation would be that the first £10,000 is exempt. The rate of tax applicable to the £30,000 balance would be that rate which was averaged over the previous five years. I do not see any grave inequity in an arrangement of that sort. Had the person remained in employment, earning the kind of money in respect of which he was being compensated for, he would have been liable to tax at a reasonably high rate. What one is doing is going back over the average of the previous five years. Exempting the £10,000 is a major step forward and one that has been welcomed. I have received, commendation is hardly too strong a word, from trade union representatives and workers in respect of this extension saying it was time it was done and that they saw it as being of very considerable benefit to them. Under the existing arrangements, because one could so arrange one's affairs as to have little or no income in a particular year, either by way of covenants or leasing arrangements or any other of the numerous devises that were used, we have had situations where people on golden handshakes, on figures of the order of £81,000, were not liable to any tax and paid no tax. That is the situation at the moment pending the introduction of this legislation. I am not suggesting that Senator FitzGerald is arguing that such a person should not pay tax but I am saying that under the provision of the order which Senator FitzGerald has rather enthusiastically suggested should be left intact, though he has made recommendations which he said were second best, a considerable number of cases, perhaps not quite of that order but certainly of a substantial order, because of the arrangements that have been made and are there to be made under existing arrangements, will be exempt from tax altogether. Many of them are, because of avoidance. I expressed my views on that elsewhere and I adhere to them. Where others are paying their share of tax, people who come into benefits of that kind are exempt totally from paying tax. That is the consequence of adhering to the present arrangements.
In relation to some of the examples that he has given—I would like to thank him for submitting them to us—he mentions that there appears to be a notional case looking at the wrong figures concerned, the married man with two children on a salary of £10,000 who retires on 31 March of next year, receives a lump sum payment of £20,000 and pays bank interest of £1,000. Senator FitzGerald says the tax payable under the old method of the top slicing relief would be £1,893 and tax payable under the proposed method of relief would be £6,437. The increase would be, on that basis, £4,544. I have had it examined in the meantime. The tax he refers to is the tax on the income for that year, it does not include any tax in respect of a lump sum of £20,000 or £25,000. The tax at the second example, which will be payable under the proposed method of relief, includes the tax which will not be chargeable in respect of the lump sum. In other words, it includes the tax on the figure of £10,000. The figures in the third element increase in the tax payable shows this tax which represents 22.7 per cent of the lump sum of £20,000 and 27 per cent of a lump sum of £25,000, but the important thing is that the lump sum is not included for tax purposes. Taking that into account, the Senator has also indicated that he has ignored the standard capital superannuation benefit which could also operate to reduce the tax bills below what is shown. This, too, means that the additional £4,000 that I referred to is £6,000 plus the £4,000 provided for, is also left out of account, so that the actual example given does not reflect the situation, though it is fair to say that it acknowledges that it does exclude the standard capital superannuation benefit.
Senator FitzGerald also mentioned that one should adopt the total income for the purpose of calculating the rate of tax to be applied to golden handshakes. To do that it might be appropriate if the total amount of the golden handshake were to be charged to tax. In fact, only the chargeable element of the payment is subject to tax and it is arrived at by deducting from the total payment the exempt part which will be £10,000 at least and in the case of many golden handshakes it may be considerably more. Since what is required is the average rate of tax to be applied to the taxable part of the lump sum, the rate obviously then must be the average rate applicable to the taxable income over the previous five years and that is what the section provides for.
What one is doing here is looking back over the average taxable income and the rate of tax over the previous five years and exempting £10,000 from the redundancy payment or whatever it might be. In many cases the amount of redundancy will not be as much as that and then, in respect of the balance, charging it at the average rate of tax liability over the previous five years.
I am making this sort of provision for two purposes, first of all, to deal with the blatant abuse which has been practised in this sector, the loopholes as they were on top slicing and golden handshakes, and also to increase the exemptions on lump sum redundancy payments which are very considerable. There is a very significant increase in this year from £3,000 to £10,000. Even in doing that there may be, as Senator FitzGerald said, some particular cases where people will be liable under this new arrangement to more than they would have been if the top slicing had remained in existence.
The case he mentions must have been an extreme example of someone liable to £40,000. It suggests to me that that particular person on the basis of the compensation arrangements that he referred to, nine weeks payable for each year's service, must have been fairly close to retirement anyway or else was being remunerated at a very healthy rate of income, if he was entitled to £40,000 on termination of employment and I do not think it is of any significance that one is white collar, blue collar or otherwise, he must certainly have been close enough to retirement or else was being remunerated at a very high level. It is fair to suggest that what I have already made is a reasonable approach and, incidentally, though Senator FitzGerald will not find much to reassure him in this, the Dáil certainly took the view that what was being done was in the right direction. It favourably supported the extension of the exemptions from £3,000 to £10,000 and also plugging the loopholes in respect of golden handshakes which were not liable to tax at all. That is what my proposal has effected. What Senator FitzGerald's first recommendation proposes is that the threshold in the first instance should be increased, for example, from £3,000 to £12,000. Whereas I made it £6,000, Senator FitzGerald doubles it to £12,000 and the £4,000 which I brought up to make it £10,000 in the first case would be £8,000. Therefore, the exempted threshold, instead of being £10,000 now would become £20,000.
If the main purpose of increasing the exemption limit under the section was to grant the exemption to the typical manual worker who receives a modest lump sum then we are not talking of such a case in the exemption limits that Senator FitzGerald's recommendation would introduce. I do not mind saying that, of course, the exemption limit is also available to directors, top executives of companies, including controlled companies in respect of what is known generally as the golden handshake but this is where the blatant tax avoidance has been introduced. I will give one example, for we have had many examples of cases up to £50,000 and £60,000 where no tax liabilty at all accrued. I would not feel justified, having closed the loophole, in opening it up immediately again because Senator FitzGerald suggests there may be some manual workers, or any other workers, who would have lump sum payments coming to them of the order of £40,000. With the exemption and the average arrangements that I referred to, what will emerge is that they will be at least not at a disadvantage by comparison with the situation that would have arisen had they remained in employment for what must be, it seems to me, a relatively short period in regard to the example he has given. Having said all that, my first experience in dealing with the Finance Bill has certainly made it quite clear that when you plug a gap or a loophole, perhaps another one is opened up. Certainly when you introduce something to plug it you may—I say may—affect some very exceptional cases in the way it was not intended. That is something I obviously will keep under review. I am satisfied that, having regard to the blatant avoidance that has been perpetrated under the existing arrangements and to the fact that, as I say, in Britain, though Senator FitzGerald does not seem to be aware of it, they too propose to change, and also having regard to the very equitable arrangement I am now introducing, that if there are some examples of people who would be badly done by at least we will have the opportunity of looking at them. If they are they will not be disadvantaged to an extent that they will be anywhere near suffering in the course of this year in which they will have a £10,000 exemption, anywhere near being taxed into penury, much less unable to support their dependants. This could not arise as a consequence of the exemptions.
Obviously this is not just a dialogue between Senator FitzGerald and myself. I hope not. My ears have been open and will remain open and, if some of the rather unrepresentative examples he mentioned do pose problems, we can have a look at them in the course of the year. It is not the intention to ensure that any of these payments should be totally exempt from tax. Yes, £10,000, but to suggest that someone who gets £40,000 because an industry is closing should not be liable to some tax could not be accepted, or that he should be exempt from tax. The exemptions which have been welcomed in the Dáil for the reasons I have mentioned should equally commend themselves to this House.
With regard to the extent of knowledge of the proposed change, the Minister tells me he indicated on Committee in the Dáil that he was proposing the change. Would the Minister tell me what he told the Dáil as to what the nature of the change was to be? Did he tell the Dáil what the basis in the new Schedule was to be? Did any Members of the Dáil have any opportunity of studying its significance? Was the new formula in any way indicated on Committee Stage to the Dáil?
I do not think it was. I indicated to the Dáil that I did intend to introduce an amendment to deal with the abuse, but I would have to check the record.
The Minister's recollection is correct.
To deal with the abuse of top slicing relief. I indicated that and I do not know whether or not at the same time I indicated that ipso facto I proposed to increase the exemption limits on lump sum payments. I do not think I mentioned that at the time, but certainly I gave notice of my intention. When it was brought to the attention of the experts in this area, they would have been sufficiently alert to present arguments either to the Dáil or the Seanad to ensure that the case was fully threshed out.
I can tell the Minister that the experts in question did not know a thing about it.
The Bill was recommitted. It was not just a Report Stage discussion.
I noted that. But the whole discussion at the re-committal stage related only to the change of the £3,000 to £6,000, up to £10,000 with the addition of the £4,000. There is not an addition of £4,000 in all cases, as the Minister knows.
I said that.
There was no discussion of the paragraph in the Schedule which is the whole basis of charging to tax the excess over the sum specified.
There was. I would be amazed if the record did not show that I indicated how the sum in excess of £10,000 would be chargeable to tax. I am quite sure I did.
The Minister did not.
I did on Report Stage.
I am sorry if I so expressed myself as to mislead the Minister on that point. Of course the Minister informed the Dáil on Report Stage about a piece of paper that they were seeing for the first time on Report Stage, the text of which the Minister will agree was not all that easy to get into heads. On that day when that piece of paper came to them, with the simple benefit of such information as the Minister was able to give to them in the context of a lot of talk about golden handshakes and people exploiting existing provisions by tax avoidance and without the benefit of any consideration by any of the experts, it went through.
This is the only place where a debate about this matter can take place. This is the only place where I know that a debate about this matter has taken place. I did not ask any questions about this Schedule but I received an analysis of it from totally detached professional people and I have given the Minister the benefit of examples I did not have an opportunity of absorbing myself. They were not given for any other purpose than to try to make this House understand what we are doing. I will quote from the language which has been expressed to me. Limiting (i) in the formula to taxable income ensures that the minimum tax payable in future on the lump sum will be 20 per cent and the average will probably be nearer to 35 per cent.
We are bringing in a new tax without Dáil Éireann or anybody advising anybody in Dáil Eireann doing a damn thing about it. It comes to us without our having had the benefit of anything other than what has reached me and, through me, the Minister. As far as I know it does not seem to have reached anybody else. In this year in which Ministers are warning the public about the increasing impact of redundancies on our employment policy, circumstances, whether under our control or not, will ensure that people will receive sums on which they will be taxed at a 20 per cent to 35 per cent rate on the opinion of people who have no vested interest in this matter good, bad or indifferent. We need to inform the Legislature about what we are doing.
I do not think this is just or wise, or that it should be done at this time when the whole industrial relations apparatus has not been settled. It will impact on people who are now redundant and already know what is going to happen to them. It is a laughable disgrace to talk about golden handshakes to men who have lost their life interest because the company they worked with for many years has closed. What they have been doing, they can no longer continue to do. They are no longer employable at anything else. They will get a sum of money which their trade union have negotiated for them. How will this improve the atmosphere in industry which we want to improve? What kind of money can the Minister be thinking he will get in this year from it? Can he not let the impact of it be slight in this year? If the Minister was set on change why did he not announce it on budget day or in the Finance Bill? If it was not in the Finance Bill why was it not introduced on Committee Stage? Why did it come so late in the day? What circumstances occurred to make an important change in a policy which will affect industrial relations? I urge the Minister to consider an alleviation, and an alleviation there will be.
The Minister talks about average tax, but men who are in the position of comfort to work out what their average tax is relate the tax they pay to their total income. They do not relate the tax they pay to their taxable income.
I am inviting the Minister to take what the normal business would take as being the kind of average which should apply. With regard to the £3,000 increase, the simple fact is that, according to the Director of the Central Statistics Office, what would cost £100 in November 1968 would now cost £409.07. So much for the increase from £3,000 to £6,000. That is the basic increase. The Minister knows perfectly well that the £4,000 is reducible to the extent that there is any little pension available from the job. That £4,000 is not for real in all cases. The only real increase is the £3,000 to £6,000 and that increase should be the same as it was in 1968. There has been economic growth which would justify that £3,000 being a higher figure. If it is to be the same figure in inflationary terms it should be £12,000 for starters. The £8,000 would then be reductible to the extent that there was a pension enjoyed from the job. These are facts which differ in every case.
I do not follow the pronouncements of the Conservative Government with the same care as I follow the Minister's. It does not surprise me that the Conservative Government are not particularly concerned about compensation payments made to industrial workers which the Labour Government were prepared to tolerate. I do not think we should get involved in that. I merely say it as a matter of fact. The Minister can correct me if I am wrong. The fact is that the existing law stands in England. When they change laws and we imitate them, there is one little benefit from them. At least we see the specialist comment on the effect of the change. If the UK had done this thing four years ago, as they had done that in 1964, some years before we enacted it, we would have had the benefit of examining the criticisms of the change. In this case there has been no change. The Minister cannot tell us anyone has written a damn thing to anybody about this, other than the pieces of papers I have been reading from. The Minister said—and I am sure it is absolutely true—that he was congratulated on the £3,000, That is all right becaue any increase of that kind of sum, whether it is sufficient or not, is understandably welcome, and I welcome it. Has anybody expressed criticisms to the Minister about the formula which is now proposed in the Schedule to replace the existing formula?
In the first instance, I do not think the formula itself warrants any detailed examination which would give rise to conclusions one would not reach in any event. The formula is very simple. It is exempting the £10,000 in the first case. The balance of the payments will be liable to tax at the average rate of tax payable over the previous five years. That is not a very complex formula one way or the other.
It is not the average rate of tax. It is the average of the tax to the taxable income. That is not the average tax.
The average tax paid over the previous five years. It surprises me that Senator FitzGerald is presenting it as if it were almost guaranteed to undermine any understanding that might emerge with the unions in a year in which there is a difficulty about redundancies.
I have abstained from any such language.
I appreciate that, but the Senator said that when we are having redundancies, a pattern which is regrettably there, obviously one should not do anything to aggravate the situation by introducing a provision of this sort. I want to say very definitely that this does the very opposite. It does not in any way aggravate the situation as to the vast majority of workers who will be affected by redundancy. In fact, it improves their condition very considerably. That has been conveyed to me orally by a number of trade union representatives and workers who see the benefit in this.
Let me give some examples to illustrate why that would be so. In the last 200 cases which are under review here, the lump sum payments fell into the following categories: £3,000 to £5,000 in 39 cases, £5,001 to £7,000 in 28 cases, £7,001 to £10,000 in 76 cases, and over £10,000 in 57 cases. Now, under the new formula, all the cases under £10,000 would be exempt, in other words, approximately 71 per cent.
With respect, that is not true. If there is any pension benefit the £4,000 is reduced.
No. Pension is left out of this completely. Pensions will not be included for the purposes of the £10,000. If you have a superannuation benefit as distinct from pension, that is included.
The first £10,000 is not, if there is any superannuation.
It is the first £6,000. You add £4,000 to that which means in toto that the amount can go as far as £10,000.
But does not in all cases.
In the vast majority of cases it will go as far as £10,000. There are some other points I would need to clarify for the Senator. He mentioned the question of redundancy payments. It must be stressed that redundancy payments under the Redundancy Payments Act—and the Senator has been talking about redundancy—are totally exempt from tax.
I did not use the word "redundancy".
I thought the Senator did. We are talking about redundancy. I might be forgiven if I thought the Senator referred to redundancy more than once.
I used the word "compensation".
The Senator will be aware that they are totally exempt from tax. Any extra payment over and above that will be exempt up to the additional £10,000. I honestly cannot see in those circumstances how what is being introduced as a major advance for those who have lump sum payments in the normal course of employment can be represented as being a penalty instead of a significant new exemption.
There may be people who will see a change which will mean that certain final payments, shall we call them that, without using pejorative phrases like "golden handshakes", will become very much more liable to tax than hitherto. I acknowledge unashamedly that that is part of the purpose of this. We have seen final payments, if one wants to call them such, in the order of £80,000 being totally exempt from tax because of the arrangements that were made and are there to be made unless this section is implemented in this form. Far from having the effect which Senator FitzGerald suggests it will have, in my view, and in the view of those who have communicated with me representing worker interests, it will have the very opposite effect. An exceptional worker may have a lump sum payment of the order mentioned by Senator FitzGerald, £40,000. On the basis of the scheme he presented that worker must be very near the retirement stage anyway, or else he was being paid at a very substantial rate. There is no criticism involved in that. Had he remained in employment he would have been paying tax at a very high rate. He is not representative of the vast majority who will benefit under this scheme.
As far as revenue is concerned the balance one way or the other is not of consequence here. It is not possible to quantify this precisely but most of what will be saved by getting at those who have exploited the loophole under the top slicing provision will be applied to extend the exemptions to the majority of workers who will benefit from them. On that basis the revenue implications are not so considerable but the question of equity is. I hope Senator FitzGerald, who has undoubtedly received these representations and has had an opportunity to examine them, will see that, first, they exclude some of the matters I referred to. Secondly, I do not know how representative they are but, to the extent that we are speaking of the majority of cases, I have no doubt that it will be a matter of benefit as distinct from disadvantage.
Probably I have already said this but, in the light of what the Minister has just said, I must repeat the words which have been used to me with regard to one company, in the case of the named company. The Minister does not seem to realise that the situation is not as he has put it. In the case of this named company, there are 300 workers who will be getting from £5,000 to £40,000 each, no management executives included.
The Senator said 300 workers. I have given the Senator some indication of the breakdown in the cases we have examined, over 200. It would help if we knew how many were around the figure of £40,000 and what exactly was their position so that we would know precisely the kind of cases we are talking about.
I am not able to do any more in the time I have had, which has been since yesterday morning and lunch time today, to find out for the Minister anything other than the company named and I can give the Minister the name if he wishes to have it.
I do not mean here.
Privately. There are 300 workers who will be getting from £5,000 to £40,000 each.
But 260 of those might be under £10,000. I do not know.
The Minister said this will improve things. If I am being told the truth by a firm in which I have the most complete and total faith, over half of them will be adversely affected by the repeal of the top slicing relief. Over half of them will have their position worsened by what the Minister said has been welcomed on their behalf.
The other half will be beneficially affected presumably.
I will go on to read to the Minister another paragraph which I had abstained from reading to him. It was stated that the new system devised is patently a tax gathering device in an area where severe hardship can be experienced by workers thrown out of jobs in middle or late middle age and where the prospects of obtaining new employment are remote, that taking tax from these people seems to be a very severe form of anti-avoidance legislation and that it is no answer to state that a change has been brought about because, in the past, comparatively few have been able to plan the tax away by using the existing system. They are people who know the whole situation and obviously, therefore, they have been dickying up——
The tone and the terms suggest at least as much emotion as reason.
I do not think the Minister is devoid of emotion and he would be less a man if he were. It does not detract from the argument if I am emotional about the fact that there has been no debate, no consideration of this. The Minister knows that, and must know it. Is there anything else in this Finance Bill which was hidden from everyone until it was released and published on 12 June in Dáil Eireann? Is there anything else of any significance that nobody has had a chance to consider and which will affect many people? The Minister has just given us the last 200 cases. I do not know what that means.
The last 200 out of how many cases? Does it mean that there will be this number of cases only in a year? I have mentioned one company where there are 300 cases, and I know of two other companies. That is three, and we are only in June of this year. I press the Minister on this. The figure should be at least £12,000 because of inflation and to maintain the value of the concession which was given when they introduced taxation of capital as if it were income.
I do not recall clearly the terms of that letter but it seemed to me that it was not just emotional in so far as concern was expressed for the individual—it was emotional I thought in the attitude expressed towards the Revenue Commissioners in calling it a blatantly tax gathering measure. That to me suggested a certain predisposition which showed a certain emotion which was not objective. We have to be objective. That is not the only function. We are concerned too, as the House must appreciate, with equity and with ensuring that some do not avoid at the expense of others who pay. That is the real formula here. In the case the Senator mentioned, if over 50 per cent are disadvantaged as a consequence of this, I have to say that perhaps 50 per cent will be advantaged. To what extent I do not know until we get the figures involved. Nothing the Senator has said can change my mind at this stage and make me agree that what will certainly be of immediate and obvious advantage to a very considerable number of workers who will be getting lump sum payments should be changed now at the risk of further blatant exploitation such as we have seen.
The Senator asked me to leave it as it is. That is his first case, and I could not agree to doing that. Secondly, I could not agree to extending the figures to the extent he proposes because then you would have a £20,000 exemption as distinct from £10,000. I do not think that would be necessarily in the interests of the vast majority of workers. People who change employment from time to time at executive level could do rather well out of this not once, twice but three times. That is not the purpose for which the section was introduced. I am prepared to take note of the cases Senator FitzGerald will present to me and to consider them and, secondly, to see if there is a possibility that some people will be very hard done by—people I think will find themselves very well done by. I am prepared to have this examined with a view to looking at it again next year. I do not imagine there will be many examples where the disadvantage will outweigh the advantage. I believe the opposite will be the case.
It is obvious that £6,000 is more than £3,000, and it is obvious that anyone who is being told that he will get an allowance of £6,000 will be pleased it is not any longer £3,000. The real point is: what is the real value of the allowance? The real value of the allowance 12 years ago was four times what it is now. I cannot accept the Minister's view about it and I am afraid I do not. So I press the recommendation.
This refers to section 336 of the Income Tax Act, 1967 which provides that registered trade unions who are precluded by statute or by their rules from assuring to any person a sum exceeding £600 by way of gross sum or £450 by way of annuity are entitled to exemption from income tax in respect of their dividends and interest which are applicable and applied solely for the purpose of provident benefits. I received representations from the Irish Congress of Trade Unions in respect of this and as a consequence this proposes to raise the limits from £600 to £2,000 and from £450 to £750.
To reassure Senator Cooney, may I say that in respect of this provision I received representations from categories rather different from the last category. This gives effect to the proposal which I announced in the budget to exempt from tax, pensions payable to War of Independence veterans. It has been decided also to extend the exemption to cover pensions payable to the widows of these veterans, and the section provides for this. I would not imagine that anyone would suggest that these pensioners have any particular muscle or otherwise. The section was introduced to give effect to what I have said and I think the House will welcome it.
Section 13 raises the exemption limits from £70 to £150 in the case of interest on deposits with the Post Office.
I understand that this section gives preferential treatment to one particular group of banks. Could the Minister indicate why the preference is given to these banks as opposed to other banks?
Firstly, the Post Office Savings Bank and the Trustee Savings Banks generally tend to cater exclusively for small savers. Secondly, the rate of interest which they allow is controlled directly by the Minister for Finance. Thirdly, the rate of interest, which is fixed, is very much below the rate of interest which is available through the associated banks. For that reason this provision was applied in respect of these two banks, the Post Office Savings Bank and a Trustee Bank.
As far as the associated banks are concerned, the provision giving interest relief in their case applies only to a specific panel who got the benefit of the exemption at that time. I listed them in the Dáil. Other banks have come into being in the meantime who compete with the commercial banks who are included in the relief, and an anomaly exists there. One has the choice of either extending the provision right through to all banks, which the provision does not, or simply making special provision for the Post Office and Trustee Savings Banks for the reasons I have given. I came to the conclusion that what I have done, which is to increase deposit interest from £70 to £150 in respect of them alone, is the appropriate way at this stage.
Would the Minister think that the small investors who are with the associated banks are going to come very badly out of this? There are people who cannot take their accounts anywhere else, because of the locality of banks. Those people are going to come out second best.
No, I cannot accept that that is well founded. They are already better off than depositors with other commercial banks who do not get the benefit of this. Secondly, the rate of interest which they get is higher on their deposits than that which is available through the Post Office and the Trustee Savings Banks. It was to equalise this situation that this extension to the Post Office and Trustee Savings Banks was introduced.
This section alters the date for payment of income tax which is the subject of direct assessment. Tax for the current year will now be payable in one sum on 1 October, except in the case of full-time farmers, where the tax will be payable in two instalments on 1 October and 1 January 1981. For those in receipt of trading profits or professional income, the change means that they will now be due to pay their year's tax in one sum half-way through the tax year. Those on PAYE will be paying it still six months ahead in that they pay it immediately on receipt of the income. The first sum now becomes due half-way through the year. Those assessed on rents and investment incomes were required to pay their tax in one sum on 1 September, so that for them also the change puts the date of payment back by one month as it does in the case of farmers. I have mentioned how this compares with the PAYE sector. This is in line with what I said in my budget statement, that I was trying to move to a situation where one treats all taxpayers equally. Where you had a provision whereby the self-employed and professional people paid 12 months later in many cases, it is necessary to make an adjustment there and I have done that. I have made an exception in the case of farmers, because they now will pay in two instalments, the first of which will be in October and the second in January.
This section gives effect to the decision announced in the budget that the proposal to tax certain short-term social welfare benefits would not be implemented. The main reason for introducing the proposal in the first instance was that the exemption of those benefits from tax provided a disincentive to do work the remuneration from which obviously would be chargeable to tax. For a variety of reasons but also because of the new scheme of taxation being proposed this year which does provide a major work incentive I came to the conclusion, that to a certain extent I was justified in expressing my trust in the employees of this country as I increased the bands and limits which would make it more profitable for them to remain at work rather to absent themselves from work.
I received representations from numerous industrialists that this has been a pattern, particularly towards the end of the year. I would hope that that trust has been well placed because the cost of not going ahead with the scheme that was announced last year, namely, to tax short-term social welfare benefits, was in the order of £8.5 million. This sum will not now be collected but one would look closely at what experience would emerge as a consequence of not taking the course that was proposed to be taken last year. I hope that I will be justified in exempting these short-term payments from income tax.
How short is "short-term"?
As distinct from long-term. A convenient distinction would be long-term disability benefits, disablement pensions, old-age pensions, widows' pensions. Short-term are basically unemployment and disability benefits that are of short but not fixed duration. There is no definition between short and long other than that.
"Short" could be several years?
It could in some cases but in the vast majority of cases you are talking of months rather than years.
Would it include occupational injury benefit?
I think that would be short-term.
This deals with income-splitting. Because of the effect of the decision in the Supreme Court which I have already mentioned, it was decided to introduce these new provisions in respect of tax of married persons. Senator Alexis FitzGerald expressed reservations on this the last day which were well stated but too courageously expressed in that he was against the extension, but he went much further than he needed to do. Had I adhered to the Supreme Court decision, as I have already indicated, it would have applied to earned income only. It would not have involved income-splitting whereby you transfer the allowances that are unused by one spouse to the other but that is what section 18 now does. It provides for the assessment of each spouse as a single person and for convenience it provides for the assessment of the husband in respect of the combined incomes of husband and wife. I say "for convenience" because the vast majority of cases will be cases where the husband will be the wage earner. In order that that vast majority would not have to make a special application to the Revenue Commissioners we will make a provision here that the assessment will be on the husband but those who require separate assessments or single assessments can apply for them. With income-splitting now available to married couples there will be no tax advantage in opting for assessment as single persons. It is fair to say that most married couples will wish to have their tax in respect of their combined incomes assessed on the husband so that the benefit of the personal allowances and the double rate bands will still accrue to the couple but it is a matter for each of them to decide. In some cases if they go for single assessment it will then be a matter for each spouse to determine whether if there are any unused allowances on the part of one or the other they want to have those transferred to the benefit of the other. There may be some cases—they would be exceptional—where because of the special relationships between them they might not want to see unused allowances transferred to the other but for the vast majority of cases the assessment on the husband is the most convenient thing and there is no advantage to be gained by having separate assessments but they are available for those who wish to have them.
I would like to pose a question to the Minister under section 18—Special Provisions as to Married Persons, 192(1) which states that:
A wife shall be treated for income tax purposes as living with her husband unless either—and there are two qualifications. The first one is understandable:
(a) they are separated under order of a court of competent jurisdiction or by deed of separation...
The section continues:
(b) they are in fact separated in such circumstances that the separation is likely to be permanent.
How does the Minister propose to determine the circumstances in which the separation is likely to be permanent? It seems to me to be a very hazardous area.
It is a question of fact that would have to be determined in each case and it has been approached on that basis. I can assure the Senator and the House that the intention will be to implement this in the spirit of the Bill generally and to give the advantage where possible. Nonetheless, I cannot postulate the situation in each case as it may emerge. If such circumstances were to arise that the separation is likely to be permanent then it would be different but it is a matter for factual assessment in each case.
If one spouse says that this is not going to be permanent, it is most unlikely it will be permanent, and the other spouse says that it is likely to be permanent, how are the Revenue Commissioners to decide between the two spouses?
In that situation they would assess the husband in respect of the joint income and then there could be appeal to the appeal commissioners. There would have to be evidence of some bloody-mindedness on the part of one or the other of them to take that kind of course.
In that case it is likely to be permanent.
Is this about not giving the money back even if it is unconstitutional not to give it?
Does the Minister anticipate much litigation arising from this section? Many people are going to say that they will not pay because it is unconstitutional. Does the Minister then propose to sue all the taxpayers?
It is not a question of "will not pay". They have paid but they want to be assessed as if the new arrangements applied two or three years ago when they did not apply. The action will have to be taken by them rather than by me.
I gather that some might not have paid all.
Necessary action will be taken in such cases.
Does the Minister think that is right?
If we did not have these sections here the actual cost to the taxpayer would be of the order of about £45 million if you go back two years, and if you go back a little further, as one of the judges suggested might arise, it could become £100 million. That is worth protecting.
We are not happy with section 22 which proposes to tax farmers with a valuation of £40 to £60. We on this side of the House feel that that section of the community are taxed sufficiently already with all the taxes that have been imposed on them over the past year. I will not detail those taxes. My colleagues, I am sure, will look after that. This section of people do not earn a taxable income and even the Land Commission accept that. The Land Commission realise now that a £30 valuation farm is not viable. The Land Commission are slow in the division of land, and we will talk about that another day. It is recognised that the £40 to £60 valuation farm allows just a bare living on it and to tax that type of farm is to discourage the farmer from developing more, if the farmer is able to develop at all in that area.
Another reason why we oppose the section is that now is the time to encourage farmers to develop their farms intensively and by taxing them you are discouraging them. All the reports in the newspapers over the last few weeks by Professor Sheehy and others have proved that farmers are losing money. Professor Sheehy in one of last Sunday's newspapers indicated that they were losing 1 per cent a month. The Minister might say that if there is a loss in the farm, then there will be no tax to pay. My argument is that imposing a tax on the profit on a farm of that size does not encourage farmers to develop. The proof is there that that size of farm does not allow a family to earn a proper living. It does not allow a farmer to pay his wife, sons and daughters who work on that farm for the work they are putting into it. We need to encourage production. Our exports depend on agricultural produce. Of all our exports 50 per cent are produced on the land and if we are going to discourage production from the land then we will reduce our exports and we depend on our exports.
The land of Ireland belongs not just to the people who own the land and who work it but to all of us who earn a living from that land, who are working in industries developing the produce from that land. That is the co-operative movement, and that will suffer by the imposition of this tax on that type of farmer because it is the £40 to £50 valuation farmer who makes up the co-operative movement. If we destroy the co-operative movement by not allowing profit that would allow further development, then we are not alone destroying the co-operative movement and the agricultural industry but we are also creating unemployment within this country. We are opposing this section because we want those people to earn a living from their lands so that they can put back their profits into the land to create more jobs for us all. They are the people we have always depended upon.
In the western and southern parts of our country 90 per cent of those people live on land of lower valuation. We want to produce from that land. If you take up any newspaper in the past week you will see that production is falling quickly and the price that the farmers are getting for their produce is falling also. The Farming Independent of 7 June 1980 shows tables indicating that the average production of fat bullocks, class 1, has reduced from 88.5 in 1979 to 84.44, that is based on £6.76 per 100 kilos. Class 5 has reduced from 80.20 to 71.13. The average reduction in cows sold has been £3.80 per 100 kilos from 1979 to 1980. The average reduction for heifers has been £12.80 per 100 kilos. The average reduction in French lamb from 1979 to 1980 was 104.45 to 101.20 pence per kilo.
That is what is happening to agriculture in Ireland before the introduction of this section, which is now going to tax further those people who have already been losing because of the Government's policy in agriculture which is not encouraging farmers to develop. Unless we encourage farmers to develop we are all in trouble. The farmers are not taking this lying down. They will fight against this tax move. I assure the Minister if he is going to set the farmers on the road, as happened some years ago when they had to sit outside Government Buildings, not alone will the farmers themselves be caught up in this type of situation but the workers also. They will realise, when the facts are pointed out to them in this situation—not in the situation that existed six months ago when all the workers were out on the streets in the city—that the jobs created by agriculture are lost. They will come out and support the farmers unless the Government realise the situation. I suggest that this section be withdrawn. That will be a realisation in itself and will give some encouragement to farmers that the Government are listening to them. I could quote many more taxes that were imposed on farmers over the past year and for the sake of agriculture, for the development of agriculture, and for the sake of us all I ask the Minister to withdraw this section.
I am delighted to get an opportunity at this stage to say I am amazed at a rural based Minister for Finance allowing himself to be manipulated into a situation that he will actually put this legislation on the Statute Book. I am amazed that the urban bias of this Government has shown its face to such a degree that before we are through with the articles contained in this document we will have done untold damage to the farming community and to the national economy. I do not have to tell the Minister what the proposals have already done, even before they are law. There is no question about it, confidence in agriculture was never at a lower ebb. We have come to a situation when all the economists agree that we have reached saturation point as far as agriculture is concerned. They agree the only way our economy can be got back on the rails is by increased agricultural production. What are we getting this year? What did we get last year? We have less than half of 1 per cent growth in agricultural production. We sit around and listen to the Government talk about equity in tax. What is the Minister doing? He is playing one section of the community against another. It is of little use to tell us today that one of the reasons the agricultural community have to take the rattle is because the Minister wants to placate the thousands who decided to march in the streets of our towns and cities.
I did not say that.
Some of the Minister's colleagues are saying it, and the Minister is on record as saying it.
I thought the Senator said it was of little use me saying that.
I am saying that in case the Minister might say it.
I never said it.
Some of the Minister's colleagues spent many long hours saying it.
I hate to spoil a good case, but I never said that.
The Senator must be allowed to make his contribution.
So long as he is not making mine as well.
We will be listening very attentively to the Minister. So many cases are put by so many Ministers at the moment that one is not sure what is behind them. When the Government gain farmers' confidence, and when the ordinary farmer believes he will be given a reasonable return for his efforts, this country will get going again. Many farmers in the £40 to £50 poor law valuation bracket are taxed heavily, not by one but by ten taxes. Unfortunately, they cannot claim back most of these taxes through any particular section. Take the case Senator Butler was speaking about. From a farmer's point of view, it is what he gets at the market place that counts. Provided he produces the type of produce that is marketable, and is in a position to compete, at the end of the day it is what he realises for this produce that counts as far as he is concerned. When one looks at the quotations from the meat factories one sees that every week we are taking less for our cattle. It is true that the French market has made a shambles of our lamb trade; in fact, there are farmers in my part of the country taking from £7 to £10 a head less for lambs than they were taking a couple of months ago. The grain merchants decided only last week that as far as they are concerned £80 a ton was the maximum. The 30-day test introduced last year caused considerable financial and other types of inconvenience for many store cattle producers.
Those are direct taxations; they cannot be claimed from anywhere. When the subsidy on ground limestone was taken off, contractors' costs escalated. There was also a fantastic increase in the interest on bank loans. We have now reached a situation when, on top of all that, we find that farmers in the category between £40 and £50 poor law valuation are in the tax net. If this Government, or any other Government, were serious about getting this country out of the terrible economic mess it now finds itself in everybody should be doing his level best to help small family farmers. They are not entitled to dole, to medical cards or social welfare benefits because they do not happen to be in that category. I make a plea to the Minister this evening to look at this problem again because they are the hardest hit section of the community. The Rates Bill does exactly the same, but we will be talking about that very shortly.
In the interests of the economy, changes will have to be made because even without this being law, one can see what has happened in the last four or five months. I shudder to think what will happen if this line of thought is allowed to develop. Whoever will be debating this legislation next year or the year after will find it very easy to give an Opposition viewpoint, because at that stage the harm will have been done. Suffice to say that I understand the Minister has given a guarantee that the threshold will not be any lower than £40 for three years. I believe I saw words in a similar vein in the 1977 manifesto. I want to go on record as saying that I do not believe we will have three years before that is tampered with. The Government—if they are in office then —will find some reason to believe that it is in the public interest to ensure that it is lowered. I do not think there is a farmer in Ireland who will pay too much attention to that guarantee. As the economic problem worsens somebody in the Government will come up with a very valid reason to ensure that that threshold will be reduced.
The Minister had a golden opportunity in the last year to ensure that the problems that seem to beset industry are not allowed to upset growth in agricultural production. However, notice was not taken of this matter. Towards the end of 1980 there will be two lame ducks, agriculture and industry. There is little point saying at this stage that because we had to have equitable tax as such, we wind up much worse off. There is no doubt in my mind that the PAYE workers were entitled to take a stand. They had huge problems. Anybody who ever dealt with people in that category will know that. The fact that a huge lob by believed farmers were getting away with murder was no reason to put the boot into the farming population. When the Agricultural Institute's figures are available for this year and for last year, they will show at least a 25 per cent reduction in farmers' real income. I do not know any other section of the community that would accept that situation.
I want to make a few general remarks on the question of taxing farmers' profits. I want to put it to the Minister that his Government lack total credibility in this area of taxation, both rural and urban.
I want to refer very briefly to the background of this taxation. When the party, of which I am a member, were in Government we introduced taxation on farms of £100 valuation or over. There was a whispering campaign conducted at that time implying to the smallest farmer in the land that he was going to be subject to tax. I went to the Library of the Oireachtas to find there were only 17 farmers in the entire County Mayo, with a population of 100,000 people, who were subject to tax under those provisions and in the constituency of West Mayo there were about five. Yet the whispering campaign went on. There were implications that as industrialists did not pay tax why should the farmer?
Then there was the incredible manifesto which indicated that Fianna Fáil would retain the notional system of farm taxation and allow rates on agricultural land as an instalment of the farmers' taxes payable at the end of each year. The manifesto also promised to provide subsidies and low interest rates for farmers who come within an expanded development category. Subsequent to that there was the introduction of the 2 per cent levy. If we are talking about equity. I am absolutely behind the notion of farm taxation based on income. This Government, who in Opposition had opposed the introduction of farm taxation on farmers of £100 valuation or over, imposed an across-the-board 2 per cent levy on farmers. That was grossly unjust. The abolition of car tax helped the wealthier section of the community. The tax concessions in the budget relieved the wealthiest section to the greatest extent. The 2 per cent levy was an arbitrary grabbing of tax not on an assessment of income but simply on produce and on sales.
I do not know whether that was in last year's Bill but it is not in this year's Bill.
A Leas-Chathaoirleach, you are in the Chair rather than the Minister. There have been two speeches of a general nature before this and I think my speech is in the same vein.
Order.
It is up to you to adjudicate if I have the latitude to speak in this vein.
The Chair hopes that all remarks will relate to section 22, which is before the House.
We are discussing this issue of farm taxation against the position of the Government's lack of credibility for the reason I have mentioned.
We are in Committee, but this seems more like a Second Stage debate. Nonetheless, I think I should make a few points on Committee.
This section deals with the reduction of the tax threshold to £40. It is important that I reply to the arguments that this will be a crushing burden on the farming community in a difficult year—and I recognise that it is a difficult year. I have taken steps in this Finance Bill to change many proposals but I will retain this section at the moment.
The total yield to revenue as a consequence of this section will be of the order of £500,000 this year. I was reluctant to intervene when Senators were reminding me of my rural background, of what happened last year, and the crushing burden that this provision would impose on the farming community. One should look at the consequence of this section —it would be of the order of £500,000 for a full year. If that is seen by some Opposition Senators as a crushing disincentive to farm development, they will have some difficulty persuading me to that effect. Other arguments we can enter into at the appropriate time but that is the consequence of this provision.
I have a healthy respect for Irish farmers and for agriculture generally and know that an imposition, if one calls it such, of that dimension would not have that effect on them. I had consultation with farm organisations, who told me of their difficulties. I am always impressed by the fact that they do not use the same passion, not to say in some cases venom, as some spokesmen from the Opposition parties. I agreed we would have a simplified form of accounts for this group. This would mean they would not have to undertake the expense of consulting accountants, which I recognise is a considerable expense, but I would prefer to see money being put into farm investment rather than wastefully applied to accounts. I do not think they will have that problem. Some of those who were liable to tax last year, and who did not have the benefit of these simple accounts, will now be able to use simple accounts where they are involved in small units.
On the particular issue we are discussing, I thought I should state these facts. No doubt some of the arguments that have been made may, or will, be repeated on other sections as we come to them but I thought when we were talking about the 2 per cent levy we were out of line and some of the arguments made do not hold water, even in a difficult year.
How many farmers will pay the £500,000?
Nine thousand.
Any form of farmer taxation based on Griffith's poor law valuation can be shown to operate unjustly because it has been proved by experts —and this was referred to recently in the periodical published by An Foras Talúntais—that even in County Wexford, a farming area of high productivity, two farmers had the same acreage, one had a lower valuation than the other whose land had less potential. The case was made that if farm taxation is to be equitable it should be based on a soil map of the country. If soil testing were carried out, it would take into account the potential of land and would be graded according to that. Farmers have no difficulty proving the Griffith poor law valuation system is unjust in the way it affects some people in some areas. Any form of taxation based on that system is bound to arouse dissatisfaction. Taxation must be seen to be equitable.
We should look at this measure in the context of our adverse trade balance. It is necessary to stimulate production in order to increase exports. It is unwise to adopt a taxation system that causes uncertainty on the land. I am not concerned so much with the £500,000 that will be collected from this group of farmers but I dread that the number involved will be increased in the next and subsequent years. This tax should be considered against the background of a whole series of levies imposed on the farming community by this Government last year. We had 2 per cent co-responsibility levy, the Bord Bainne levy, the dairy inspection levy, the 30 days' test, the vets' inspection fee at the factory and the Agricultural Institute levy. Take all this in conjunction with the new move to bring more and more into the tax net. More will be said about this on another Bill within a day or two. I will be brief today.
I want to draw the Minister's attention to a statement in Farm And Food Research published by An Foras Talúntais in December 1979, that the 1978 farm management survey showed that costs were increasing rapidly as a proportion of farm output, particularly on dairy farms and on larger farms in general. If the farm survey of 1978 showed costs were increasing rapidly, what is the position in 1980? In the same issue the publication went on to say that on a full-time farm costs were 53 per cent of gross output in 1978. With the rapid increase in costs since then, it would be reasonable to say that that 53 per cent is nearer to 63 per cent, and perhaps above it. That is something the Minister should bear in mind when he introduces a new form of taxation. I join with Senator Butler and Senator Connaughton in asking the Minister to give new hope and new enthusiasm to the farming community by withdrawing this measure.
I was interested in Senator Connaughton's remarks that farmers are confused and that they are taxed under various headings. I would like to say to the Opposition Senators that the whole idea of taxing farmers was sold to the PAYE sections and to the general taxpayers by the Opposition when they were in power. If Senator Connaughton or any other Senator has difficulty in getting a copy of what was planned, I would have no difficulty in getting a copy for him. He will see what Deputy Richie Ryan had in stock for the farmers was a blanket taxation of every farmer over £25 valuation.
And it became law.
Senator McGowan to continue.
This is a good subject to cry crocodile tears about. The farmers are not fools. Most of them know that they cannot continue to make profits and to be exempt from tax. That is the basic issue. Most farmers recognise the Government are trying to make the tax burden as light, and the returns as easy, as possible. I am glad to see the Government have responded to the many requests to be realistic when they come to subsidising limestone and fertilisers. As I said on numerous occasions, the subsidies of limestone and fertilisers never got into the farmers' pockets. Many schemes benefited traders rather than helped farmers or producers. The Government are entitled to withdraw subsidies when they find out they are not going directly where they were intended, and the farmers are wise and clever enough to know that. The limestone and fertiliser subsidies went largely to help the transport companies. All the improvements and alterations were wise and very much appreciated by the farmers. We cannot suggest that an Opposition are not entitled to make political capital out of taxation proposals. That is the job of the Opposition but I expect them to be constructive and to use language the farmers clearly understand.
No farmer could escape having problems, but one of the problems is not, as stated by Senator Connaughton, the fact that his returns from cattle are falling every month. That is not so. The Senator is out of touch if he is sincere in making that statement. I certainly do not see that. It is purely a political band wagon that lacks any substance and support.
The Government invited the IFA tonight to put forward constructive proposals. The IFA have never yet come forward with anything, and they never agreed among themselves. They have played politics when putting forward proposals. I ask them to be realistic and to face up to the Government's problem, which is very simple to understand, that is, that the Government must be seen to be fair to the farmers, those who are making a profit and those who are not making a profit. The IFA have a major role to play, and a major contribution to make. They have yet failed to be forthcoming here. When IFA representatives met on this subject in the west decisions and policies were made. The farmers and their representatives were never allowed to have a voice as to the proposals that should be put forward. It is vital that the IFA make a contribution. I think the Government will respond if the IFA put forward proposals that are acceptable to farmers in general and to the Government. The quicker that is done the better. There is a lack of clarity as far as the IFA are concerned. They have tried to have it both ways and that will not work. The farmers can no longer be guided by efforts to use them politically. Most farmers realise that the Government, whether they add a levy or take off a levy are doing it in the best interest based on experience from day-to-day operation of the taxation system and of dealing with farmers. The improvements, benefits, assistance and the subsidies that are given to farmers are now clearly understood by the farmers and will go more directly into their pockets.
Am I right in thinking that if a farmer does not make profits he will not have any taxation?
I was going to say that.
Am I right in thinking that the reduction of the threshold will also bring the £40 valuation man into the realm of having to pay the full unsubsidised rates?
That is a matter for another Bill.
Is that going to happen? If the farmer does not make enough profit to pay tax, nevertheless the Exchequer will get at him by taking money from him in increased rates.
That would arise in a different Bill. I should like to comment in relation to a number of points that have been made. Senator O'Brien talked about the anomalies of the Griffith valuation. I would like to make two points in relation to that. First of all, I wish to comment on the reduction of the threshold to £40. The tax liability will not be based on valuation at all. It simply will be accountability that arises because of the valuation reduction from £50 to £40 and to talk in terms of the anomalies of the valuation system in this context is irrelevant. This simply means that the liability to tax arises on the basis of accounts of people who will have valuations of £40 and upwards. That does not say that they will be taxed on the basis of the valuation system. They are not being so taxed.
In relation to the figure of £500,000 which I have given to the House, the likelihood is that that money will accrue not from those between £40 and £50 valuation but rather because of the termination of the marginal relief in respect of those between £50 and £60 valuation. As the House will know, marginal relief will be applied here on the basis that a person on £40 valuation will pay only one-tenth of what his liability would be on the accounts system. On a valuation of £41 he will pay two-tenths, on a valuation of £42 he will pay three-tenths and so on. The average payment—we can only estimate this at the moment— in tax under this section would be as little as £25 per annum. We must remember—and the point has been made by Senator Cooney—that if people do not make an income they will not be liable to income tax.
They will have to pay more rates.
When we talk about this section I did not have the opportunity of——
We are not living in a vacuum.
I never suggested we were. I live among farmers all the time and have been very close to them. Let me assure the Senators that many of the amendments I have introduced to the proposals that were originally announced last year are as a conseqence of not being in a vacuum and among them is the simplified form of accounts that is being introduced here for this area. In a difficult year it is not reasonable for Senators to try to over-state the consequence of this particular section as if this was going to drive into the ground the section of the population who will probably pay something of the order of about £25 per annum. If one has a good case one should not destroy it by overstating it.
They will pay £150 extra in rates.
Senator Connaughton said that I should not tell the farmers—in fact. I had not told them in any event—that because others insisted that they pay I would also insist on that. I never said that and I think it is now appropriate that I clearly indicate that. It becomes a little frustrating to have someone else put words into one's mouth with which one entirely disagrees. I suggest to Senator Connaughton that he should make his own case and I will make mine but to refute a case that I have never made is a rather warped way of making an argument.
Senator Connaughton and others will have noticed that even in a difficult year there has not been any public aggro. I am not going to say that farmers do not reserve the right to take action. Senators have talked about people going back on the streets and Senator Butler referred to that also. Perhaps if one talks enough about it one might encourage some of them to do it.
Both as Minister for Finance and as a Deputy representing a very strong farming area. I have been concerned to engage in discussion and consultations to good effect both with farming leaders and others. I want to state here that I have every reason to appreciate the approach which the farming organisations have taken. I am talking about events at leader level. Some views have been expressed about organisation at regional or local level but I do not know about that. In respect of the IFA or the ICMSA, the discussions we have had have been on a very positive basis in what we both acknowledge to be a difficult year. We acknowledge as well the importance of agriculture and how we must support it and hence many of the recommendations are now in this Bill as provisions which were not there before. I will not anticipate some of the arguments I may have to make or the answers I may have to give in response to arguments that I anticipate will be made at a later stage. I will only suggest that we are not talking about crippling figures and to do so would not serve the farmers' cause. Senator Staunton has said he is in favour of farm accounts. I recall some farm leaders saying that they are in favour of accounts universally for farmers not related to any threshold. I want to make it quite clear that the commitment, the statement of policy that I have indicated about £40 being the threshold for three years, will be adhered to. There is no reason why at this stage people should assume that, as Senator Connaughton said, I will be back in a few years' time. The Senator spoke about betting on the situation obtaining in a few years' time. I am not a betting man but perhaps we can have a little bet outside and Senator Connaughton will find himself on the losing side of the bet.
It is a pity I did not bet in 1977.
I accept what the Minister has said about not coming back for three years but he could be in Europe for all we know. He may not be the Minister to come back next year or the year after.
It is a Government commitment.
I also accept the Minister's word that the Government will not come back for three years. That is not the point at all. The point is that they have introduced taxation at this level. In my opinion and in the opinion of the experts the average person with a £40 valuation does not make a profit, or if he does make a profit on his farm it is a profit at a level that would not allow him to pay tax. The Minister said that he would collect £500,000. This is the first blow even though it might take three years to deliver the second blow. The difficult part in regard to any taxation is its introduction and the introduction of farmer taxation was very, very difficult. It was introduced by the previous Government. The attacks at that time were very vocal and much capital was made of it. When there was a change of Government the farmers felt that a Fianna Fáil Government would rub out the mistakes of the Coalition Government. Those mistakes were pointed out by the Fianna Fáil Party when they were in Opposition. When Fianna Fáil came into power they accepted those mistakes, if they were mistakes at all, and decided to drive the nail further. Even Senator McGowan knows that the Minister admits that this year is one of the most difficult year farmers have had over a period of probably 15 years.
It is only £25. It will not break them.
It is not £25. It is at least £200 in rates.
It is this and all the other things.
They will not be taxed unless they make a profit.
We cannot have interruptions like this.
The Minister said only £500,000 is involved. He should forget about it.
In relation to the estimated yield from farm taxation this year, it is very clear to everyone that I did not go for what farmers appear to abhor even though I do not recall that it was specifically stated, namely, a predetermined yield. I never did and I never intend to do that. As Minister for Finance one has to estimate what will come from certain sections. In this context I have given my estimate of what will come from this. Although Senator Butlet has presented his case objectively as he sees it I think he will acknowledge that there is a bit of an béal bocht when Senators start talking in terms of the consequence of this measure in a bad year. The principle is that one must account for one's profits if one makes them, everyone in the same way, everyone paying his fair share. Is not that what the farming organisations and the farmers themselves say? If one does not make profits, one does not pay tax. Because of the fact that last year was a bad year and this year perhaps is not a good year either, the actual liability will be on the basis of very much reduced incomes. It is not a question of a major tax liability arising here. I like to think that as a consequence of this, next year we will be talking about much more than £500,000 not simply because the revenue authorities would like to see more than £500,000 coming in from farming but because the profits will be made. I am sure that Senators on the other side of the House who are concerned for farm welfare and for the welfare of the farming community would certainly like to see the day when the figure we are talking about would be more than £500,000. I take it they would look forward to that day.
The Minister has got it wrong.
Order. If two or more people speak at the same time their contributions cannot be heard clearly.
The real issue is the liability to tax on accounts which are based on profit, on income. I have never heard farmer representatives suggest that they should not account for their profits the same as everybody else and I am sure anyone here who is interested in the welfare of Irish agriculture looks forward to the time when the £500,000 we are talking about this year will be considerably more. It will be evidence of well-being in Irish agriculture and of course it will be a contribution which other taxpayers will welcome also. There is no point in saying that we are putting a crushing burden on the farmers this year. If and when they make a profit, then the tax they will pay on that will reflect it. This is what everyone will reasonably want, giving due account for all the allowances that we may come to at some stage during the course of the debate.
When Senator Connaughton expressed some scepticism about the continuance of the promise that the £40 threshold would not be reduced for three years, the Minister in commenting on his scepticism made the point that it would not be the Minister personally irrespective of where he may be in three years' time. He said it was a Government commitment and he was a bit hurt, I think, that Senator Connaughton should have been sceptical about the promise. I think section 23 abolishes the optional basis of assessment. Is that right? Is that section 24?
Section 23 is one, I am sure, that will commend itself to all sides of the House. This is the one that allows the farmers we are talking about in this section—and I specifically made provision for this purpose—to opt for accounts either on the current year or the previous year. That is the purpose of this section. If you like, they have the choice. Normally the accounts are based on the previous year's income but people coming in for the first time, though they had notice last year that this provision would be made this year, are now given the option of presenting accounts on the basis of either the current year's income or last year's income. That will be welcomed by the farmers.
I will not repeat everything I said on section 23 thinking I was speaking on section 24, but Senator Connaughton's grounds for scepticism about the strength of the undertaking not to make any change for three years can be found in this section. Three years ago there was a solemn commitment given by the Minister's party as follows and I quote from page 18 of the manifesto: "Fianna Fáil will retain the notional system of farm taxation." That was a solemn commitment given three years ago. Yet here we are, three years on, and they have reneged on that. Senator Connaughton had every reason to be sceptical about the commitment given today with regard to the £40 threshold.
Are the provisions in this section the same as the analogous provisions in the case of a businessman or an industrialist?
They are better. The House will be aware of the fact that in the schemes announced last year for farm taxation it was proposed to limit the allowances to 30 per cent in respect of farm buildings, farm development, farm plant and machinery. Having reviewed the position I thought that the 30 per cent restriction should apply only to farm plant and machinery and should not apply to farm buildings and farm development generally. Even in respect of farm plant and machinery, I decided to exempt fixed plant and machinery in the farm buildings from the 30 per cent. For that reason the provisions are at least as generous as anything that applies in any other sector.
Are they the same or better?
Better.
The provisions are the same in respect of stock relief. In fact, I had to defend in the Dáil my proposal to make this special provision here. I said quite deliberately I did it because we are concerned with increasing the herd numbers in Ireland and every incentive that I could give in this area I would give. So the provisions here in respect of stock relief are certainly not matched by stock relief for manufacturing industry generally. There is also a provision to take account of losses which might be suffered because of disease in a herd and that also will be a welcome provision as far as stock relief is concerned.
This debate has to be ended before eight o'clock although we would have liked to comment on the provisions that we have agreed. It will be very interesting to hear the Minister's approach to this matter of the resource tax considering what he has been saying about the actual tax situation that people who did not make a profit did not have to pay tax. Here we have shades of the 2 per cent levy that was taken off the books very quickly. The Minister mentioned that he never would have anything to do with what we called a predetermined yield of tax. I put it to the Minister that he obviously must have had an eye on a predetermined yield in so far as the imposition of the resource tax was concerned. However, before I get into that area, I would like to ask if the report was correct in an issue of The Irish Press last week that Mr. Haughey gave an assurance to Mr. Donal Cashman of the IFA that this was the one and only year that the resource tax would be imposed on Irish farmers. I would like to ask the Minister if he would confirm that Mr. Haughey did give an assurance to the President of the IFA some days ago that the resource tax would be ended after a 12-month run. This is a very important matter and it is an answer that a tremendous number of farmers in Ireland want to hear.
Once it comes down to ability to pay, a point which the Minister has been at pains to make when dealing with the reduction of the valuation threshold from £60 to £40, how does one defend the situation whereby you pay tax whether you are able to do so or not? With a stroke of the pen it is being decided that any farmer with a valuation of £70 or over will now be taxed, whether he is able to pay it or not, at a rate of £3.50 per £1 valuation. I might add that this does not happen to be one of the particular problems in the area that I represent. Unfortunately, we have not too many £70 valuation holdings but it is true that a tremendous number of people who happen to be in the middle income group, the people who are quite good farmers, may have over-stretched themselves somewhat in the last year or two through borrowing. In this category I would like to include persons who are not in good health. There will be a fair number of widows with farms left to them on the death of their husbands and irrespective of their situation, irrespective of whether they have that money, whether they made a profit or not, they will have to pay. No matter what the economic problems might be I cannot understand any tax being imposed on a community unless it is tied to ability to pay. It is not sufficient to say that it is very short-term. The 2 per cent was short-term. First it was on; then it was off and then it was on again with certain variations. Now we have this tax being imposed again on medium to large size farmers. I put it to the Minister that he himself on this occasion used the words "the pre-determined yield". He said as did members of his Government coming up to the budget, that that policy would not be pursued. Deputy Colley was on record as speaking about a "pre-determined yield". When the Government changed, the Minister for Finance said he would not be pursuing that policy.
I cannot understand why the Minister, on the one hand, said there would be no pre-determined yield expected of farmers and on the other decided to impose a most inequitable tax, not taking into account the ability of the person to pay. There must be some undertaking given to the farming organisations, because there is no other group in Ireland which would accept that type of taxation.
Did the Taoiseach give that commitment to Mr. Cashman? He must have, otherwise the farming organisations would be far more vocal than they are. Will he also give a guarantee that in the years to come no such tax will be imposed on any farmers, large or small?
I, too, oppose this section. The Minister realised when we were discussing section 22 that we would oppose it. That is an indication that if he were over here and I was in his seat, he would be standing up opposing this section of the Bill. It is an unfair section. It is an imposition——
They keep on arguing about things the Minister did not say.
The front bench is full of farmers.
All the Senators over there would be doing the very same thing. It is the right thing to do. It is wrong to impose a tax on a section of people who may not make a profit. It is wrong for a Minister to impose a tax where there is no profit. That is exactly what the resource tax is doing. It is putting a tax on farmers who may not make a profit. I know many farmers will make profits but many farmers will not. The Minister admits it is a difficult time for farmers. I imagine that even the strongest trade unionist in Ireland—if this tax was explained to him or her—would not believe it; they would not stand for that type of taxation. Why should farmers stand for that type of taxation? They should not and they will not even though they will be forced to pay it. Many things can happen to the farmer. We are trying to get rid of disease. The Government are doing their best to get rid of brucellosis and bovine TB. The cost to a farmer of getting rid of disease could be substantial and could prevent him from making a profit and because he got rid of disease, he will now have to pay a resource tax. Farmers should not be put in a special category and forced to pay tax such as this. I ask the Senators to think carefully of what they are doing. It is wrong to impose a tax in that situation. It will discourage those farmers who will make very little or no money. They will say, "To hell with it, let's get out". We do not want farmers to get out. We want them to invest and produce more and then let them be taxed on their profits, a reasonable profit, because they have to invest those profits back into the land. We all depend on the land and produce of Ireland. We encourage farmers to produce more but this section of the Bill discourages farmers. Farmers will ask, "What is next?" if they have to pay tax on losses. My advice to the Minister is to withdraw that section and give to rural Ireland the confidence that it needs today.
I have a great deal of sympathy with many of the remarks of Senator Butler. I think that one of the saddest things that has been happening in this country over the last few years is the divergency between the farming community and the rest of the country. Most of us have close connections with the farming community and we should be aware of the extremely difficult times which most farmers, particularly small farmers, have gone through over the last couple of centuries, or as far back as one can trace.
One of the symbols of recent years and one of the greatest sources of division between the farming community and the urban community, was the appearance, sometimes it was only an appearance, but occasionally there was reality to it, that apparently wealthy farmers were paying little or no tax when virtually every urban dweller was paying tax. This was a source of scandal. I do not necessarily say that this section of the Bill deals with the problem in its entirety. The Minister has explained how the various provisions are far better than those applied in business in so far as they are comparable, in regard to stock and various other matters. It would be scandalous if obviously wealthy farmers with several hundred acres at their disposal were, through the various provisions in the Bill, still not paying any contribution towards the revenue at a time when everyone knows that things are difficult and everyone should be making some effort to pay a fair share. This section, inadequate, perhaps inappropriate and I hope not permanent does, nonetheless, fill a necessary gap. I would hope that Senators on both sides of the House, and in particular the farming Senators, are anxious that this very dangerous rift between the farming community and the rest of the community is healed as soon as possible.
I am opposed for a number of different reasons to section 30 which imposes a resource tax on farms with £70 PLV and over. The purpose of the resource tax is clear. It is there to lift out a predetermined sum. I did not coin that phrase and I do not think it was coined on this side of the House. From statements made in 1979 it appeared from the Government of the day that agriculture was expected to produce £100 million in a taxation package in 1980. Ways and means would be found to extract that and the resource tax that we are now discussing is part of the package to obtain a predetermined sum.
The second objection I have is that it is a method of extracting taxation without having due regard to the capacity of the taxpayer involved to pay tax. It is not based on his income, or on his profit or anything else. It is simply levied without regard to the capacity of the person concerned to pay it. In relation to agriculture, it represents the removal of a sum of money that would and could otherwise be put to productive use and capital development on many farms. I strongly put to the Minister that there is a crisis of confidence in agriculture and that strikes at what remaining shreds of confidence may be there. That is dangerous. It is unjust and unfair to impose this form of taxation at a time when the real incomes of the people who are expected to pay it are reduced.
We have had assessments of agricultural incomes from what I regard as independent and objective analysts. They have left nobody in any doubt that there is a slide in agricultural incomes. Therefore, against a background of the dangerous present slide in farm incomes you lift out this predetermined sum without regard to the capacity of the person to pay it. It is an unjust and unfair form of taxation and I oppose it.
I see this taxation of farmers as being a question of equity and as a very difficult question. There is no doubt about that. I have certain sympathies with what Senator Butler had to say about the resource tax but we have to keep in mind that fairness has got to be seen to be done. The questions raised about the equity of taxation in the last few years, as Senator Conroy said, were, potentially, highly divisive. Ireland is and always will be, an agricultural country. It is a question of the productivity that can be obtained from agriculture. The situation at the moment is that a large proportion of the population are taxed by a procedure which means certain sums of money never reach their pockets. Take-home pay is all they see. Other sections of our society at least get the cash running through their pockets even if at a later stage they have to pay some of it out as fair taxation. Those two precedures give rise to division and we have to face up to that. We have a problem of equity.
The Opposition quoted eminent agricultural analysts as saying that revenue is down this year and so on. The same eminent agricultural analysts published reports saying that the productivity of agriculture is too low and the National, Economic and Social Council published a report talking about alternative routes in agriculture. There must be pressure on those who have the potential to produce. Maybe the resource tax is not the best way of doing it but it is one way in the context of the problems of today. It is one which brings about that pressure. It is negative pressure. I would prefer to see a positive pressure but, obviously, the Minister has been asked some direct questions and he is dealing with them in his own way. I see a need to provide fairness to find an incentive to make use of the most valuable resource we have, that is, the land.
The section has to do exclusively with farmers who occupy or who are deemed to occupy farm land the rateable valuation of which amounts to £70 or more. Would the Minister give the percentage of farmers in that category at the moment?
Approximately 10 per cent—15,000 in a total of 150,000. A number of points, some broad, some precise, have been raised in the course of the discussion. I will endeavour to deal with all of them but, if I omit any, Senators can remind me as I am on my feet and I will attempt to cope with it. First of all, I would like to make it quite clear that there is no question of a predetermined yield in the assessment of farm income tax generally. Let me remind the House at the same time of what I think I could reasonably say I have achieved in this area. If the House were to look at the pre-budget submissions by the Irish Congress of Trade Unions, which I believe were made public at the time, the pre-budget submissions to me very clearly stressed that nothing less than the package as announced the previous year, with the yield consequent thereon, would be satisfactory from their point of view. They perceived that as being £100 million. Obviously, that gives the lie to the suggestion that in my approach to this issue my decisions have been based not so much on what I believed to be right and appropriate, but rather on pressures from any other source.
It is for that reason I felt entitled to take the view that the total yield within which the resource tax is an element would be the yield which would be appropriate for a year in which farming had certainly not reached the amount that we would like it to have reached, namely last year, because it is payable on last year's accounts. Having said that, there was in last year's package the question of the resource tax. One of the reasons it was there was that the yield from farm taxation hitherto which had been part of the aggro which has been referred to had been perceived and probably been demonstrated to be less than it should have been. In the years when farm profits were quite healthy, there were situations which certainly gave rise to concern in that the total tax yield since the package was introduced up to 1979 was £19 million. When you allow for the fact that a considerable proportion of that tax came from a group called trader-farmers representing £6 million or something like that, you will see that the actual amount that came from farm tax and the farm sector generally was £13 million over the whole period since it was introduced. Obviously, that gave rise to frustration and to a considerable degree of antagonism which was fairly evident both ways as far as I could see it. When I was Minister for Foreign Affairs I witnessed the placards which were being demonstrated along St. Stephen's Green by the representatives of the marchers on that occasion. What they said about the Government was nothing by comparison with what they said about the farmers. I took the view then, even in that position, that it was very unhealthy in our economy and in our society that this kind of bitterness should be demonstrated so publicly. It was evident that one of the causes of it was the strong feeling that this injustice existed. At that time one of the elements to get over to ensure that there would be some reasonable amount coming in, some reasonable certainty in one sector of it, was the resource tax. Why was it necessary? First of all it is evident that farmers were over-investing in farm plant and machinery on the basis of advice given to them by tax planners, accountants, who persuaded them that this was in their interest—the more you invest in farm plant and machinery the less tax you pay—and they were right. The consequence of that was that they paid ridiculous prices in periods of even relatively tight credit for farm plant and machinery, simply to ensure that tax was not paid to the Revenue Commissioners. It was detrimental to their interests and to the national interest, that they were so advised and that they so acted. Anyone who has any association with farming knows that. I am sure my friends on the other side as well as this side know that as a fact. If they do not, they are not living in the reality of what happened over the last few years. I am prepared to state it here as a fact. I stated it to the farm leaders when I met them.
Number two factor—I am giving a certain amount of background—we had some deplorable cases under the notional system of operation as it was down the years where very big farmers paid no tax at all. Farmers with valuations up to £400 or £500 paid no tax.
Just a few.
It is more than just a few. I started with one province in the Dáil and by the time I came to the end of that province I think the members of the Senator's party were quite happy not to ask me to go into another one. Quite frankly I do not want to do it now either. That is all past history but at least it demonstrates that there was a case. When you talk of farmers, it is a nice generic term, just as "businessman" is a nice generic term but all kinds of people shelter within the term. When you make a plea for the productive middle farmer, small farmer and all that, and I support that entirely—I have nothing against the wealthy farmer either—you are not talking about the same kind of animals at all. For those reasons, so that there would be some degree of equity as it was perceived at the time, the resource tax did seem to be a necessary element to ensure that at least some degree of certainty entered into this, in view of the fact that up to then the total revenue, as I told the House, was ridiculously low even in good years in farming. Everyone recognises that and I was very happy about those good years.
The resource tax was coming in as part of an overall element. That is the background to it. Let us look at what it represents today before we start to get into any argument about this too putting a crushing burden around the necks of farmers to the extent that they will not be able to cope. I recognise we are in a difficulty and I will come back to where we stand. It is at the rate of £3.50 per £ valuation. Farmers who are on £70 will have, as Senators know, the marginal relief applied so they will pay only one tenth of £220.50, that would be £22.50 they will pay; on £71 they will pay one-fifth of what they would be liable to, which would be something over £40; on £72 they will pay three-tenths and so on up the line. The marginal relief will ensure that up to £78 valuation they will pay fractions of what the total liability would be.
Let us take the case of £100 valuation for a moment. It is difficult to average because this one is based on valuations —I acknowledge that. It is recognised that while there are anomalies in the valuation system as far as farmers are concerned, they operate more in their favour than against them. It has been suggested by the Fine Gael Party that they were going to abolish this. They must have been out of contact with the realities among farmers and the reality of valuations, to suggest that because, for every ten cases wherein on a revision of valuation you might get a reduction, farmers themselves recognise that in 90 cases they could expect to get an increase. That is the reality.
Having said that, look at the reality of what this tax will represent. I am not relying on any of the arguments that have been made already. I want to say that for a man with £100 valuation this year it will represent £350. That is the amount he will pay.
I heard Senators opposite say "We are not concerned about the amount. It is the principle rather than the amount". Let us go to the man with £400 valuation. That is when it gets higher. He is a pretty substantial man I would think. The evidence is that he has not paid as much as he should have paid hitherto. He pays 400 times £3.50 which is £1,400. This year we are not talking about a crippling burden on people who can pay some of it. We are talking rather about a principle. People generally are approaching it on the basis that if the farming community above that figure are being asked to pay this resource tax, that is not fair. I have endeavoured to indicate why this was introduced in the first instance. I agree that it is not an ideal form of taxation by any manner or means. For that reason in my budget statement—and I want to make this very clear—long before we met the farm organisations, I said quite clearly that it was our intention to review the farm taxation package in the light of its operation this year. That was the position when the Taoiseach, the Minister for Agriculture and I met them subsequent to the budget on 14 April. We said that the Government indicated that it was not their intention that the resource tax should be a permanent feature of the tax code and that termination of this tax will be considered by the Government in the light of the amount of tax paid by farmers in relation to farm incomes generally in the current year. That is what I said myself, if not in the precise words. It is quite the same as I said when introducing the budget statement more than two months before that.
Some people have been trying to imply from time to time that positions have been conveyed in a different fashion by me or somebody else, but that is not the case. In relation to the press report Senator Connaughton referred to, I would not say I am not aware of it but I can tell him that the definitive position is the position as we indicated it to be to the farm organisations. My hope, my intention, is that the tax yield from farm income this year will be such as will enable the Government to terminate the resource tax at the end of this year. We cannot give any commitment in advance until we see how it operates this year. You do not review something before it starts, which is what I said from the very beginning in my budget statement. You can only review it in the light of the operation. Determined efforts might be made by the tax planners advising farmers to diminish even further the liability to income tax generally by some further investment in farm plant and machinery, which I would greatly deplore even in the interests of farmers and of taxpayers. My estimated revenue from farm tax is at least £14 million. As a consequence of amendments I introduced in the Dáil the figure I originally suggested of about £86 million is reduced by £1 million or £2 million. That is the figure I had in mind.
If some pattern were to emerge in the manner in which accounts were presented which demonstrated that avoidance measures were being used and we got very much less than that, obviously we would have to look at it in the light of our stated position. That is unlikely to happen. I hope it is unlikely to happen. I hope that the opportunity will arise at the end of the year to terminate this resource tax. I do not want to go back over the history of farm taxation. If I were obliged to do that, quite frankly it would do nothing at all to create the understanding we want to create between the farming community, the trade unions and the working population generally.
I have done all I possibly can to defuse that problem in my consultations with the trade unions and with the farmers. I think I can claim that at least I have been successful to date in the sense that we have not had any demonstrations over the past six months from either sector. That is the way I would like to keep it. I should like to think we could engage in consultation rather than confrontation. I have tried to give the background to this as clearly and as frankly as I could, the reason why it was perceived to be necessary, the reason why it had to be produced this year and also I have given my own hope and intention that, given a reasonable return in income this year, it may not be necessary to retain it.
There is no guarantee as of now that the resource tax will cease at the end of 12 months.
I cannot say that. I never said that.
Many farmers want to hear there is.
Senator Connaughton is anxious to get the bad word to present to the farmers and say, "The Minister for Finance said the resource tax will not end this year".
I did not say that.
What did the Senator say?
I asked could we now assume that the resource tax will not cease after 12 months?
I have said more than once the Senator cannot so assume. Senator Connaughton should not assume from that that it will be there either.
The Chair would ask Members to address the Chair.
There are fewer of these farmers. I gather there are very few of them in the area the Senator represents. There are quite a considerable number of them in the area I represent. They have accepted my bona fides on this. I have spoken directly to them and to the farm leaders. I am not particularly impressed by, “This is what the farmers want to hear”, as if this is the first time it has been spoken about openly in public. I have met the farm leaders so often on this issue that they know the reality, both at local and national level. They are well capable of asking the questions that they want to be assured on.
It would appear that some of the newspaper articles are not correct.
If what appears in newspapers is taken to be the gospel truth then I am no longer a believer. On a number of occasions recently I have seen things stated as facts, either implicitly or by innuendo, which were totally at variance with the facts, many in respect of my own personal position. What appears in newspapers does not impress me as fact at all.
The Minister did his best to make a case for the resource tax.
He made a good case.
He made no case. In fact, he made very little reference to the resource tax. He made reference to the demand by the Irish Congress of Trade Unions. They are demanding that the Minister should introduce a form of taxation to collect £100 million from farmers. The Minister in his statement seemed to agree that should be the situation.
It is the very opposite. If I did what they asked me to do there would be an extra £15 million this year. That is the minimum they want.
The Irish Congress of Trade Unions are dictating to the Minister how farmers should be taxed. The Minister is listening to them, and he must listen to them. He must examine the case made by the farmers and by the Irish Congress of Trade Unions and make up his mind what is right and what is wrong. The resource tax is not right. The Minister admits that. He did not make much reference to the resource tax.
In answer to the case we made against the resource tax, he made a general statement on taxation, and he mentioned fair or foul. If it is a fair taxation it is fine, but if it is a foul taxation it is not fine. It is not fine for the farmers or the nation, and not fine for the Congress of Trade Unions. It is foul, and that is it. The resource tax is foul taxation. It does not allow for a person who, in certain circumstances, will not make a profit. The farmers are not accepting the resource tax. This was stated quite clearly by the IFA president, Donal Cashman, a few days ago. If I were a farmer, I would not accept it if, through no fault of my own, or because of the weather, I made no profit on my farm. This is unfair taxation and it should not be imposed. We will do our best to show the Irish Congress of Trade Unions that this type of taxation should not be imposed on anyone. Would the Irish Congress of Trade Unions accept taxation on their members if they did not get their wages? They would not.
This is something to argue with the Senator's colleagues.
This taxation is unfair and it should not be imposed on farmers. If the Congress of Trade Unions accept that it should not be imposed on them, and then tell the Minister he should impose it on farmers, this is wrong.
The Minister spoke about plant and machinery. Farmers have purchased plant and machinery over the past number of years. It is not long since we joined the EEC. We are being told—and Senator Mulcahy often said this—that our land is not being developed. Proper plant and machinery are required to do that. Farmers had not got the money to buy machinery until very recently. Now they have got the money to purchase this plant and machinery. They must buy it to till the land properly and quickly and at the right time. Our weather is not always favourable. On the Continent land can be tilled every day of the week. In Ireland that is not feasible. Therefore, it is essential to have the proper machinery.
They would give a lot on the Continent for our weather.
The case should not be made that because farmers bought machinery and plant they must be taxed by a resource tax. I cannot understand this situation. A resource tax is the wrong type of taxation. Let us by all means tax farmers on their profits. We introduced that, and we do not apologise for it. If the Minister feels farmers are not paying their fair share of tax, he should ensure that they do so but not by this method.
I want to get something on the record. When I mentioned the figure of £19 million income tax from farmers, it was in respect of 1974 to 1978, inclusive, half of which came from trader farming. I want to make that quite clear.
The Minister addressed himself in a broad and philosophical vein to this resource tax issue and I should like to respond in a similar vein. We are opposed to this resource tax for the reasons mentioned by Senator Butler. It is not a tax on income; it is a tax on an arbitrary valuation of farmers. It does not relate to income. For these reasons we were utterly opposed to the 2 per cent levy. We are behind the notion of income taxation for the farming community, but we deem this resource tax to be unfair for the reasons stated.
There is a juxtaposition here so far as the Government party are concerned. A debate was waged for weeks on the introduction of tax by the previous Government. Wealth tax was introduced by our Government as a substitute for estate duty taxation. Estate duty taxation was abolished. The Exchequer was losing revenue from estate duty taxation, which was anathema to the farming community. Wealth tax was instituted as the equivalent of an insurance policy. You paid a little bit and the benefit to the individual family was immensely better than the risk and the exposure to that family so far as estate duty was concerned.
The Minister's Party waged war against this notion of wealth tax. We could refer to the debates in Dáil Eireann at that time on the issue of wealth tax. We introduced it as a substitute for estate duty taxation. This Government withdrew the 2 per cent levy because of the warfare against it and they now introduce a resource tax. It is a resource tax which is not giving relief in any sense. It is the equivalent of the wealth tax without the relief, because the notion is not there of income. The notion is arbitrarily: "You have so many acres of land; your valuation is X Y or Z; you will pay X tax." You could be losing £10,000 a year and you will have to pay this tax. For that reason we are opposed to it.
Could I put a question? Last year when the Minister's predecessor was here I put a question as to the cost of generating employment. We have been told what positive expenditure is involved from time to time to produce a job. I asked the then Minister for information regarding this section with all the defects that were introduced into it after the idea was pushed over to the Revenue Commissioners, what kind of employment was generated at what tax cost. The Minister said he would have the matter studied and I have no doubt the benefits of his studies are there now for his successor.
I might be able to give the Senator the figures in a moment. I did not know of that question last year.
The Minister could answer the question on another section.
I put down a recommendation on this and it is important. I will have to be very careful in what I say with regard to this. It is an assistance to the Minister, the Industrial Development Authority and the whole industrial operation of the State because, according to opinions which I have had, the formulation of the language as it stands is not going to give to the recipient of the assurance specified in this and the next section any right in law that is secure if he wishes to enforce the assurance against any Government who choose to introduce legislation repealing the section. I beg the Minister to get the consent of his party to a continuance of a debate on a matter of singular importance to the economic activity and the employment generating activity of industry.
I am sorry to have to interrupt the Senator but in accordance with the order of the Seanad I must now put the question.
I suggest that an order the Seanad has made the Seanad is capable of discharging if the Seanad wishes. I now propose that the Seanad discharge the resolution which it passed this morning and that the resolution be amended to continue until 12 midnight.
I second that. We are being serious because unfortunately we have reached only section 42 of the Finance Bill which has 96 sections.
The Chair would like to point out that a motion to rescind cannot be moved without prior notice and so the Chair's hands are tied. In accordance with the order of the Seanad, I must put the question.
What is the nature of the notice required? Is it notice in writing? Has it to be before the resolution which was passed takes effect? Would the Chair assist the Seanad generally by referring the Seanad to the authority for that? I have no doubt that the Chair is being very well guided in this whole matter but it would be useful for the Seanad to know precisely why the Seanad has suddenly found itself without any power of acting when it is in session.
At present the Chair's hands are completely tied and the only duty of the Chair is to put the question in accordance with the decision taken by the House today. I must now put the question, "That Committee Stage is hereby completed——
What is the basis for this? Is there a Standing Order with regard to it which the Chair would refer us to? How do we put ourselves in the position as one of the two Houses of Parliament of being unable to do anything by virtue of a decision which we made earlier today? Would the Chair tell the House how the Seanad finds itself paralysed and unable to do anything to assist the country at this moment?
The Chair sympathises but it cannot allow a discussion on this.
It seems to me that there is a mechanism whereby the Seanad by agreement can decide to continue its discussion.
The Chair cannot allow a discussion on this. If there was agreement the Chair would operate it but the fact is——
I invite the Leader of the House to indicate agreement on this.
The Leader of the House has not indicated agreement to the Chair and therefore the Chair must proceed with the question. I cannot allow any further discussion on this.
In reply to me, Sir, you said that since the Leader of the House has not suggested to you that there is agreement you must terminate the debate and put the question. If the Leader of the House was agreeable to the continuation of this very simple discussion, are you implying that in those circumstances the House could continue to sit? Could you respond to my question?
The Chair will agree that a new order could be made immediately with agreement but only by agreement. In the absence of such agreement the Chair must put the question.
Is it reasonable that 56 more sections and a number of Schedules should go through without debate of any kind?
The Chair sympathises with the Senator but I am putting the question: "That Committee Stage is hereby completed and the Bill is reported to the House and Report Stage is hereby completed and the Bill be returned to the Dáil."
On a point of order, since you said that if agreement——
The question has been put and it is not possible to put that point of order.
Are we now free to seek the agreement of the Leader of the House for a continuation of this debate to discuss these urgent matters?
No. The Bill has now been returned to the Dáil without recommendation.
You indicated before the question was put that if there was agreement there could be such continuation.
That matter has been finished.
We sought on a point of order that such agreement be reached before you put the question and you would not allow it. Now, subsequent to the question being put, we are told that agreement cannot be reached because the Bill has gone to the Dáil.
The Senator is being disorderly.
