Does this section affect section 12?
SECTION 10.
Question proposed: "That section 10 stand part of the Bill."
There is no connection. This is to bring the treatment of those in the public sector into line with the treatment of those in the private sector. There are no covert benefits being conveyed.
Until now, if a person got voluntary severance or redundancy payments in the private sector, a set of tax rules had to be complied with. The same applied to the public service. However, was there no legal basis for so doing with the public service. Has this only now been discovered?
I agree with Deputy McCreevy. Why is this coming forward now? Was the present practice not considered lawful?
The payments at which the section is aimed are made on an administrative basis, but the Attorney General has confirmed this year in relation to at least some State bodies that these ought to be provided for on a statutory basis. However, putting them on a statutory basis would bring them within a blanket exemption applying to certain payments under superannuation schemes rather than the normal rates applying to redundancy schemes. This payment is, therefore, intended to ensure that, when payments are put on a statutory basis, they do not escape the tax net but will be subject to the same rules that apply and the status quo will be maintained.
Section 114 of the Income Tax Act, 1967, charges to income tax payments from employment which are not chargeable to tax under any other provision of the tax code. Its principal, although not exclusive, target is payments on termination of employment, particularly those often described as ex gratia. However, because of its wide scope it also covers normal retirement lump sums which are not otherwise chargeable to tax.
To maintain the tax free status of such lump sums, section 115 which provides for some mitigation, a base exemption of £6,000 plus £500 for each year of service of the charge under section 114, also contains a blanket exemption for payments under superannuation schemes, both private and public sector. None of the reliefs in section 115 apply to payments of actual pensions as these are chargeable to tax without any need for section 114.
Under revenue approval practice, the type of payments now being targeted may not be paid under private sector superannuation schemes. However, statutory superannuation schemes do not require revenue approval and, because of the wide ranging definition of "retirement benefit schemes" for the purpose of the occupational pension legislation in the 1972 Finance Act, any statutory provision for these payments will attract the blanket exemption rather than the normal reliefs available at present for the administrative schemes which also apply in the private sector.
It is quite clear, from reading between the lines, that it has been discovered that public service lump sums are taxable. They have not been dealt with on an administrative basis and we are now saying they are not taxable in statute either.
Perhaps we could have a technical explanation of this.
We will go into private session for that.
Sitting suspended at 5.32 p.m. and resumed at 5.34 p.m.
Question put and agreed to.
Amendment No. 20 not moved.
SECTION 11.
Question proposed: "That section 11 stand part of the Bill".
Every Finance Bill since 1970 has included a provision on subcontractors' payments. I hope they have all been put together in one chapter in the consolidated tax Bill. I am very au fait with this because I became an articled clerk in October 1970, just after the passing of the Finance Act, 1970, which was the first legislation on subcontractors’ payments and I have lived with the changes since then. There is yet another change in subcontractors’ payments in this Bill. Why is this change necessary?
I presume it has been put into one chapter, because that is the logic of the consolidation Bill. I cannot give the Deputy chapter and verse on that. However, I am pretty sure it has because that Bill is quite a volume of tax law.
The changes now being made provide for, first, an extension of the scheme to certain forestry activities which are currently excluded.
That was put in before.
No, these are tree planting, the maintenance of forests and the preparation of land for planting. Prior to this the provisions were for the cutting and felling of trees.
The second change relates to the extension of the time limit from six months to ten years for the taking of summary proceedings in respect of offences under the section. Currently, section 17 does not contain a reference to time limits for taking summary proceedings in respect of such offences. As a result, the six month time limit under the Petty Sessions (Ireland) Act, 1851, applies. It has been found that this time limit is inadequate and militates against the taking of proceedings for offences, as many offences do not come to light until a considerable time after their commission. A ten year time limit already exists for other tax offences, for example, revenue offences under section 94 of the 1983 Finance Act.
There are two other changes the first of which concerns civil penalties in relation to non compliance with the section. There is also a technical amendment concerning the right to offset outstanding PRSI and levies against any refund of tax deducted under the scheme. It is a tidying up and defining measure.
I did not know the time limit for prosecution was six months. I have no difficulty with that. I also notice, however, it will allow the list of defaulters to be published. I hope all these provisions are put together in one chapter.
I am sure that is so.
It has been changed many times.
Question put and agreed to.