SELECT COMMITTEE ON FINANCE AND THE PUBLIC SERVICE debate

Finance Bill, 1998: Committee Stage (Resumed).

SECTION 106.

Question proposed: "That section 106 stand part of the Bill."

Mr. McCreevy

This section provides for a reduction in the rate of excise duty on off-course betting from 10 per cent to 5 per cent. The 10 per cent rate has applied since 1985. The reduction in the rate is targeted at reducing the incentive for offshore betting and to safeguard employment in the Irish betting industry.

Deputies will recall that when I announced this reduction in the Budget Statement I also announced that the Minister for Agriculture and Food would arrange for the abolition of the current 5 per cent on-course betting levy. Both reductions are subject to an alternative source of funding being put in place for the Irish Horseracing Authority and Bord na gCon. The section will have effect from a day to be appointed by ministerial order. On the basis of discussions that have taken place with the industry, I hope to be in a position to make the necessary order effective from 1 July 1999.

Mr. Noonan

It is too early in the morning to have an argument.

Mr. Deenihan

The Minister will be aware of concerns in greyhound circles. There is concern about the shortfall now that the betting tax will not be made up. The greyhound industry does not have the same possibilities for sponsorship as the horse racing industry. It has experienced strong growth over the past four years and is on the up and up. There is, however, genuine concern that this new arrangement will not be of benefit and the greyhound industry will suffer as a result and the progress which is being made will be arrested. Will the Minister indicate ways in which the industry could make up this shortfall?

Mr. McCreevy

When I made my Budget Statement, I referred to Bord na gCon and the Irish Horse Racing Authority and said that the shortfall arising from the abolition of on-course betting tax would have to be made up for both institutions. When I asked Mr. Michael Dowling to become the facilitator he was told whatever arrangements were made, they should be equitable for both organisations.

I am very familiar with the greyhound racing industry as I owned my first racing greyhound when I was ten years of age in 1959. Over the years I have had some success with greyhounds and many, many failures. I was very involved with the racing industry when I had more time. I am familiar with many people in the greyhound business. North Kerry, Kildare, Tipperary, Limerick and north Cork are very involved with the greyhound business. I was conscious during the negotiations that the greyhound industry should not be discriminated against for the reasons which Deputy Deenihan has just outlined. The new arrangements will ensure that it will get its equitable share. I talked to the chairman of Bord na gCon who is from a similar racing background, and whom I have known for many years, and I will make sure the new financing arrangements will not discriminate against greyhound racing.

Question put and agreed to.

NEW SECTION.

Mr. McCreevy

I move amendment No. 129:

In page 230, before section 107, but in Part 2 to insert the following new section:

"107. - (1) The Finance Act, 1926 ishereby amended-

(a) in section 24, by the substitution in subsection (4) (as substituted by section 69 (1)(a) of the Finance Act, 1982) of '£1,500' for '£800' and

(b) in section 25, by the substitution in subsection (2) (as substituted by section 69 (1)(b) of the Finance Act, 1982) of '£1,500' for '£800'.

(2) Section 2 of the Betting Act, 1931, is hereby amended by the substitution in subsection (2) (as substituted by section 69 (2) of the Finance Act, 1982) of '£1,500' for '£800'.

(3) Section 76 of the Finance Act, 1984, is hereby amended by the substitution in subsection (8)(b) of '£1,500' for '£1,000'.

(4) Section 42 of the Finance Act, 1989, is hereby amended by the substitution in subsection (3) of '£1,500' for '£1,000'.".

No.

Amendment agreed to.

Section 107 agreed to.

NEW SECTION.

Mr. Noonan

I move amendment No. 130:

In page 230, before section 108, to insert the following new section:

"108. - Section 8 of the Principal Act is hereby amended in subsection (3)——

(a) in paragraph (a):

(i) by the insertion of the following subparagraph after subparagraph (i a) (inserted by the Finance Act, 1998)

'(i b) goods being pig semen, the total consideration has not exceeded is not likely to exceed £40,000 and, in calculating that total consideration, supplies of pig semen to-

(I) any other farmer licensed as an artificial insemination centre in accordance with the provisions of the Live Stock (Artificial Insemination) Act, 1947, or

(II) a taxable person over whom that farmer exercises control, shall be disregarded, or',

(ii) by the substitution in subparagraph (iii) (inserted by the Act of 1998) of 'services specified in subparagraph (i) and any or all goods of the type specified in subparagraph (i a) and (ib) and goods of the type specified in subparagraph (ii) supplied in the circumstances set out in that subparagraph’ for ’services specified in subparagraph (i) and either or both of goods of the type specified in subparagraph (ia) and goods of the type specified in subparagraph (ii) supplied in the circumstances set out in that subparagraph’,

(iii) by the insertion of 'or' at the end of subparagraph (iii), and

(iv) by the substitution of the following for subparagraph (iv) (inserted by the Finance Act, 1998):

'(iv) goods of the type specified in subparagraphs (i a) and (ib) and goods of the type specified in subparagraph (ii) supplied in the circumstances set out in that subparagraph, the total consideration has not exceeded and is not likely to exceed £40,000,’,

and

(b) in subparagraph (i a) (inserted by the Act of 1998) of the proviso thereto by the insertion after ’paragraph (a)(ia)’ of ’(a)(ib)’.”

This section seeks VAT exemption for AI services for pigs. The Minister is aware that the pig industry is in bad shape at the moment and one cost is that of artificial insemination. This is drafted along the lines of the exemption introduced for bovine last year and applies to pig semen. The Minister would have received correspondence similar to that which I received. This amendment meets the case.

It requires a leap of the imagination to go from the last amendment to an intense discussion on pig semen but that is the nature of Committee Stage of the Finance Bill.

Mr. McCreevy

A diversity and range of topics are discussed at this committee. The aim of this amendment is to exclude flat-rate farmers involved in making supplies of pig semen from the requirement to register an account of VAT. The Finance Act, 1998, introduced a requirement for farmers involved in the supply of livestock semen to register an account for VAT. This change was mainly intended to tackle VAT induced distortions between farmers and non-farmers in the bovine trade. In drawing up the Finance Act, 1998, it was considered that all livestock semen sales, whatever the animal sold, should be treated the same way for VAT purposes.

In recent months, many representations have been received that pig semen production involves totally different methods and should be treated differently for VAT. Meetings with contacts in my Department, the Revenue Commissioners and trade representatives have confirmed this view. There are no trade distortions in the pig semen sector between farmers and others. No such distortion is envisaged in the future for this product. For these reasons, I support in principle the objective of the amendment. However, to fully achieve this objective, a new draft amendment is necessary which will fully meet the concerns expressed by the pig sector on this topic. I propose to put down a suitably drafted amendment on Report Stage.

Mr. Deenihan

I thank the Minister for responding to the amendment and to the current crisis in the pig industry. I do not want to be repetitive or to hold up proceedings. However, the pig industry is in a state of collapse in many parts of the country. For example, only five out of 20 major pig farmers in my constituency will stay in business by the end of this year. Any help which can be given to them is welcome. The Minister has responded, in a small way, to their needs.

Amendment, by leave, withdrawn.

Section 108 agreed to.

SECTION 109.

Question proposed: "That section 109 stand part of the Bill."

Mr. Noonan

Section 109 deals with VAT on the leasing of aircraft outside EU countries. Will the Minister brief the committee on this section? Does it apply only to the GPA? Is it driven by the needs of a particular lessor or is it of general application?

Mr. McCreevy

This section amends section 5 of the VAT Act which deals with the supply of services. The amendment deals with leasing a means of transport from Ireland to lessees outside the European Union. It provides that where a means of transport supplied by a lessor in Ireland is used outside the European Union, supply is deemed to be outside the Community. With this amendment, Ireland is availing of an option in the directive which removes services from the VAT net and this will facilitate the Irish leasing sector.

The concession was introduced following a European Court of Justice decision in July 1997, the Aro judgment. This provided the place of supply in the case of cross-border leasing was the country where the lessor was established. Prior to the Aro judgment, Revenue regarded the country where the transport was used as the place of supply. This meant that leasing services to customers outside the European Union were not subject to Irish VAT. The concession, which is fully in accordance with EU law, was introduced to maintain the status quo and protect the Irish leasing sector, principally operated in the IFSC and Shannon. This has effect in the passing of the Act. The amendment is revenue neutral as it legislates for a concession already in force. It mainly affects the IFSC and Shannon-based leasing companies. It applies mainly to vehicle rather thanaircraft leasing and it includes aircraft and trains.

Question put and agreed to.

SECTION 110.

No, none. It is taxable at the moment, if it is traded. However, we are not aware of any trading.

Question put and agreed to.

SECTION 111.

Question proposed: "That section 111 stand part of the Bill."

Mr. McCreevy

This section amends section 10 of the VAT Act which deals with the amount at which tax is chargeable. In accordance with the sixth VAT directive it provides that tax should be based on cost price as opposed to open market price for certain transfers of goods to other member states. It also provides that cost price will be used to establish the tax due in the case of certain intra-Community acquisitions following transferral into Ireland from other EU countries.

This amendment deals with the taxable amount to be used for supplies of goods transferred by a person, either from his business in Ireland to another EU member state or from his business in another EU member state to Ireland for the purposes of the business, and new means of transport transferred by a person from Ireland to another EU member state or from an EU member state to Ireland. Examples are given.

Question put and agreed to.

NEW SECTION.

Mr. McCreevy

I move amendment No. 131:

In page 235, before section 112, to insert the following new section:

"112.-Section 10A (inserted by the Act of 1995) of the Principal Act is hereby amended in subsection (1)-

(a) by the substitution of the following definition for the definition of 'margin scheme goods':

"'margin scheme goods" means any works of art, collectors' items, antiques or second-hand goods supplied within the Community to a taxable dealer-

(a) by a person, other than a person referred to in paragraph (c), who was not entitled to deduct, under section 12, any tax in respect of that person's purchase, intra-Community acquisition or importation of those goods:

Provided that person is not a taxable person who acquired those goods from-

(i) a taxable dealer who applied the margin scheme to the supply of those goods to that taxable person, or

(ii) an auctioneer within the meaning of section 10B who applied the auction scheme within the meaning of section 10B to the supply of those goods to that taxable person,

(b) by a person in another Member State who was not entitled to deduct, under the provisions implementing Article 17 of Council Directive No. 77/338/EEC of 17 May 1977, in that Member State, any value-added tax referred to in that Directive in respect of that person's purchase, intra-Community acquisition or importation of those goods, or

(c) by another taxable dealer who has applied the margin scheme to the supply of those goods or applied the provisions implementing Article 26a (inserted by Council Directive No. 94/5/EC of 14 February 1994) of Council Directive No. 77/338/EEC of 17 May, 1977, in another Member State to the supply of those goods,

and also includes goods acquired by a taxable dealer as a result of a disposal of goods by a person to such taxable dealer where that disposal was deemed not to be a supply of goods in accordance with section 3(5)(c).',

and

(b) in the definition of 'second-hand goods' by the insertion after 'means of transport, 'of 'agricultural machinery (within the meaning of section 12C),'.".

This amendment replaces section 112 of the Bill. Paragraph (a) ensures that the disposal by an owner of goods repossessed under the terms of a hire-purchase agreement is included in the definition of margin scheme goods. This paragraph is a consequence of the amendment to section 108 and allows the benefit of the margin scheme to apply to the subsequent sale of these goods.

Paragraph (b) ensures that 'agricultural machinery' is not included in the normal margin scheme. It is part of the package of measures allowing for the introduction of the new special scheme for agricultural machinery contained in section 117. As agricultural machinery now has its own scheme it is important that it cannot be included in any other scheme. This paragraph ensures that this will be the case.

Mr. Noonan

How does it work in practice in respect of agricultural machinery? If someone buys a combine harvester on hire purchase which breaks at the end of the first season and is recovered by the agency, how is that treated?

Mr. McCreevy

Perhaps one of the officials can answer that.

The committee went into private session at 10.30 a.m. and resumed in public session at 10.31 a.m.

Mr. Noonan

I understand.

Amendment agreed to.

Section 112 deleted.

NEW SECTION.

Mr. McCreevy

I move amendment No. 132:

In page 235, before section 113, to insert the following new section:

"113. - Section 10B (inserted by the Act of 1995) of the Principal Act is hereby amended in subsection (1) by the insertion in the definition of 'auction scheme goods' of the following paragraph after paragraph (a):

'(aa) an owner within the meaning of section 3(5)(c) who enforced such owner’s right to recover possession of those goods under the circumstances set out in section 3(5)(c), or’.”

Section 10B of the VAT Act, 1972, allows for a specialist scheme for auctioneers. This amendment is linked to section 108(b) of the Finance Bill which prevents double taxation on goods which are being repossessed under hire purchase agreements. This amendment allows the auction scheme to apply to goods which have been repossessed and are being sold on behalf of their owners by auctioneers.

Mr. McDowell

Is it free of VAT?

Mr. McCreevy

The auctioneer will account for it on his profit margin. This provision allows this to be included in that scheme. Without this amendment it would not be possible to do that. He would have to charge VAT on the full value. The purpose of this section is to allow that provision to be incorporated.

Mr. Noonan

Would it apply to the sale of goods in a pound which had been repossessed?

Mr. McCreevy

Yes, if the auctioneer is selling goods from a pound and they came from a non-taxable source. If the original sale of the goods was to a private individual the subsequent pound sale of the goods is under the auction scheme.

Amendment agreed to.

SECTION 113.

Question proposed: "That section 113 stand part of the Bill."

Mr. Noonan

May we hear the speaking note on this? Why is it not amalgamated with section 115? What is the difference?

Mr. McCreevy

This section amends section 12A of the VAT Act, 1972, which deals with the farmers' flat rate. It confirms the budget increase to farmers' flat rate from 3.6 per cent to 4 per cent with effect from 1 March 1999. The flat rate scheme is a simplified and practical method of giving VAT refunds to farmers. It compensates unregistered farmers on an overall basis for the VAT charged to them on their purchase of goods and services in accordance with the mechanism provided in the EU 6th VAT Directive. The tax compliance burden for farmers participating in the scheme is minimal and the State is relieved of a significant administrative burden.

The amount of the flat rate VAT for any year is arrived at by calculating the VAT payable on agricultural inputs as a percentage of agricultural sales for the preceding three years. The Revenue Commissioners calculated on the basis of macro-economic data for the past three years that a flat rate of 4 per cent is now needed to achieve full compensation.

Mr. Noonan

I will explore the general principle. Is the Minister aware that some of our EU partners have variations on this so they can target different sectors of agriculture and give larger rebates to people on the basis that there is a higher VAT imposition on their imports but they are using it as a type of aid to protect their sectors? Has the Minister thought about introducing that here? For example, pig and beef farmers are in a desperate state this year.

That is a separate problem to do with income tax and corporation tax. Many years ago, some farmers opted to run their businesses as companies. The point about improving the system has been put to me on a number of occasions by the IFA. I did not accede to their request nor have I any intention of doing so. If people wish to incorporate their business they can do so. If a farmer feels like incorporating his business he should do so but very few go down that road because arrangements would have to be put in place about the property. If they wish to transfer their property to a new limited company all types of questions arise. Perhaps a smaller angle is stamp duty. That may not be a major consideration but the issues of inheritance and locking oneself into a limited company are of major importance.

I move amendment No. 133:

In page 235, lines 38 to 42, to delete paragraph (a) and substitute the following:

"(a) in subsection (2)-

(i) by the insertion of '(other than in the circumstances where an owner as referred to in paragraph (c) of subsection (5) of section 3, enforces such owner's right to recover possession of a means of transport)' after 'purchases or acquires', and

(ii) by the insertion of the following paragraph after paragraph (a):

'(aa) a means of transport from a person where the disposal of that means of transport by such person to such taxable dealer was deemed not to be a supply of goods in accordance with section 3(5)(c), or”,

and".

This section amends section 12B of the VAT Act. It deals with the specialist scheme for second hand means of transport. This amendment tightens up the new rules for the repossession of goods under hire purchase agreement, which are being introduced by paragraph (b) of section 108.

Subparagraph (i) prevents the owner of a vehicle repossessed under hire purchase agreement from deducting residual tax at the time of repossession. Subparagraph (ii) allows a taxable dealer to deduct the residual tax included in the price of a vehicle when he buys it for resale from the repossessor of the vehicle. This puts these vehicles on a par with all other second-hand vehicles which a dealer buys from a non-taxable source.

Amendment agreed to.

Section 116, as amended, agreed to.

Sections 117 to 125, inclusive, agreed to.

Sitting suspended at 11.04 a.m. and resumed at 11.13 a.m.

Chairman

The advice is that we have dealt with all sections and amendments, and questions were put on each amendment. Where there was dissent it was recorded, and we are now advised that another vote would only duplicate the votes we have had already.

Mr. Noonan

Will the Chairman advise Opposition members how to have a vote on a section with which they disagree?

Chairman

We will not be able to discuss many important amendments and sections.

NEW SECTIONS.

Mr. McCreevy

I move amendment No. 134:

In page 239, before section 126, but in Part 4, to insert the following new section:

"126.-(1)(a) For the avoidance of doubt it is hereby declared that the Heading 'CONVEYANCE or TRANSFER on sale of any property other than stocks or marketable securities or a policy of insurance or a policy of life insurance' in the First Schedule to the Stamp Act, 1891, shall be deemed always to have had effect (prior to the substitution made by section 7(a) of the Finance (No. 2) Act, 1998, but subsequent to the substitution made by section 117(a) of the Finance Act, 1997) as if the following paragraph were substituted for the paragraph (8) which was inserted by section 117(a) of the Finance Act, 1997:

'(8) Of any other kind whatsoever not hereinbefore described by reference to a consideration for which a rate of duty has already been specified at paragraphs (1) to (7):

for every £100, or fractional part of £100, of the consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . £9.00'.

(b) For the avoidance of doubt it is hereby declared that the Heading 'LEASE' in the First Schedule to the Stamp Act, 1891, shall be deemed always to have had effect (prior to the substitution made by section 7(b) of the Finance (No. 2) Act, 1998, but subsequent to the substitution made by section 117(b) of the Finance Act, 1997) as if the following clause were substituted for the clause (viii) of subparagraph (a) of paragraph (3) which was inserted by section 117(b) of the Finance Act, 1997:

'(viii) the case is of any other kind whatsoever not hereinbefore described by reference to a consideration for which a rate of duty has already been specified at clauses (i) to (vii):

for every £100, or fractional part of £100, of the consideration . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . £9.00'.

(2) Subsection (1) shall not apply to an instrument in relation to which either of the Headings referred to at paragraph (a) or paragraph (b) of subsection (1) was the subject matter of an appeal under section 13 of the Stamp Act, 1891, being an appeal made before the 2nd day of March, 1999.”.

Mr. McCreevy

I move amendment No. 135:

In page 239, before section 126, but in Part 4, to insert the following new section:

"126.-(1) The Finance Act, 1990, is hereby amended by the substitution of the following section for section 114:

'114.-(1) Subject to subsection (2), stamp duty shall not be chargeable on any instrument, other than a conveyance or transfer referred to in subsection (4), (5), (6) or (7) of section 58 of the Stamp Act, 1891, or subsection (1)(b) of section 106 of the Finance Act, 1996, whereby any property is transferred by a spouse or spouses of a marriage to either spouse or to both spouses of that marriage.

(2) Subsection (1) shall not apply to an instrument whereby any property or any part of, or beneficial interest in, any property is transferred to a person other than a spouse referred to in that subsection.

(3) Section 74(2) of the Finance (1909-10) Act, 1910, shall not apply to an instrument to which subsection (1) applies.'.

(2) Section 212 of the Finance Act, 1992, is hereby repealed.

(3) This section shall have effect in relation to instruments executed on or after the 2nd day of March, 1999.".

This is an anti-avoidance provision. The avoidance scheme which the amendment is trying to counteract involves the use of the sub-sale provisions in section 58 of the Stamp Act, 1891.

Section 58 of that Act provides that if A sells property to B and, before taking a conveyance, B then sells on the property to C and the property is in consequence conveyed directly from A to C, then the conveyance is chargeable only on the consideration paid by C. In other words, B does not have to pay any stamp duty. If the consideration paid by C is less than market value, the Revenue Commissioners charge on the market value. If, however, B and C are married to each other, then the only stamp duty chargeable on the conveyance is the amount of the consideration paid by C even if that consideration is much less than the market value. This is because transfers between spouses are exempt from stamp duty.

The amendment provides that the spouse exemption will not apply in sub-sale situations or in the corresponding provisions in the CREST legislation. I am informed that no one has used this loophole but it is effective and easy to operate if anyone wanted to do so. For that reason, we are closing it off. I am disappointed that Deputy McDowell did not identify this loophole some time ago and assist his clients in availing of it.

Amendment agreed to.

Chairman

Amendment No. 136 in the name of Deputy McDowell is out of order as it involves a potential charge on the Revenue.

Amendment No. 136 not moved.

Mr. McDowell

I move amendment No. 137:

In page 239, before section 126, but in Part 4, to insert the following new section:

"126.-'The Minister for Finance shall by order amend the First Schedule to the Stamp Act, 1891 (as amended by this Act) in order to provide that the tax treatment of an instrument whereby an interest in new properties is acquired is not less favourable than the tax treatment of an instrument whereby an interest in second-hand property is acquired in similar circumstances.".

This amendment and the previous one, which was ruled out of order, were tabled last year in respect of the Finance (No. 2) Act, 1998, as a response to the Bacon Report. Unfortunately, the debate on the Act was extremely truncated and we did not reach the amendments. Therefore, I tabled them again to see if we could get a response from the Minister in respect of them.

The amendments are motivated by the same thinking, namely, that in the past, and for good reason, we attempted to stimulate the construction industry, particularly in the housing sector, but that the industry does not need such stimulation at present and that we should seek to encourage first time buyers. The amendments seek to provide that the first-time buyers' grant would apply to both second-hand houses and new houses and also that the stamp duty concession for new houses would also apply to second-hand houses if they were being bought by first-time buyers. The intention is to focus relief and assistance on first-time buyers rather than on the construction industry.

I have already spoken to the Minister's officials about this matter and I must inform him that the amendment is worded as it is because it would have been ruled out of order had I worded it as it should have been worded.

Mr. McCreevy

The purpose of this amendment is to grant to second-hand houses the same stamp duty treatment afforded to new houses. In effect, this would mean that second-hand houses up to 125 square metres in area would be exempt from stamp duty if purchased by an owner-occupier and that second-hand houses over 125 square metres in area would attract stamp duty on a quarter of the consideration paid for the house, again if purchased by an owner-occupier.

Up to now new houses have been treated differently from second-hand houses for stamp duty purposes. The reason for this difference in treatment is that new houses are subject to VAT at 12.5 per cent, whereas the sale of a second-hand house does not incur VAT. This concessionary treatment also acts as a support to the building industry. I would be reluctant to move in the direction proposed by the Deputy in the absence of any detailed information on how the measure would affect that industry. I am also concerned that it does not conform with the recommendations set out in the Bacon Report which I implemented last year via the Finance (No. 2) Act, 1998.

Quite apart from these considerations, this proposal would significantly reduce the yield from property. The estimated annual cost of the proposal would be of the order of £60 million to £70 million. For those reasons, I oppose the amendment.

Mr. McDowell

I do not find the Minister's reasoning convincing because it seems to ignore the basic thrust of what I am attempting to achieve. What I am saying is that first-time buyers need assistance. I do not believe anyone could credibly argue that the construction industry needs any support of this kind at present. In so far as developers can obtain land, they can build on it and make huge profits. These incentives were introduced to stimulate the industry but it is clear that they are no longer necessary. The CIF or other organisations could not credibly argue that developers will not build houses if this concession is removed.

Mr. McCreevy

If we removed the stamp duty paid by first-time buyers of second-hand houses, it would cost approximately £50 million per annum.

Mr. McDowell

What is the purpose of the exemption from stamp duty for first-time buyers of new houses?

Mr. McCreevy

I do not recall which Government introduced the exemption but its purpose was to stimulate the building industry which was as flat as a pancake at the time. That was the raison d’être behind the introduction of the first-time buyers’ grant, which costs the Exchequer approximately £30 million. I and many others believe that it is already built into the price of a house. However, given that it is so difficult at present for first-time buyers to purchase houses, it would not be politically feasible to announce the abolition of the new house grant.

Over many years I have reached the view that grants can be quite effective as a short-term measure but that they are self-defeating in the long-term because they end up being included in the price of the goods being sold. I refer here to grants given in a wide variety of areas. Ministerial colleagues in other Departments will continue to seek the introduction of grants in these areas but in the past ten years I have come to the conclusion that, in the long-term, they are an ineffective means of redistribution. I accept, however, that they can be expedient as a short-term measure.

It is unfortunate - this is a common thread linking successive Administrations - that once a scheme is introduced it is practically impossible to discontinue it. Although my predecessor Deputy Quinn introduced the car scrappage scheme as a temporary measure, I came under ferocious pressure to retain it. Deputy Quinn provided a one year extension to the original scheme and I announced in December 1997 that I intended to discontinue it. I would have thought it would have been easy to discontinue the scheme without being lobbied by colleagues, people involved in the industry, etc., but that was not the case. As events unravelled, however, the scheme has not been needed in the 1998-9 period because sales have increased.

That scheme was designed to be very focused but Deputy Quinn could not discontinue it in the year he originally intended and, while I did not buckle, I was put under pressure to retain it. Any Minister will confirm it is easy to start a scheme, especially if it serves a useful need, but doing away with it is very difficult. When people have forgotten the original purpose of schemes 25 years later, they are continued by various Departments and acquire a life of their own.

Mr. McDowell

I accept that and the Minister's remarks on the first time buyer's grant has some merit. I agree that it would be politically very difficult to abolish the scheme, but inasmuch as it is to be retained it should apply equally to first-time buyers or second-hand houses. The original purpose of the exemption from stamp duty for new house and the first time buyers grant was to help the industry. That is no longer necessary, but first time buyer's need help and in so far as we are retaining these kinds of concessions they should be focused on the buyers and not on helping industry.

Mr. McCreevy

One point my unique building circumstances has brought home to me is that the builders will charge VAT on the price of new houses, but there is no stamp duty whereas it is the reverse with second-hand houses.

Mr. McDowell

That relates to the industry, but it does not bother the purchaser.

Mr. McDowell

I move amendment No. 138:

In page 239, before section 126, but in Part 4, to insert the following new section:

"126. - The Minister for Finance may from time to time by order amend any monetary threshold referred to in the First Schedule to the Stamp Act, 1891 (as amended by this Act) having regard to changes in the value of money and property.".

Given that stamp duty rates and thresholds were set many years ago and had not been changed, we should build in an automatic threshold increase and the Minister should be allowed, by regulation, to increase the thresholds for the various rates of stamp duty by order. With CAT there is automatic indexation of the threshold and we should follow that precedent. For example, the exemption of stamp duty for houses under £60,000 is not worth a great deal now and will probably be worth a great deal less in two to four years. We should give the Minster power to index or vary by order.

Mr. McCreevy

I should be grateful to the Deputy for proposing to extend my powers under the stamp duty legislation. However, it is difficult to see the rationale for giving me power to amend the various monetary thresholds contained in the First Schedule to the Stamp Act, 1891. We have an annual budget and Finance Bill. In preparing for these I have regard to existing stamp duty thresholds. Where there is a need to amend thresholds after enactment of the Finance Bill it can be done by introducing a second Finance Bill. This is what happened last year when I introduced the Finance (No. 2) Bill, 1998, to implement the Bacon report. I am, therefore, opposing the amendment.

Mr. McDowell

There has been a problem with stamp duty because the thresholds were unchanged for many years. The Minister suggests this principle has not been accepted elsewhere in the tax code, however, the principle of indexation was built in to the residential property tax and the capital acquisitions tax. I would withdraw the amendment if the thresholds were revisited on a regular basis, but that does not happen.

Mr. McCreevy

There is a logic to the Deputy's argument and Ministers like to take powers through measures such as ministerial orders. However, taxation matters, such as the imposition of stamp duty changes, should be presented to the Oireachtas in the Finance Bill. The Finance (No. 2) Act, 1998, changed the entire stamp duty regime on foot of the Bacon report. I would like to see how these changes work. While the Deputy is correct to point out that this provision applies to other areas of the tax code, I do not consider it should apply in this instance.

Amendment, by leave, withdrawn.

Chairman

Amendment No. 139 is deemed to be out of order as it involves a potential charge on the Revenue.

Amendment No. 139 not moved.

Sections 126 to 131, inclusive, agreed to.

SECTION 132.

Chairman

Amendment No. 143 is related to amendment No. 140 and both may be taken together. Is that agreed? Agreed.

Mr. McCreevy

I move amendment No. 140:

In page 241, lines 6 to 13, to delete subsection (9) and substitute the following:

"(9) Section 177 shall apply and have effect-

(a) in paragraph (a), as respects statements delivered on or after the date of the passing of this Act,

(b) in paragraph (b), as respects interest chargeable for any period commencing on or after the date of the passing of this Act in respect of stamp duty to be paid whether before, on or after such date, and

Section 160 amends all the ad valorem rates of stamp duty to a straight percentage, subject to rounding up to the nearest pound. This amendment brings the rate of company’s’ capital duty into line with other stamp duty rates by expressing it also as a percentage, subject to rounding up to the nearest pound.

The consequential amendment to section 132, which contains commencement provisions for the pre-consolidation measures contained in Chapter 2 of Part IV, inserts a commence revision for the revised rates of company's capital duty.

Amendment agreed to.

Section 132, as amended, agreed to.

Sections 133 to 143, inclusive, agreed to.

SECTION 144.

Question proposed: "That section 144 stand part of the Bill."

Mr. McDowell

What is the thinking behind the general substitution of the word "penalty" for "fine"?

Mr. McCreevy

What is the difference between a fine and a penalty?

Mr. McDowell

A fine is imposed by the courts.

Mr. McCreevy

Aside from that what is the difference? Normally when the term "fine" is used it indicates that some kind of offence has been committed. It is part of the vocabulary of the criminal law. A penalty, however, is usually a monetary punishment designed to coerce a person to comply with the law. It is calculated, for example, to make taxpayers pay their tax on time. If they do not, interest will be charged on the late payment. This interest is a penalty.

In a stamp duty code, this clear distinction is not always made. The term "fine" is often used where the term "penalty" should be used. The various amendments to the Bill are designed to provide for a clear distinction between what is meant to be an offence and what is meant to be a penalty. Where an offence is involved, the provisions of section 1078 of the Taxes Consolidation Act, 1997, are applied to that offence.

Mr. Noonan

That is correct. The referee can penalise on the field of play but if a person hits somebody in the tunnel he could be fined or arrested.

Mr. McCreevy

That is correct.

Mr. McDowell

I am surprised somebody has not challenged the power of the Revenue Commissioners to impose a fine.

Mr. McCreevy

I am sure there is a lawyer waiting to start another industry. All the measures in this Chapter related to the pre-consolidation measures. I hope the Stamp Duly Consolidation Bill will be introduced later this year. It will be the first consolidation in this area since 1891.

Question put and agreed to.

Sections 145 to 159, inclusive, agreed to.

SECTION 160.

Question proposed: "That section 160 stand part of the Bill."

Mr. McDowell

There seem to be substantial changes in this section. Perhaps the Minister will clarify them.

Mr. McCreevy

Section 160 substitutes a new First Schedule to the existing First Schedule of the Stamp Act, 1891. The First Schedule comprises a list of the instruments which attract stamp duty. It also specifies the rates at which duty is payable and contains details of certain exemptions from duty. Section 160 streamlines the First Schedule by reducing significantly the number of instruments charged with stamp duty. The instruments now omitted were instruments which formerly attracted a fixed £10 duty. As a result of this measure, 100,000 instruments will now fall out of the charge.

Section 160 also changes the way in which ad valorem rates of duty are expressed in the First Schedule. Up to now stamp duty rates have been expressed in the form £1 per £1,000 or part of £,1000 or £3 per £100 or part of £100, etc. From now on, stamp duty rates will be expressed as a percentage, subject to the rounding up to the nearest pound. The new way of expressing the rates of duty will not increase the amount of duty payable in any particular case but will simplify the calculation of a liability.

Question put and agreed to.

Sections 161 to 167, inclusive, agreed to.

SECTION 168.

Mr. McDowell

I move amendment No. 141:

In page 248, between lines 8 and 9, to insert the following subsection:

"(2) Subsection (7) of section 9 of the Management Act, 1891, shall apply to any instrument which cannot be used for any reason (not being a reason listed in that subsection).".

This is a technical amendment. As I understand it, the definition of a waste instrument applies only to conveyance. The purpose of the amendment is to extend it to other instruments.

Mr. McCreevy

Section 9 of the Stamp Duties Management Act, 1891, sets out a number of circumstances where the Revenue Commissioners may refund stamp duty. Refunds may be made, for example, if the document is found to be void, or unfit for the purpose originally intended because of some mistakes in the document or the purpose of the document cannot be carried through because one of the parties fails to fulfil his or her obligations under the document. It is difficult to see any circumstances outside of those already covered by the legislation where it would be appropriate to refund stamp duty. Consequently, I oppose this amendment.

Mr. McDowell

Is the Minister happy with the phrase "conveyed or transferred" in section 168?

The committee went into private session at 11.53 a.m. and resumed in public session at 11.55 a.m.

Amendment, by leave, withdrawn.

Section 168 agreed to.

Sections 169 to 172, inclusive, agreed to.

NEW SECTION.

Mr. McCreevy

I move amendment No. 142:

In page 249, before section 173, to insert the following new section:

"173.-Section 58 of the Act of 1891 ishereby amended in subsection (8) (inserted by the Finance Act, 1981) by the substitution of 'Paragraph (15) of the Heading "CONVEYANCE or TRANSFER on sale of any stocks or marketable securities or a policy of insurance or a policy of life insurance"' for 'Paragraph 8 of the Heading "CONVEYANCE or TRANSFER on sale of any property other than stocks or marketable securities"'.".

This is a technical amendment. Its purpose is to ensure that the reference in subsection (8) of section 58 of the Stamp Act, 1891, to "conveyances or transfers on sale" is the same as that contained in the new First Schedule to the Stamp Act, 1891, as inserted by section 160 of this Bill.

Amendment agreed to.

Sections 173 to 176, inclusive, agreed to.

SECTION 177.

Mr. McCreevy

I move amendment No. 143:

In page 249, between lines 25 and 26, to insert the following:

"(a) in subsection (1) by the substitution of '1 per cent of the amount determined in accordance with the said section 70 but where the calculation results in an amount which is not a multiple of £1 the amount so calculated shall be rounded up to the nearest pound:' for '£1 for every £100 or part of £100 of the amount determined in accordance with the said section 70;',".

Amendment agreed to.

Section 177, as amended, agreed to.

Sections 178 and 179 agreed to.

SECTION 180.

Question proposed: "That section 180 stand part of the Bill."

Mr. McDowell

Perhaps the Minister could explain the stamp duty exemption for shared ownership leases.

Mr. McCreevy

It is part of the exercise to tidy up the stamp duty code in advance of consolidation. I am providing in this section for the repeal of certain obsolete and superfluous provisions which are no longer required. Two provisions which are included in the list of repeals are not obsolete. The first concerns shared ownership leases. These leases are exempt from stamp duty provided certain conditions are met. One of the conditions is that it must be proved that when the lessor acquired his or her interest in the house, the subject of the shared ownership lease, stamp duty was paid. I am dispensing with this condition.

The second concerns the repeal of section 18 of the Finance Act, 1943. This section limited to six months the amount of time any person would serve in prison for non-payment of any tax or duty by imposing an obligation on the Revenue Commissioners to secure the release of any person so imprisoned once the six month period has elapsed. As it is more appropriate for the courts to decide what the proper term in prison should be for non-payment of stamp duty, I am removing this obligation from the Revenue Commissioners. I pointed out on Second Stage that under the old section a person from the Revenue Commissioners had to turn up at the prison gates and let the person out.

Mr. McDowell

Was that just for the non-payment of stamp duty?

Mr. McCreevy

It was for all taxes.

Mr. McDowell

That applied to anyone convicted of a tax offence. It is not too difficult to use one's imagination this year about what measures would be required to get them out.

Mr. McCreevy

I do not know if the Minister for Finance would be obliged to release the prisoner but someone on his behalf would have to knock on the door of Mountjoy Prison and let the prisoner out.

Question put and agreed to.

Section 181 agreed to.

SECTION 182.

Chairman

Amendments Nos. 144, 145 and 148 are related and may be discussed together.

Mr. Noonan

I move amendment No. 144:

In page 251, between lines 13 and 14, to insert the following subsections:

"(2) Section 59 of the Finance Act, 1985, is hereby amended by the insertion of the following subsection after subsection (2):

'(3) For the purposes of this section, the expression "spouse of the disponer" shall include any person who immediately prior to the death of the disponer was one member of a couple, of whom the disponer was the other member, who, although not married to each other, ordinarily co-habitated with each other as man and wife for a period of two years or more ending on the death of the disponer.'.

(3) Paragraph 1 of Part 1 of the Second Schedule to the Principal Act is hereby amended by the addition at the end of the definition of 'class threshold' of the words 'and provided further that for these purposes a person shall be deemed to be a child of the disponer if he is a child of any person who immediately prior to the death of the disponer was one member of a couple, of whom the disponer was the other member, who, although not married to each other, ordinarily co-habitated with each other as man and wife for a period of two years or more ending on the death of the disponer.".

Ms O. Mitchell

This amendment attempts to treat a partner as a spouse for inheritance tax purposes and also to treat the children of either or both partners in the same way as the children of a married couple.

Mr. Noonan

Under the Capital Acquisitions Tax Act, 1976, children have a tax free threshold of £188,400 in relation to gifts and inheritance from their parents. A child is defined as including a stepchild, but a stepchild is not defined in the Capital Acquisitions Tax Act. The legal definition of a stepchild is the child of one of the spouses by a former marriage. Thus, to qualify as a stepchild, the child must be the child of a former marriage.

If a woman has a non-marital child and subsequently marries someone who is not the father of that child, that child is not the stepchild of his mother's spouse. The consequence of this is that the child in question has a tax free threshold of only £12,560 if he inherits from his mother's husband. The solution would be for his mother and her husband to adopt the child in question. However, this is not always possible. In one case which has been brought to my attention, a mother adopted her own child before marrying, thus ruling out the second adoption. Adoption might also be ruled out for reasons of age. It is suggested that "step child" be defined for the purpose of the capital acquisitions tax as, for example, "the child of one of the spouses by another relationship". This issue is of increasing importance with a greater number of non-marital children.

Chairman

Under the order of the Dáil I cannot call on the Minister to reply. I must put the question.

Mr. McDowell

Question put.

The Select Committee divided: Tá, 8; Níl, 7.

Tá

Ahern, Michael.
Browne, John (Wexford).
Dennehy, John.
Fleming, Seán.
Foley, Denis.
Lawlor, Liam.
McCreevy, Charlie.
O’Keeffe, Batt.

Níl

Carey, Donal.
Deenihan, Jimmy.
McDowell, Derek.
Mitchell, Olivia.
Noonan, Michael.
Ryan, Seán.
Stanton, David

Question declared carried.

Sitting suspended at 12.15 p.m. and resumed at 2 p.m.

Chairman

We will now deal with Part 7 of the Finance Bill, 1999, covering sections 189 to 196, the Schedules to and Title of the Bill. We will deal with amendments Nos. 162 to 182. It is proposed to group the following amendments for the purpose of debate, amendments Nos. 166, 171 and 173, 174 and 175, and 177 to 182, inclusive. All other amendments which are not grouped will be discussed individually. Amendment No. 162 in the name of Deputy McDowell is a new section but is deemed out of order as it involves a potential charge on the Revenue.

Amendment No. 162 not moved.

NEW SECTION.

Mr. McDowell

I move amendment No. 163:

In page 254, before section 189, but in Part 7, to insert the following new section:

"189.-Section 944A of the Taxes Consolidation Act, 1997 (inserted by section 134(1)(a) of the Finance Act, 1998) is hereby amended by the deletion of ’may make arrangements for the publication of reports of such of their determinations as they consider appropriate,’ and the substitution therefor of ’shall make arrangements for the publication of reports of their determinations,’.”.

Mr. McCreevy

When I introduced section 134 of the Finance Act, 1998, providing for the publication of certain Appeal Commissioners' determinations, it was at the suggestion of the Institute of Taxation. It was of the view that it would be very beneficial to tax practitioners and taxpayers generally where the point at issue in an appeal is a general one affecting more than just the taxpayer involved in the appeal. The Appeal Commissioners and the Revenue Commissioners both fully supported this measure. However, Deputy McDowell's amendment appears to require the Appeal Commissioners to make a report of all their determinations.

The role of the Appeal Commissioners is to adjudicate between the taxpayer and the Revenue, in the main, in relation to the proper quantum of an assessment to tax. They are primarily a fact finding body. They may hear disputes which involve, for example, the quantum of a taxpayer's drawings, the proper gross profit rate for a business or whether a certain item of expenditure is properly deductible for tax purposes. They also, of course, interpret the tax legislation as applicable to a given set of facts.

In other words, the Appeal Commissioners adjudicate on a myriad once-off situations. I cannot see how these would be of relevance to tax practitioners or the general body of taxpayers. What was in mind in section 134 is that determinations which would have some precedental value to taxpayers and tax practitioners would be made available. I believe that that original motivation still stands good. I do not, therefore, accept this amendment. It is understood that the Appeal Commissioners will soon be publishing details of appropriate determinations made by them since section 134 of the Finance Act, 1998, was enacted.

Mr. Noonan

I understand Deputy McDowell will be here shortly. This amendment has been prompted by the adjudication by the Appeal Commissioner prior to Christmas on the assessment raised on Mr. Haughey. People were looking for an explanation as to why an Appeal Commissioner should have adjudicated in such a manner. I do not know the intent of Deputy McDowell's amendment. There were several discussions among parliamentary colleagues that such an amendment might be appropriate. In the debate at the time, this demand was made.

I had almost forgotten the role of the Appeals Commissioner until before Christmas. I remember when there were four Appeal Commissioners in the 1980s. I take it the reduction in the number of Appeal Commissioners occurred with the introduction of self-assessment.

Mr. McCreevy

Yes, more or less.

Mr. Noonan

Up to self-assessment, it was the practice that people who had a liability raised against them by the Revenue Commissioners went to the Appeal Commissioner almost as a matter of form to sort things out. There was much more work. One consequence of the reduction in the number of Appeal Commissioners is that people with a private sector and professional tax adviser background are now appointed - I understand the two current Appeal Commissioners come from that background - and the practice of having someone with a public service or revenue background, which was the case when there were four Appeal Commissioners, has been discontinued. I recall in the 1980s there was provision for four positions and three were filled. The Minister might confirm that for me. It was always the practice.

Mr. McCreevy

Apparently there is no limit on the number. Traditionally there were three. Regarding the background to the Appeal Commissioners, the Deputy is quite right in his interpretation of what has happened in recent years. As someone who has spent many hours as an apprentice accountant with many pro forma tax cases waiting to be called in the Appeal Commissioners in Stephen’s Green, I can say the system has changed radically in the past ten years. The whole tax system has dramatically changed since the mid-1980s.

Assessments used to be issued by the inspector of taxes on every self-employed taxpayer at the start of the year. Traditionally every accountant's office would appeal the assessment. Many months later, if accounts were not in, one would be called before the Appeal Commissioners. The accountant would go to the Appeal Commissioners and seek an adjournment. One could deal with 25 tax cases simply due to accounts not being in. It would be put off continuously. Eventually the Appeal Commissioners or the inspector of taxes would run out of patience, the case would be determined by the Appeal Commissioner and then one would exercise the right of appeal in the Circuit Court. It would still not be possible to get the client to produce his accounts. An accountant would probably be behind with thousands of these accounts. Appeals would be held in the Circuit Courts around the country in camera before other cases would be heard. All the accountants would turn up and again seek adjournments. The Circuit Court judge would usually be very lenient. Eventually the accounts would be produced, sent to the inspector of taxes and the whole process would stop. That was the kind of system which used to operate.

The Appeal Commissioners would sit in Dublin and throughout the country. A list would be published at the start of the year and it was a whole industry; 95 per cent of appeals held before the Appeal Commissioners sought adjournments and the inspector of taxes would usually grant them. When he got fed up, one would promise him the accounts next month or the month after and eventually they would be done. Deputy Ahern was in the same business and he will appreciate how the system used to operate.

Then there was a change in the operation of the system with the introduction of self assessment and the streamlining of the Revenue Commissioners. According to the Revenue Commissioners, 90 per cent of these cases were pro forma, for example seeking adjournments. In many of the other 10 per cent of cases one could not agree with the inspector of taxes on, for example, the proper gross profit percentage and one would fight it out and then list it for appeal. Finally those appeals would be heard and determined by the Appeal Commissioners. Again, if one was not satisfied, it could go to the Circuit Court. That was the kind of crazy system we used to have until the late 1980s.

A small percentage of decisions was appropriate for Appeal Commissioners, that is determining points of law. It was a very small percentage. The Revenue Commissioners would be able to give figures for the 1970s and 1980s. I am giving percentages regarding the quantity of appeals off the top of my head.

At that time there were at least three Appeal Commissioners. However, I understand from the Revenue Commissioners that was not as many as they would have liked. There were two up to 1978 when an extra one was appointed. As the Deputy rightly pointed out, the tradition was that at least one of those used to come from the inside - that is he would have been a former inspector of taxes - and two from the outside. When the system started to change with self assessment, this practice between accountants, tax advisers and the revenue system began to change. The appeals coming before the Appeal Commissioners became legal point appeals. Consequently there are now only two Appeal Commissioners. When the third one retired it was felt the volume of work did not require an additional Appeal Commissioner. That is the way the system has been in recent times.

On 31 December 1986, there were 59,888 cases of which appeals were on hand. That decreased to 484 by the end of 1997. In 1998 there were 609. In 1987 there were 40,463 cases, in 1988 there were 9,779, in 1989 there were 1,181 and that decreased over the years to fewer than 1,000, which proves my point. I would imagine the figure was greater than 60,000 in the late 1970s because that was the way things were done. The appeals now before the Appeal Commissioners are what we now understand to be appeals. There are still appeals over gross profit percentages and similar matters and they are genuine appeals. A very small percentage would be on points of law. I would be able to count on one hand the number of cases before the Appeal Commissioner on points of law during my adult working life as an apprentice and practising qualified accountant. I can remember only very few, whereas I have asked for hundreds or thousands of adjournments in my time.

Appeal Commissioners have existed since before the Famine. Section 23 of the Income Tax Act, 1842, provided for the appointment of so-called special commissioners for income tax. Appointments were made by the Treasury. Under paragraph 17 of the Revenue Commissioners Order, 1923, the power passed to the Minister for Finance. The provision governing such appointment appeared as section 156 of the Income Tax Act, 1967, which is now section 850 of the Taxes Consolidation Act, 1997. Since 1967, the commissioners have been known as the Appeal Commissioners. Their functions have been extended over time to taxes other than income tax, more laterally to excise duties in recent Finance Acts.

Mr. Noonan

I may introduce amendments on Report Stage regarding the manner of appointment of Appeal Commissioners. As in all areas, everything is changing and we must be more transparent in appointments. I am not suggesting there was any malpractice in the past.

A procedure whereby an Appeal Commissioner is appointed by the Government on the nomination of the Minister for Finance from a panel certified by the profession - similar to the practice for the appointment of judges - might be appropriate. There should be a large pool of nominees from the profession, people of high repute in private practice who have served as professional tax advisers, usually with an accountancy background. It could be certified in a manner similar to the way the Incorporated Law Society and the Attorney General's committee certifies those eligible for the position of judge. Then the Minister could nominate and the Government could appoint.

I do not intend to suggest the Government should be restricted in appointing people it considers suitable. There needs to be a procedure. It cannot be random. We cannot have a situation in future where the Minister decides he knows someone who would make a good Appeal Commissioner, signs an order and that is the end of the matter. I presume he must communicate it to Dáil Éireann by way of replacing the order before the House. In the end that gets lost in the Library and very few people see it. I presume he must communicate it to Dáil Éireann by way of placing the Order before the House. It will lie in the library and few people will see it. Items are placed before the House by putting them on the Order Paper or in the library and many Members of the House never advert to the fact that an Order is extant. They do not know the decision has been made.

The Minister should consider how to return to the practice of involving someone from a public service background. We had a debate on share options yesterday and said that those who had the strongest views would be those with a private sector background. The point was made that there was movement into the State companies and that people were becoming interested in them. It is important to have a mix of cultures in public administration. In the tax area, someone who has spent his life protecting the affairs of a private sector client against the demands of the Revenue would bring a particular skills to the appeals function if he was appointed an Appeal Commissioner.

There is another public service culture which is essential - the attitude of the career civil servant to public service is frequently more vested in the public interest than the attitude of persons who come from a private sector background. If the quantum of work were to justify it, there should be an extra appointment now. If there is not sufficient work, the Minister should give an indication that the next appointment would be a person from a public service background. If the number of Appeal Commissioners is to remain at two, there should be one from each background.

The principle being protected by the non-publication of the judgment of the Appeal Commissioners and the Circuit Court is the right of a citizen to have his tax affairs remain private. There is a compromise. In certain circumstances a judgment could be published without using the name of the appellant where it was clear that anonymity would be preserved. Everyone would have known who was involved if the case before Christmas had been published. There is a generality of cases. An appeal mechanism could be instituted so the appellant could object to the publication of the judgment on the grounds of disclosure of the person involved, but only on those grounds. The Minister could meet Deputy McDowell's point if he moved along those lines.

The Deputy's remarks about the change in public opinion has been a topic I have talked about for some time. I have indicated in Government and in Opposition that the changes in practice and efficiency in the Revenue Commissioners deserve a footnote in the history of the success of the economy. I remember those days. How the system did not fall on its head, I do not know. The changes made by the Revenue Commissioners have been enormous.

Deputy Noonan is right about the change in public opinion. I know what those in certain institutions are saying in private but they will not speak about it openly. That does not mean we should not examine the legislation and be cowed into doing one thing or another. We must do our best.

When the Tax Consolidation Act was passed in 1997, many practitioners thought it would be a good idea if the Appeal Commissioners' decisions in cases on points of principle could be written down and collated. It was on foot of that representation that I initiated the possibility of the publication of the Appeal Commissioners' decisions in last year's Finance Bill. It was never intended that the dispute between Joe Smith's shop in east Limerick and the Revenue Commissioners over whether he should pay 14 per cent or 17 per cent be published. It was a fair proposal, however, for cases in which precedents were created. The Revenue Commissioners send out their practice notes every few months to the tax practitioners, telling them how they interpret various sections and what practices are taking place. I saw the Appeal Commissioners' publication as adding to that general body of knowledge.

It is about to happen and we will look at it then. I do not have a closed mind on this but I want to protect the independence of the Appeal Commissioners.

Mr. McDowell

We all want that.

Mr. Noonan

Do they have a secretariat separate from the Revenue Commissioners?

Mr. McCreevy

They are kept separate in the legal sense but they are given some back-up by the Revenue Commissioners.

Mr. Noonan

Mr. McCreevy

I will give consideration to that point before the next Finance Bill.

Amendment, by leave, withdrawn.

Mr. McDowell

I move amendment No. 165:

In page 254, before section 189, but in Part 7, to insert the following new section:

189.-Section 939 of the Taxes Consolidation Act, 1997, is hereby amended-

(a) in subsection (1)(a) by the insertion after 'oath' of 'or may require any such person to furnish any document or other thing or any other information to them in such manner as they may direct'; and

(b) in subsection (3) after 'duly summoned' by the insertion of 'or after being duly required to furnish any document, thing or information'; and

It was brought to my attention - the Minister can confirm whether this is correct - that at present the Appeals Commissioners can summon people to give oral evidence but that, apparently, these people cannot be obliged to produce documents. I am not sure if this is the case and I tabled the amendment to cover that.

Mr. McCreevy

This amendment proposes to give to the Appeal Commissioners powers in relation to the furnishing of documents and information in connection with a tax appeal hearing. Under section 939 of the Taxes Consolidation Act, the Appeal Commissioners "may summon any person whom they think able to give evidence as respects an assessment made on another person to appear before them to be examined, and may examine such person on oath." In addition to being able to summon people for examination on oath, they also, under section 935, have the power to issue precepts to seek information.

I am in a difficult position as regards this amendment. The Deputy will appreciate that the Appeal Commissioners are in the best position to form a view as to whether their existing powers in this regard are adequate. If the Appeal Commissioners feel they need extra powers for the purpose of establishing facts and gathering evidence, I will be only too happy to consider their proposals. However, I believe I should hear from them before making any changes to the existing provisions.

I understand the last significant change to the powers of the Appeal Commissioners was made in 1995 - in section 173 of the Finance Act of that year - by my predecessor, Deputy Quinn, and this was in response to specific suggestions made by the Appeal Commissioners.

Mr. McDowell

Does the gap to which I referred in respect of the production of documents exist?

Mr. McCreevy

The Appeal Commissioners are independent within the tax system and successive commissioners have jealously guarded that independence. I would prefer if, as in the past, they requested additional powers rather than my imposing such powers on them. I am sure this matter will be brought to their attention but we have received no request from them that they need additional powers in this area.

Mr. McDowell

Perhaps the Minister could bring it to their attention.

Mr. McCreevy

If they respond by stating that they require this additional power, I will table an appropriate amendment on Report Stage.

Amendment, by leave, withdrawn.

Chairman

Amendments Nos. 166, 171 and 173 are related and may be discussed together by agreement.

Deputy McDowell

I move amendmentNo. 166:

In page 254, before section 198, but in Part 7, to insert the following new section:

189.-Where but for this section a decision of the Revenue Commissioners could not be appealed to the Appeal Commissioners, such an appeal shall lie under this section, and section 933 of the Taxes Consolidation Act, 1997, shall apply with any necessary modifications to such an appeal.".

This amendment involves two net points. Following a recent a controversy, I was struck by some press reports which suggested that, in cases involving particular taxes, an appeal lay from the decision of the appeal commissioner to the court and did not in others. I am anxious to hear the Minister's views on that because it seems that, in principle, there is no reason this should be the case. I accept the amendment does not deal precisely with this matter, but I wish to discover where and at what stage an appeal lies.

Mr. McCreevy

With your permission, Chairman, I propose to take together amendments Nos. 166 and 173 in the name of Deputy McDowell and amendment No. 171 in the names of Deputy Noonan and Deenihan. The amendments in the names of Deputy Noonan seek to extend the remit of the Appeal Commissioners. The amendment in the name of Deputies Noonan and Deenihan is concerned with internal Revenue procedures relating to the new powers.

As a preliminary matter I wish to draw attention to errors of layout in section 189 of the Bill and would request the Clerk of the Dáil to make a correction to certain line alignments under Standing Orders. The errors are on page 262, lines 30 and 31; page 272, lines 44 and 45; page 276, lines 4 and 5; page 274, lines 25 to 31, and page 277, lines 32, 33 and 34.

Deputy McDowell's first amendment seeks to ensure every decision of the Revenue Commissioners is capable of being appealed to the Appeal Commissioners and thereafter to the courts. The second amendment seeks to have a right of appeal to the Appeal Commissioner of every notice issued by a Revenue authorised officer under the proposed new powers, for the purpose of obtaining information from a taxpayer or from a third party. This point is also touched on by the amendment in the names of Deputies Noonan and Deenihan. Their amendment proposes detailed procedures be laid before the Houses of the Oireachtas regarding Revenue's use of the new powers before they can take effect.

It is important to be aware that the fundamental remit of the Appeal Commissioners is the determination of an assessment of tax. They hear evidence from both the taxpayer and the Revenue in order to arrive at their determination as to what is the correct amount on which the taxpayer should be assessed. They do not perform the task of an ombudsman in reviewing how a tax administration has treated its clients or customers. Neither do they act judicially in reviewing administrative decisions by way of judicial review - that is the function of the courts.

No doubt the Revenue Commissioners make decisions every day of the week, perhaps even many times each day. I cannot see why every decision they make should be referable to the Appeal Commissioners. This is a recipe for administrative chaos. With regard to the serving of a notice by a Revenue authorised officer under the new powers to obtain information, it is important for Deputies to reflect on the following: why these new powers have been proposed by me, and what duties the Revenue Commissioners have. I do not have to remind Deputies of recent events which indicate that serious tax evasion has gone on in this country. The Revenue Commissioners are the people who are charged with pursuing tax evasion. They have requested these powers to enable them to do their job more effectively and successfully.

There have been reports in the media that the powers I propose to give to the Revenue Commissioners are unprecedented in the western world, but this is not true. I may have been unduly restrictive in requiring the consent of a Revenue Commissioner to be required in certain circumstances before a Revenue authorised officer can seek information. That is generally not the case in other countries - for example, Australia, New Zealand, Canada, France, Germany and Sweden, the country which I understand invented the concept of an Ombudsman. In those countries the decision to seek information is made at a much lower level. In Sweden the Revenue authorities can access bank accounts without having prima facie evidence of tax evasion.

I would emphasise that the powers being given to Revenue are to enable them to get information. If, having obtained that information, it is considered that a taxpayer has an unpaid liability to tax, an assessment can be made. If the taxpayer appeals the assessment, it is at that stage that the Appeal Commissioners are called upon to fulfil their role as adjudicator and having heard the evidence presented to them, they make a determination. It does not make sense that the Revenue should be prohibited or delayed in obtaining information to enable them to do their work by having an appeal mechanism prior to seeking the required information. However, this does not stop the taxpayer from seeking judicial review if he or she feels that Revenue is not entitled to the information.

The amendments from Deputies Noonan and Deenihan focus on Revenue procedures for use of the new powers.

As I said on a previous occasion I am anxious to preserve the balance between the legitimate expectations of taxpayers to go about their business without unwarranted intrusion and the need to empower Revenue to tackle the episodes of tax evasion which have caused such public concern.

The Revenue Commissioners have already indicated that they will update their statement of practice on the use of Revenue powers in the light of these new provisions and will introduce appropriate checks and balances. It should be recalled that before an inspector of taxes can seek access to a person's bank details, the consent of a Revenue Commissioner is required. In other words, the investigating officer will have to make a case to a Revenue Commissioner. The Revenue Commissioners have already indicated that where a third party notice is being served with their consent, the taxpayer in question will be advised that the notice has been issued.

A Revenue Commissioner will not give his or her consent to the issue of a third part notice to a financial institution without good grounds. Under the legislation, the investigating officer must have reasonable grounds to believe that the financial institution in question is likely to have information relevant to the liability of a taxpayer. Establishing the proper tax liability of a person who does not wish to comply with his or her obligations can entail detailed and painstaking investigation. We see from the daily media reports of the two tribunals how convoluted the process of investigating can be. Establishing the facts of a person's dealings with a bank might only be one aspect of calculating a person's liability to tax.

There has been much in the media about the appointment of a special tax ombudsman and what are purported to be unfavourable comparisons have been made in relation to the position in the United Kingdom. The Adjudicator's Office in the United Kingdom is not independent and is funded by bodies against whom complaints are made. A complainant aggrieved by the decision of the adjudicator may further complain to the Parliamentary Ombudsman who is the equivalent of our Ombudsman. Our Ombudsman, an independent statutory officer, already has jurisdiction to deal with complaints against the Revenue. He has substantial statutory powers to enable him to fulfil his role, including the right of access to all documentation and information which he considers relevant and the right to interview all relevant staff. Indeed, one might conclude that he has more powers than the Revenue Commissioners at present. Where the Ombudsman believes there is prima facie evidence of systematic abuse of powers by Revenue, or any other body within his remit, he has the discretion to investigate on his own initiative.

Overall, this is a balanced package of powers which brings us more in line with the main international tax administrations. However, I will consider whether to put into legislation what has already been announced by the chairman of the Revenue Commissioners, that is, that the taxpayer would be given notice that information has been sought from a third party.

Mr. Noonan

I thank the Minister for the explanatory note. I will deal with amendment No. 171. I am being helpful to the Minister by trying to improve his situation, whereas when we come to discuss section 189 I will have some hard things to say about the powers being sought and the manner in which they are being sought. In terms of the amendment, I take it the Minister will get his wish and that the section will be passed by 4.30 p.m.

I believe the section is unconstitutional, and I have some support from various eminent counsel to that effect. This amendment proposes to insert a subsection so that the Minister can, subsequent to the Bill being passed some time next week, amend his legal hand by means of regulation. There is no such thing as first and second class law. What one does by regulation has the same authority as what one does in primary legislation. I strongly advise the Minister to return on Report Stage with an amendment along the lines I suggest to enable him to mend his hand subsequently.

The Minister said Revenue will exercise their powers fairly and with discretion, and I am sure they will do so. I, like many other Deputies, have had complaints over the years about Revenue auditing a company. Nobody likes auditors arriving in, either for income tax, corporate tax or VAT purposes, and camping there for a week, but it must be done. As regards self-assessment, unless there is a certain amount of respect, bordering on fear, for Revenue, then it will not work. I strongly advocate an increase in the number of random audits conducted. I generally discount complaints I get from constituents about the manner in which Revenue audit because they are quite entitled to audit and tough luck if one does not have one's affairs in order.

We are not talking about companies here but about individual bank accounts which could be examined by the Revenue Commissioners. We have a serious problem if Revenue relies on a statement of practice because it has no force in law, unlike a ministerial regulation. If the Minister proceeds along the lines I suggest in this amendment and specifies in the regulatory section the things to which, inter alia, Revenue will adhere, when Revenue come to draft their statement of practice, it will, to a very large extent, have the force of law in so far as it reflects the guidelines and the regulation.

If guidelines on the grounds on which an authorised officer may use or seek the use of powers specified by the Minister, then the statement of practice will have the force of law as well and so on down through the catalogue of powers and procedures I mentioned here. I used the words "inter alia” so the Minister can bring in new powers.

The Minister has a serious problem with this section. What is likely to happen is that when Revenue apply the section to the small people, they will grin and bear it because they will not risk a court action. However, when they apply it to a serious player, they will end up fighting it all the way to the Supreme Court, and I believe they will lose. Deputy McDowell is a lawyer; I am not. However, I met them coming home from school when I was Minister for Justice and had much contact with lawyers so I am familiar with the pitch, although I would not be that familiar with the game.

Recently a case was reported in the paper which arose from Mr. Haughey and others taking the Moriarty tribunal all the way to the Supreme Court. On page 173 of the Supreme Court judgment on the issue of Mr. Haughey's sisters, the judgment said fair procedures require that a person likely to be affected by the tribunal should be given notice of its intention and offered the opportunity of making representations thereto. When one moves into people's private bank accounts without prior notice being given to the owner of the bank account, there is a difficulty. I know this arose in respect of a tribunal but I would say it is a fair reflection of the relationship between the court and the Executive to say that traditionally the courts have allowed the Revenue a longer leash than that given to other agencies of State, companies in the private sector or private citizens. The courts are very reluctant to interfere with the tax gathering powers of the State and will give much latitude. That is also the tradition in the United Kingdom and most democracies because they know a country cannot be run without raising revenue and they are very reluctant to interfere dramatically. Even taking into account the difference between the tribunal and Revenue, this will crash when we are challenged on the fact that notice to a person is not being given and that procedures are not fair and just. It will also crash because we are not providing for the right of appeal or to make representations at that point.

There is a second problem because of the arbitrary manner in which Revenue could operate if they simply act on the basis of section 189. I know it is the intent of Revenue to be fair and equal in their attitude to each taxpayer. Section 189, however, allows them to operate in an arbitrary fashion in that they can pick and choose and treat one taxpayer differently from others. Although a statement of practice internally will regulate that and apply fair procedure internally, it does not have the force of law. Consequently, if there is a challenge - I believe there will be one - it will not help the defence. Even if they produce a statement of practice in the High Court and the Supreme Court on a constitutional challenge, they will be asked what is the law.

The Revenue, by and large, do a very good job and have exercised their powers fairly. However, my criticism of the Revenue is that they have frequently got powers from Parliament which they have not exercised or not exercised to the extent we believed they would when they looked for them in the first instance. My fear is that this will crash. In looking at the right to privacy in the Constitution, I refer Members to the Haughey-Moriarty case and page 123 of the judgment. That states that the court is prepared to accept that the constitutional right to privacy extends to the privacy and confidentiality of a citizen's bank records and transactions. The court is prepared to accept that constitutional rights to privacy extend to confidentiality of citizens' bank records and transactions. No constitutional rights are absolute, and they can be transgressed in the public interest if there are good and sufficient reasons. However, if they are transgressed in a manner where fair procedure does not underpin them, then there are difficulties, and major difficulties arise for the right to privacy out of the Haughey-Moriarty case.

In my early days in the Department of Justice some constitutional issues arose, and I asked the then Secretary, Mr. Andy Ward, a man for whom I had and continue to have the greatest respect, what the Constitution meant about a particular section. He told me that it meant whatever the Supreme Court decided it meant. In the judgment I referred to, the Supreme Court decided that the constitutional right meant that the court was prepared to accept that the constitutional right to privacy extends to the confidentiality of a citizen's banking records and transactions.

Mr. McDowell

There is no right to privacy in the Constitution.

Mr. Noonan

That is right.

Mr. McDowell

It is only an enumerated right, as discovered in the Geraldine Kennedy case.

Mr. Noonan

That is right, but the unenumerated right has been enumerated now by decisions of the Supreme Court, particularly in the Bruce Arnold-Geraldine Kennedy case. It has been built on in subsequent judgments as recently as the case we have been discussing. I appeal to the Minister, as this should be done correctly. I will come back to give my views on individual powers when we debate this section, but I ask the Minister to take something similar to my suggestions on board.

The Minister would lay before the House details of the procedures to be followed by the Revenue Commissioners, or by any authorised officer thereof in the exercise of their powers conferred by this section. The Minister has full control of this and he has already said that on the advice of his officials and the Revenue there will be a statement of practice, laying out the details of procedures to be followed. The Minister should give the statement some force of law by putting this in.

Paragraph (i) states the guidelines for the grounds on which an authorised officer may use or seek to use the powers. That gives the Minister much discretion, and if he asks the Revenue to give the draft statement of practice, the main elements of the draft statement can be incorporated in the guidelines in so far as that relates to the manner in which the Revenue intends to proceed - the circumstances in which a person bound by an obligation of secrecy or confidentiality may be obliged to breach such obligations. Deputy McDowell set a direct negative down in respect of solicitors, but there is a real issue here.

As I pointed out on Second Stage, a person in the black economy whose operation is getting too big may go to his or her personal tax adviser, who may be a solicitor, and say he or she has been working in this way for several years and now wants to do it legally. The solicitor would take down the details and contact the Revenue on behalf of the client to discuss the situation. They would probably arrive at a settlement which would not necessitate pursuing the errant taxpayer in the courts. Often, evasion mechanisms are first brought to the attention of the Revenue by tax practitioners who want to get a client on the right side of the law.

Some of the obligations placed on third parties here would bring about a situation whereby in the case of a solicitor taking notes of a conversation where the client is informing that solicitor that he or she has evaded tax over a period of years, the notes of that conversation can be taken by the Revenue. What will happen in practice is that either the solicitor will break the law by saying he did not take notes and that a conversation that did not occur or an honest solicitor will have to tell a client that anything said is reportable in certain circumstances.

The Minister has to deal with this area of confidentiality. There has to be some appeal element. The Minister has said he envisages a situation developing where the Revenue inspector makes a case to the Revenue Commissioner, and only on the basis of the case presented to the Revenue Commissioner that he or she will sign the authorisation to allow an individual's personal bank accounts to be investigated. When the Revenue has investigated a person's bank accounts, it is at that point that they may raise an assessment against the person and the person may appeal against it. An appeal mechanism is then built in up the scale, but the appeal is against the assessment of the Revenue for tax liability. There is no appeal against the right of the Revenue to look at one's personal bank accounts, which raises constitutional problems also. Mr. Barry Galvin, who heads the Criminal Assets Bureau, cannot look at the bank account of a person who, prima facie, is a drug baron without getting a warrant.

The Minister is proposing a power here for investigators with no papers at all to look at personal bank accounts. I am not challenging the necessity for these powers, and all Members are aware of the background to this debate, but when the big man is taken on, we will crash on constitutional grounds. There is a whole variety of constitutional problems here, but I am offering a mechanism whereby this can be mended. It does not have to happen today; it can be done in six weeks or two months time on good legal advice. Some of those I referred to are staying out of this debate for prudent or public relations reasons, but they have received advice from senior counsel. The advice is that this will not stand up, and that advice is extremely strong. My fear is that the smaller operators roll over in the face of these laws, but the bigger people challenge them.

There is no minimum provision here; in theory one could go in for sixpence. One could raise populist anger with this argument, but I do not want to do so as I want to have an objective debate.

The Minister rejected the arguments made yesterday on behalf of the credit unions, but it is clear to anyone with sense that there are many small depositors in credit unions who are not paying their taxes. They are not reporting on the interest due on their deposits. These powers would allow the Revenue to go in and investigate the small accounts. The case could be made to the Revenue Commissioner, who would sign it off, and then investigators could go to Askeaton Credit Union, for example. A minimum provision should be considered. I know the chairman of the Revenue Commissioners said on radio that they will not trawl for the small depositors, but if they will not, why not put in a minimum provision, if the Revenue believes that tax evasion in excess of £1,000 has occurred? There should be an outstanding liability of a set amount. Even £1,000 would take a great deal of those who are fearful of this measure out of the equation. That should be considered, and I will return to the matter when we debate the section. However, the Minister should reflect on the Supreme Court judgments I referred to, particularly page 123 of the Haughey judgment, though the Minister should read the entire judgment. Page 123 states that the court is prepared to accept that the constitutional right to privacy extends to the privacy and confidentiality of a citizen's bank records and transactions.

No right is absolute, but when one purports to allow a State agency to transgress the constitutional rights of citizens, one had better have the procedures correct so that those rights can be transgressed legally.

Mr. McDowell

In regard to the right of appeal to which Deputy Noonan referred, the Minister stated in his opening comments that it is always open to a person to make an appeal by way of judicial review against the exercise of such powers or the making of such an order. Presumably, people would have to do so on the basis of fair procedures or administrative law. If that inherent right exists, I see no reason why we cannot explicitly spell out that a right of appeal exists either to the Appeal Commissioners or the courts. If we are saying it is every citizen's right to go to court and claim that procedures followed in particular circumstances were not proper or right, I cannot see why we cannot make an explicit provision.

Mr. McCreevy

Deputies, in their contributions, touched on the issue of the powers of the Revenue Commissioners and the proposals I am making in that regard. Whenever this matter has been discussed in the past, it has created difficulties. As Deputy Noonan pointed out earlier, the climate has changed in Ireland in light of people's awareness of various financial scandals.

In the past 20 months, I have been asked about the powers of the Revenue Commissioners on a number of occasions. I said that two things were happening; first, that I had asked officials in my Department and the Revenue Commissioners to review the adequacy of their powers and consider those which existed in other jurisdictions. Second, I stated that the Moriarty tribunal had also been asked to consider this issue under its terms of reference. I stated that on hearing the findings of the inter-agency group, comprising my departmental officials and those from the Revenue Commissioners, and the recommendations of the Moriarty tribunal, I would consider granting additional powers to the Revenue Commissioners. I was criticised both within the Dáil and outside of it for adopting that approach and was accused of being blasé about tax evasion.

I have been in politics longer than any Deputy here present and I am accustomed to political name calling. One party is trying to gain advantage over another. That does not surprise me; I am sure I have sought advantage myself in my political career. However, it is a bit rich for outside bodies and commentators to pillory the Minister for Finance for addressing the concerns expressed and for granting additional powers - which were deemed to be too strong - to the Revenue Commissioners.

On the issue of tax evasion, I recall stating a long time ago that everyone assumes everyone else is evading tax in one way or another. That means that a person imputes his or her own morals to someone else. Over the course of the past 22 years, I have heard Deputies in this House criticising the self-employed - the local doctor, the butcher, the publican and others involved in a cash business. What they are really saying is that if they could get away with non-payment of tax, they would do so. A self-employed person in a cash business might be returning every penny he or she owes to the Revenue Commissioners; nobody can know that.

I want to apply the above analogy to the discussion on the new powers. People might agree to the Revenue Commissioners looking at the bank accounts of a particular shopkeeper, barrister, solicitor or so on as long as they do not look at theirs. I believe that 95 per cent of people believe tax evasion should be tackled but do not want it to affect them or involve their accounts or records being investigated. This is not a uniquely Irish phenomenon but it is an especially Irish one. That kind of thinking permeates Irish society, not just the professional, middle or business classes. It is also found among trade unionists and ordinary workers.

The findings of a survey carried out in recent months revealed that people wanted a greater degree of secrecy about their financial affairs and medical records. The people were not self-employed; respondents included ordinary housewives in Kildare and Cork. They did not want somebody to examine their bank accounts but they would not have had any objection, for example, to someone looking at Deputy Dennehy's accounts to see how he was getting on. That is the kind of moral dilemma which underpins the background to this problem.

Mr. Noonan

It has not been advanced in this debate.

Mr. McCreevy

Deputy Noonan stated earlier that it is not easy in the current climate to raise some of the difficulties which exist in regard to privacy because of the recent scandals. I have tried to adopt a reasonable approach to this matter. I have had more experience than other Members of the committee in dealing with officials in the Revenue Commissioners over a long period. In 99 per cent of cases, I have found them to be very reasonable in their approach. However, I can recall cases in which individual officers have been totally unreasonable. In an organisation of almost 6,000 persons, one will obviously encounter a certain percentage of unreasonable people. The fear among law abiding taxpayers is that the Revenue Commissioners will go after ordinary self-employed people, not the big fish. There have been situations in which people have certainly crossed the line and persecuted individual taxpayers. One finds that kind of behaviour in all walks of life but the percentage of people involved is usually very small.

In regard to these powers, I am seeking to ensure that before an authorised officer is given the right to access an individual's bank account, one of only three people will have to authorise the request. There are only three Revenue Commissioners and a very elaborate procedure must be undergone before a request would be presented to any of them for permission to access 'Mr. X's' or 'Miss Y's' bank account. Extremely good reasons will have to be given to access individual accounts and that will only occur in exceptional cases. An official will not be able to take a notion that a certain taxpayer is hiding something and pursue them on those grounds. Only if there are very adequate grounds will an official be able to gain access to a person's bank account.

Deputy Noonan referred to the opinions being expressed by some professions behind closed doors. I am aware of those. I was also conscious not to go overboard in the granting of additional powers and I do not think I have done that. I have listened to comments made on this matter in recent weeks from various organisations. I have a reasonable amount of experience in this area I hear what the Revenue Commissioners are asking for and what they think is required. I also hear the points put forward by Deputy Noonan and others in regard to all the constitutional matters. I have not concluded whether I will make any further adjustments in this regard. However, I am definitely not stepping back from some of the positions which people wanted me to, which would leave the position as it was.

The chairman of the Revenue Commissioners has given commitments in interviews that fair procedures will be followed. Deputy Noonan rightly raised the Haughey judgment. Fair procedures will have to be followed in light of the Haughey judgment. The chairman of the Revenue Commissioners has stated on the public record that he will so do. The question arises whether it is necessary to put that into law. I will consider further this matter and others over the next week.

It has been suggested that there should be a tax ombudsman. I read out a briefing note on the position in the United Kingdom. We have an Ombudsman who also deals with Revenue complaints. I am inclined to go along with the Bill, as initiated, and to consider in the course of next year all the powers given to the Revenue Commissioners to see how they are operating and what comes to light. If, having considered the matter, it is deemed necessary, I will then bring in measures to tilt the balance back in favour of the taxpayer.

I would have expected more cheering from the chattering classes for what I have done in regard to Revenue powers, considering the abuse they have visited on me in the past 20 months or so. However, they do not like the idea that their bank accounts could be investigated by the Revenue Commissioners. They are all in favour of investigation of the bank accounts of Deputy Dennehy or Deputy Ahern but not their own. They will have to make up their minds on this matter.

I am not inclined at this stage to signal any change in the Bill, as initiated, but I have listened to what the Deputies have said. I have received many representations across the political divide on this issue. I have also heard from a number of professional bodies. We will consider the matter further and announce our decision next week.

Mr. Noonan

I thank the Minister for that. I do not think there is any expectation, certainly among members of my party, that the Minister is going to remove section 189. We will talk about the powers in the section when we debate the section itself. However, for the purposes of the amendment, I take it that the Minister is pressing ahead with the Bill as initiated. I am trying to amend the section to ensure the Minister does not subsequently find himself in a situation where he has given powers to the Revenue but that they are inoperable.

As I understand it, if the Minister is subject to a constitutional challenge, the fact that the Revenue are operating fair procedures will be a defence, even by way of statement of practice. However, if the challenge is on the basis not that the Revenue are transgressing constitutional rights but that the section is unconstitutional, the fact that the Minister does not have the fair procedures provision in the text itself could lead to the Bill being struck down. That is the issue. I do not think the Minister can rely on the fact that there would be fair procedures - they must also be seen to be fair. I am not offering the Minister a perfect mechanism but a vehicle, which he can redesign between now and Report Stage, to allow him to better his position.

The Minister has said there is already a great deal of protection in the Bill because only one of three people can sign the authorisation for the investigation of someone's bank account. The Minister has been a Member of the Dáil for longer than I have, but I have been a Member for almost 20 years. The Minister for Justice, Equality and Law Reform brings new criminal legislation before the House every year. Invariably, the fact that an individual garda or sergeant cannot exercise a particular power is promulgated as a great protection and the authorisation is vested in a superintendent or a chief superintendent. However, in practice, the protection is more apparent than real. Once it becomes law and a matter of procedure and practice, the authorisations are given pro forma.

It will be very difficult to convince anybody that if three busy people have a series of applications from the Revenue Commissioners on their desks they will not just sign them. They will come in like files into the Minister's office, the private secretary says to sign them and the Minister reads some of them but does not read others. That is what happens in the real world. Saying that it must be authorised by one of three people and that it can only go out under the signature of a Revenue Commissioner does not convince me that the Minister has built the required constitutional protection into the Bill.

I have not advocated an ombudsman because I do not agree with the proposition. The current Ombudsman's remit extends to investigating complaints made by taxpayers against the Revenue Commissioner. However, the Ombudsman's office has no particular expertise in the tax area. While the Ombudsman, as a former senior public servant, has a great deal of knowledge of the area, he has no particular expertise in it. According to the latest annual report, 60 or 80 of the complaints made by taxpayers have not yet been investigated because the Ombudsman does not have the necessary resources. I forget the exact number of complaints, but the annual report records that more than half of the reports made last year had not been addressed by the Ombudsman. Therefore, it is not the answer to say that the Ombudsman, acting under the present legislation and in accordance with his present remit, will solve the problem.

I am suggesting in paragraph (d) of my amendment that the Revenue should have a compliance officer. When the Minister sets down the procedures which should be followed - these are reflected in a detailed statement of practice - the Revenue should have a compliance officer. Compliance officers are now quite common in the private sector. It is not like in the American police movies where there is a section to keep the police clean and they get into all sorts of conflicts with their colleagues and become very unpopular. In the private sector compliance officers operate quite easily for three or four years and then move on. It does not affect their promotion prospects, although they are there to oversee the activities of their colleagues and to ensure they are acting in accordance with the set procedures. The Minister should appoint a compliance officer.

Over the years, many powers have been given by the Oireachtas to the Revenue Commissioners, some of which are underused. I understand the Minister's political difficulty. It would have been more satisfactory to allow him the perspective of an overview by allowing him to wait until the Flood and Moriarty tribunals had reported, the present series of events had passed over and he had recommendations and full knowledge in front of him. I understand the political exigencies which pushed him to act in this Finance Bill. This side of the House would do the same if we were in Government.

The Minister is right, however, to indicate that there will be a review at some point. When Flood and Moriarty have reported and people have had time to reflect on it, the Government should appoint a High Court judge to examine all the powers of the Revenue and to make recommendations on their legality, constitutionality and adequacy. The judge could be supported by a secretariat with the necessary expertise. Such an outside review is needed at this stage. The Revenue are participants in these events. There is a particular term of reference of the Moriarty tribunal in that regard. The Revenue is a participant also. If we need adjudication, it should be provided by an independent person, an appropriate High Court judge, who would review all the parts in a year or 18 months, whenever these unseemly events come to a conclusion and we receive recommendations from the tribunals. That is the course to follow and I would ask the Minister to reflect on that.

There is another matter which arises from something the Minister said. As elected Members, we are not the referee in this; we are the rule makers. Sometimes people ask me what do we do. If we are doing our job correctly, we make the rules by which people conduct their affairs and live their lives. If we legislate that a person must have a light on his bicycle, then a person must provide one. If we are changing the rules so that the Revenue may look at a person's private bank account, we would want to make sure that the rules are not only fair but that they are applied fairly. While it is debatable whether or not the rules are fair, and the Minister will insist that what he is proposing is fair, for the purposes of the amendment I am prepared to concede that the rules are fair but I urge the Minister to ensure that they are applied fairly. If they are not applied fairly, these rules may be struck down. If the Minister thinks of himself as the primary rule maker in terms of tax law rather than the referee, then he will see more clearly what I am getting at.

I am not saying that this is a perfect vehicle to achieve what he wants, but I ask him to be prudent enough on Report Stage to give himself powers whereby he can promulgate regulations at a future date which will allow him to amend his hand if, on reflection and after further advice, he feels he should do so.

Has the Minister received advice from the Attorney General that these powers and the manner in which they will be applied are constitutional?

Mr. Belton

When the Minister spoke of the existing climate and recent scandals as if they are the reason for this provision, is he including the behaviour of the Revenue Commissioners in the recent scandals in those remarks?

Mr. McCreevy

I do not think the Revenue Commissioners are involved in any particular scandals, although I understand there is a case before the courts in Limerick regarding officials of the Revenue Commissioners.

Mr. Noonan

Deputy Belton is probably thinking of the investigation by the Comptroller and Auditor General where there is an absolute conflict of evidence between the chairman of the Revenue and AIB on the question of the DIRT tax in 1992.

Mr. McCreevy

That will be determined by the Committee of Public Accounts. There is a clear divergence in the evidence of the two sides and we will let the Comptroller and Auditor General, on behalf of the Committee of Public Accounts, pursue those matters. I introduced a Bill to enable that to take place and it was enacted. I understand those measures are working.

In reply to Deputy Belton's question, there are of the order of 1.044 million taxpayers. One is never going to achieve a situation where there would be a one to one marking system of Revenue Commissioners to taxpayers, nor would that be desirable. The Revenue Commissioners have systems and procedures on which to operate. The number of individual and corporate taxpayers in 1997 was 1.88 million. The gross taxes collected was £18 billion. The number of income tax and corporation tax returns processed was about 340,000. The number of PAYE reviews carried out was 441,000. The number of personal callers to the Revenue was 736,000. There were taxpayer visits, including audits, of 54,000. There were about 6,000 Revenue staff at the end of that year.

The Revenue Commissioners have procedures and practices in place to do all of these things. It would be totally undesirable to get to a state of affairs where the Minister for Finance or the Oireachtas would state that they did not like Mr. A or Ms B and send the Revenue to conduct an investigation of him or her.

Mr. Belton

Or on the other hand state that he did like somebody, so he will not investigate him or her. One must include that also.

Mr. McCreevy

One cannot have a situation where somebody asks the Minister for Finance to investigate Deputy Belton's affairs just because a couple of thousand people in Longford do not like the Deputy. That would be the wrong way to conduct business. Therefore, the Revenue Commissioners have procedures and practices in place to deal with more than 1 million taxpayers. They operate very effectively. That is my opinion, not just now that I am Minister for Finance. It was my opinion when I was Opposition spokesperson on Finance and previously, and I am on the record as having said that in the past. I stated that they deserve a footnote in the success story of the Celtic tiger in the 1990s because they have implemented huge changes over ten or 12 years.

The Revenue operate like that. I hope we do not reach the stage where the Revenue Commissioners investigate a person just because we do not like him or her. To use whatever procedures exist for investigating people whenever things come to light on foot of audits, random spot checks, etc., is the way an independent revenue administration should operate. To operate in any other way is a recipe for disaster and anarchy.

Some of the recent underlying comments inside and particularly outside the House would want the Revenue Commissioners to head off in a totally different direction, and that would be wrong. It may not be popular to say something like that but it needs to be said at a time when we are giving the Revenue new powers.

I am giving new powers to the Revenue Commissioners in the certain knowledge that they will exercise them in the same way they exercised powers in the past, on foot of procedures, checks, balances, audits and whatever other ways they operate in the independent exercise of their functions, and no other way. They will not receive these powers and let an authorised officer target an individual he does not like and exercise these powers on him just because the person hit him a belt on the football field 15 years ago. One cannot have the Revenue operating in that way. It did not operate like that in the past. I am giving the Revenue these new powers in the certain knowledge that they will not operate in that way in the future either. Despite commentators, who should know better, implying that the Revenue should operate in that way, that is not the way they should operate. No Minister for Finance or self-respecting democrat in any democracy would want them to do so, and neither do I.

Mr. Noonan

We never raised those issues.

Mr. McCreevy

In fairness to Deputy Noonan, he did not. However, that has been the substance underlying some of the comment, particularly outside the House, in the recent past.

I am giving these powers to the Revenue Commissioners on the basis that they will operate, as they have always operated, fair procedures. Deputy Noonan and others have put forward legitimate concerns in order to ensure that the powers do not fall foul of the Constitution. That is the underlying tenor of his argument. I am willing to consider those matters.

He also raised a matter which I mentioned in my contribution. I have been giving consideration to the possibility of advocating that we might examine all these powers in the course of time. I would have preferred to wait for the Moriarty tribunal to complete its deliberations. Throughout last year I had to tell the Dáil and other fora that I would not do this until the tribunal reports, but the tribunal started only recently and it will be some time before it reports. I am willing to give further consideration to the matters raised by the Deputies and will revert to them on Report Stage.

I am not deaf to what is being said. I have a good deal of practical experience in this area and how it operates. I want to do what I consider to be right. It is important to put in place laws that will be fair and equitable, will work and do not run foul of the courts.

Deputy Noonan asked about the advice of the Attorney General. My advice is that these powers are constitutional. However, the enactment of laws does not stop people going to court for a finding on their constitutionality. A large amount of legislation is found unconstitutional every year, even though the Government which introduced the legislation would have been advised it was constitutional. It is presumed when legislation is enacted that the powers under the legislation are constitutional.

The Minister gave us an over-view, but he did not specifically address why there is a problem in providing for an explicit right of appeal against the use of the power. He said there is an implicit right of appeal through a judicial review and that things would be done fairly.

The need for an appeal process arises out of the fact——

Mr. McCreevy

There is a difference between a good question and a fair question. At present, the Revenue Commissioners can access a person's bank account. The relevant power was provided for under section 18 of the Finance Act, 1983, but they must go to the High Court to exercise it. The power has been used sparingly in the past and I am aware of cases where it was refused. It is a long drawn out procedure. What is proposed in this Bill is to expedite that process and permit access to that person's account without necessarily going to the High Court; the authorisation would be signed by one of the three Revenue Commissioners.

Mr. McDowell

I do not object to that or to any of the powers provided for in the Bill. I have supported them publicly before now and I still do. However, there should be notification to the individual taxpayer whose bank accounts are being accessed in this fashion.

Mr. McCreevy

There would have to be on foot of the Haughey judgment and the Chairman of the Revenue Commissioners said that. The question is whether one should make that explicit in the legislation——

Mr. McDowell

——and whether a facility should be given whereby the person can make the case to the Revenue Commissioner that a warrant is not warranted in that instance or whether that happens later at the appeal stage. In practice, it should happen at the appeal stage. The amendment suggests that the Appeal Commissioners be given that jurisdiction and that they should give their decision within 14 days. However, if the Minister wanted to do it through the court, I would have no problem with that.

Given that the person will be given notice, there will be a need for a right of appeal.

Mr. Dennehy

The Minister has been consistent on this issue. I am a member of the Committee of Public Accounts and each year the Revenue Commissioners come before that committee. When they are attacked, as they invariably are, about the non-collection of estimated outstanding taxes, the Chairman of that committee will usually asks them if they require further powers and what those powers should be. As Deputy Noonan said, we are the law-makers and laws are a policy decision. However, the Revenue Commissioners are attacked at that committee every year for not using whatever powers are available to them. We are trying to have it both ways on this issue, but we make the rules and we must implement them.

The major reaction to this measure has been the call for an ombudsman. The public appears to be unaware that the existing Ombudsman can deal with these cases. With regard to Deputy Noonan's point, if there is a shortage of staff or expertise, it should be dealt with. However, that is a separate question. There are 6,000 people working for the Revenue Commissioners. If the Ombudsman requires extra staff, that can also be dealt with. The point is that an Ombudsman already exists, but many Members appear to be unaware of that.

We need to take action and to include safeguards. After hearing the Revenue Commissioners being attacked in session after session of the Committee of Public Accounts by the Chairman, Deputy Jim Mitchell, with regard to their lack of power and why they do not use their powers, it appears that more powers are necessary particularly in the context of the cases that have been mentioned here today.

I am prepared to defend this change. It is necessary. Generally, people who have something to hide are the people who fear these changes. I do not envisage the Revenue Commissioners being asked to sign a warrant to investigate somebody with a credit union account and it is farcical to suggest they would.

These changes are necessary. The proposals made by the Opposition could be taken account of, particularly with regard to increasing the number of staff available to the Ombudsman, if that is necessary.

Amendment, by leave, withdrawn.

Mr. McDowell

I move amendment No. 167:

In page 254, before section 189, but in Part 7, to insert the following new section:

Is the Minister suggesting he should be left off?

A Deputy

One then moves on to C.

Mr. McCreevy

That is what happens.

Mr. Noonan

That is the legal difficulty with this section.

Mr. McCreevy

The taxpayer must take advice.

Amendment, by leave, withdrawn.

Mr. McDowell

I move amendment No. 168:

In page 254, before section 189, but in Part 7, to insert the following new section:

189.-Section 1070 of the Taxes Consolidation Act, 1997, is hereby amended by the substitution for 'a felony or misdemeanour' of 'an offence'.".

Mr. McCreevy

This amendment proposes to replace the reference to a felony or misdemeanour in section 1070 of the Taxes Consolidation Act. That section provides that the Tax Acts shall not affect any criminal proceedings for a felony or misdemeanour. This amendment is part of the section 3 of the Criminal Law Act, 1997. Section 3(1) of that Act provides for the abolition of all distinctions between felony and misdemeanours while section 3(2) establishes on all matters on which a distinction had previously been made between these two terms, the law in practice relates to all offences applicable at the commencement of that Act, in relation to misdemeanours.

The Criminal Law Act, 1997 did not abolish the counts of felony and misdemeanour per se. It abolished all distinctions between the two concepts. It further provided that where there was previously a distinction made between these two terms, including the mode of trial, the law in practice relating to all offences will be that appropriate to a misdemeanour. In the light of the wording of the Criminal Law Act, 1997, it is too simplistic an approach that felonies and misdemeanours have been abolished. This amendment could have the unintended result of changing the current law. As such, the amendment, if accepted could impact adversely on current efforts to bring criminal proceedings in the area of tax evasion, by obscuring or casting doubt on what is the correct legal position. For this reason, I oppose the amendment.

Mr. McDowell

I will not argue with the Minister.

Amendment, by leave, withdrawn.

Mr. McDowell

I move amendment No. 169:

In page 254, before section 189, but in Part 7, to insert the following new section:

189.-(1) Where the Revenue Commissioners provide or amend any form, declaration, list or statement for purposes relating to taxation, they shall do so by regulations.

(2) Regulations under subsection (1) shall be laid before both Houses of the Oireachtas as soon as may be after being made and may be annulled by resolution of either such House within 21 days but without prejudice to the validity of anything previously done thereunder.".

This provides a mechanism whereby forms and regulations made by the Revenue Commissioners can be laid before the Dáil. A form designed by the Revenue Commissioners has far greater import than forms designed by anyone else, as it sets out information required to assess particular tax liabilities. We are providing a mechanism whereby it could be put before the Houses of the Oireachtas, at least in theory, and then annulled.

Mr. McCreevy

The Deputy's amendment appears to require that the Houses of the Oireachtas have a direct input into the content and design of every form, declaration, list or statement which a taxpayer may be obliged to complete and submit to the Revenue Commissioners. I have been advised by the Revenue Commissioners that under current procedure, for a form to be used for any purposes of the Tax Acts, it is required to be prescribed or authorised by the Revenue Commissioners. The provision for such prescription or authorisation is made in the appropriate section of the Tax Acts. Each form is designed and drafted to include all details required to be included therein by the relative legislative provision and is usually prescribed or authorised by a Revenue Commissioner.

Prescription means that the exact form, as prescribed, must be used. Authorisation means that all details included in the authorised form must be included in any form used for the purpose by the taxpayer. More than 200 forms are authorised or prescribed annually and constitute a substantial drain on the resources of the customer service unit of Revenue which must ensure the accuracy of detail and layout of each form. Suggestions for amendments and improvements to forms are regularly made directly to the customer service unit by tax practitioners, representative bodies and other areas of Revenue, including the local inspector.

The Tax Administration Liaison Committee - TALC - which meets regularly, and comprises representatives from Revenue and tax practitioners also provides a forum in which proposals for amendments and approvals of forms are made. If the Deputy's amendment were to be taken on board, the Dáil and Seanad might be overwhelmed by the volume of regulations which would be required and, in the circumstances, no substantive input would be possible. In view of the above, I propose to reject the amendment.

Amendment, by leave, withdrawn.

Mr. McDowell

I move amendment No. 170:

In page 254, before section 189, but in Part 7, to insert the following new section:

"189.--As and from the 6th day of April, 1999, no revenue penalty may be imposed and any enactment (including this Act) allowing for the imposition of a penalty shall be construed as allowing the imposition of a fine following summary conviction or conviction on indictment (as the case may be) for the offence contravention of which would but for this section have given rise to the penalty.".

We had a discussion earlier today about stamp duty and the distinction between penalties and fines. That distinction is still retained in other parts of the law.

Mr. McCreevy

This amendment appears to provide that every fine or penalty incurred as a result of some default in relation to tax matters can only be imposed by way of summary conviction or conviction on indictment. The amendment would appear to make every default capable of being classified as a revenue offence.

The Tax Acts provide a wide range of penalties, civil and criminal, for failure to comply with various obligations under the Acts. Those penalties are not imposed by the Revenue Commissioners. Civil penalties can be demanded by the Revenue Commissioners when the default or failure occurs but, if unpaid, they can only be imposed by a judge as a result of proceedings in court.

In practice, civil penalties relating to unpaid tax, rather than a failure to submit a certain return, are collected following a settlement by agreement with an Inspector of Taxes. Where the default involves the fraudulent or negligent delivery of incorrect returns of the taxpayer's own liabilities, the statutory penalty generally incorporates an element of tax gearing, that is, the penalty increases in proportion to the amount of tax due on the income under-declared.

For minor offences involving failure to submit returns, there is commonly a fixed amount of fine, provided in the section of the Act, which may be mitigated by the judge. Major offences consisting of sustained failure to submit a return or other document attract higher fixed penalties. I am not prepared to accept this amendment.

Amendment, by leave, withdrawn.

SECTION 189.

Mr. Noonan

I move amendment No. 171:

In page 254, line 17, before "The" to insert the following subsection:

"(1) This section shall not have effect until such time as the Minister for Finance shall have laid before both Houses of the Oireachtas details of the procedures to be followed by the Revenue Commissioners or any authorised officer thereof in the exercise of the powers conferred by this section. The procedures shall, as the case may be, address inter alia:

(a) guidelines for the grounds upon which an authorised officer may use, or seek to use, the powers,

(b) the circumstances in which a person bound by an obligation of secrecy or confidentiality may be required to breach such obligations,

(d) the establishment, within the Revenue Commissioners, of a compliance office to monitor the implementation of the guidelines.".

Amendment put.

Mr. Noonan

Vótáil.

Chairman

In accordance with the amendment to the timetable order, a division will be postponed until the close of our proceedings this afternoon.

Amendment No. 172 not moved.

Mr. McDowell

I move amendment No. 173:

In page 281, between lines 37 and 38, to insert the following subsection:

"(2) Any order made (otherwise than by a court) under the provisions inserted by this section may be appealed to the Appeal Commissioners within 14 days as if it were an assessment, who shall endeavour to determine such appeal as expeditiously as possible and as far as practicable within 14 days.".

Amendment put.

Mr. McDowell

Vótáil.

Chairman

Chairman

The question on the section cannot be put until after the votes on the amendments.

NEW SECTIONS.

Chairman

Amendment No. 175 is consequential on amendment No. 174. Amendments Nos. 174 and 175 may be discussed together.

Mr. McCreevy

I move amendment No. 174:

In page 281, before section 190, to insert the following new section:

"190.-The Taxes Consolidation Act, 1997, is hereby amended by the insertion in Part 38 of the following Chapter after Chapter 5:

'CHAPTER 6

Electronic transmission of returns of income, profits, etc., and of other Revenue returns

917A.-(1) In this Chapter-

"the Acts" means-

(a) the statutes relating to the duties of excise and to the management of those duties,

(b) the Tax Acts,

(d) the Value-Added Tax Act, 1972, and the enactments amending or extending that Act,

(e) the Capital Acquisitions Tax Act, 1976, and the enactments amending or extending that Act, and

(f) the Stamp Act, 1891, and the enactments amending or extending that Act,

and any instruments made under any of the statutes and enactments referred to in paragraphs (a) to (f);

"approved person" shall be construed in accordance with section 917D;

"approved transmission" shall be construed in accordance with section 917E;

"authorised person" has the meaning assigned to it by section 917D(3)(b);

"digital signature" has the meaning assigned to it by section 917F;

"hard copy", in relation to information held electronically, means a printed out version of that information;

"return" means any return which is required -

(a) to be made under section 172F, 172K, 172L, 258 or 525,

(b) to be prepared and delivered under section 894, 895, 895 (as modified by section 896) or 951,

(c) by any provision of the Acts (however expressed), to be prepared and delivered under a notice from the Revenue Commissioners or, as the case may be, a revenue officer requiring such a return to be prepared and delivered,

(d) to be sent under Regulation 35 of the Income Tax (Employments) Regulations, 1960 (S.I. No. 28 of 1960),

(e) to be sent under Regulation 21 of the Income Tax (Construction Contracts) Regulations, 1971 (S.I. No. 7 of 1971),

(f) to be furnished under section 19 of the Value-Added Tax Act, 1972,

(g) to be delivered under subsection (2) or (9) of section 36 of the Capital Acquisitions Tax Act, 1976,

(h) to be delivered under section 36(8) of the Capital Acquisitions Tax Act, 1976,

(i) to be presented under the Stamp Act, 1891, and the enactments amending or extending that Act, and

(j) to be made under any of the statutes relating to the duties of excise and to the management of those duties;

"revenue officer" means the Collector-General, an inspector or other officer of the Revenue Commissioners (including an inspector or other officer who is authorised under any provision of the Acts (however expressed) to receive a return or to require a return to be prepared and delivered);

"tax" means any income tax, corporation tax, capital gains tax, value-added tax, gift tax, inheritance tax, excise duty or stamp duty.

(2) Any references in this Chapter to a return include references in any provision of the Acts to a statement, particulars, evidence or any other means whereby information is required or given, however expressed.

(3) Any references in this Chapter to the making of a return include references in any provision of the Acts to-

(a) the preparing and delivering of a return;

(b) the sending of a return;

(d) the delivering of a return;

(e) the presentation of a return;

(f) the rendering of a return;

(g) the giving of particulars or of any information specified in any provision; and

(h) any other means whereby a return is forwarded, however expressed.

917B.-This Chapter shall apply to areturn if-

(a) the provision of the Acts under which the return is made is specified for the purpose of this Chapter by order made by the Revenue Commissioners, and

(b) the return is required to be made after the day appointed by such order in relation to returns to be made under the provision so specified.

917C.-(1) Notwithstanding any otherprovision of the Acts, the obligation of any person to make a return to which this Chapter applies shall be treated as fulfilled by that person if information is transmitted electronically in compliance with that obligation, but only if——

(a) the transmission is made by an approved person or an authorised person,

(b) the transmission is an approved transmission,

(c) the transmission bears the approved person's digital signature or such other means of electronic identification as may be specified or authorised by the Revenue Commissioners, and

(d) the receipt of the transmission is acknowledged in accordance with section 917G.

(2) In subsection (1), the reference to the information which is required to be included in the return includes any requirement on a person to-

(a) make any statement,

(b) include any particulars, or

(3) Where the obligation of any person to make a return to which this Chapter applies is treated as fulfilled in accordance with subsection (1) then, any provision of the Acts which-

(a) requires that the return include or be accompanied by any description of declaration whatever by the person making the return, apart from a declaration of an amount,

(b) requires that the return be signed or accompanied by a certificate,

(d) authorises the return to be signed by a person acting under the authority of the person obliged to make the return,

(e) authorises the Revenue Commissioners to prescribe the form of a return or which requires a return to be in or on any prescribed form, or

(f) for the purposes of any claim for exemption or for any allowance, deduction or repayment of tax under the Acts which is required to be made with the return, authorises the Revenue Commissioners to prescribe the form of a claim,

shall not apply.

(4) Where the obligation of any person to make a return to which this Chapter applies is treated as fulfilled in accordance with subsection (1) then, the time at which any requirement under the Acts to make a return is fulfilled shall be the day on which the receipt of the information referred to in that subsection is acknowledged in accordance with section 917G.

(5) Where the obligation of any person to make a return to which this Chapter applies is treated as fulfilled in accordance with subsection (1), then, in a case where the transmission is made by-

(a) an approved person on behalf of another person, or

(b) an authorised person on behalf of another person (not being the person who authorised that authorised person),

a hard copy of the information to be transmitted shall be made and authenticated in accordance with section 917H.

(6) (a) Where the obligation of any person to make a return to which this Chapter applies is treated as fulfilled in accordance with subsection (1) then, any requirement that-

(i) the return or any claim which is to be made with or attached to the return should be accompanied by any document (in this subsection referred to as a "supporting document") other than the return or the claim, and

(ii) the supporting document be delivered with the return or the claim,

shall be treated as fulfilled by the person subject to the requirement if the person or the approved person referred to in subsection (1)(a) retains the document for inspection on request by a revenue officer.

(b) Any person subject to the requirement referred to in paragraph (a) shall produce any supporting documents requested by a revenue officer within 30 days of that request.

(c) The references in this subsection to a document include references to any accounts, certificate, evidence, receipts, reports or statements.

917D.-(1) A person shall be an approved person for the purposes of this Chapter if the person is approved by the Revenue Commissioners for the purposes of transmitting electronically information which is required to be included in a return to which this Chapter applies (in this section referred to as "the transmission") and complies with the provisions of this section and, in particular, with the conditions specified in subsection (3).

(2) A person seeking to be approved under this section shall make application in that behalf to the Revenue Commissioners in writing or by such other means as may be approved of by the Revenue Commissioners for the purposes of this section.

(3) The conditions referred to in subsection (1) are that-

(a) the applicant for approval under this section signs an undertaking to comply with the requirements referred to in section 197E(2), and

(b) the applicant signs an undertaking to permit, in addition to the applicant, only individuals duly authorised in writing by the applicant (each of whom is referred to in this section as an "authorised person") to make a transmission.

(4) A person seeking to be approved under this section shall be given notice by the Revenue Commissioners of the grant or refusal by them of the approval and, in the case of a refusal, of the reason for the refusal.

(5) An approval under this section may be withdrawn by the Revenue Commissioners by notice in writing or by such other means as the Revenue Commissioners may decide with effect from such date as may be specified in the notice.

(6) (a) A notice withdrawing an approval under the section shall state the grounds for the withdrawal.

(b) No approval under this section may be withdrawn unless an approved person or an authorised person has failed to comply with one or more of the requirements referred to in section 917E(2).

(7) A person who is refused approval under this section or whose approval under this section is withdrawn may appeal to the Appeal Commissioners against the refusal or withdrawal.

(8) The appeal under subsection (7) shall be made by notice to the Revenue Commissioners before the end of the period of 30 days beginning with the day on which notice of the refusal or withdrawal was given to the person.

(9) The Appeal Commissioners shall hear and determine an appeal made to them under subsection (7) as if it were an appeal against an assessment to income tax, and the provisions of the Tax Acts relating to appeals shall apply accordingly.

917E.-(1) Where an approved person transmits electronically information which is required to be included in a return to which this Chapter applies the transmission shall not be an approved transmission unless it complies with the requirements of this section.

(2) The Revenue Commissioners shall notify an approved person of any requirements for the time being determined by them as being applicable to that person with respect to the manner in which information which is required to be included in a return to which this Chapter applies is to be transmitted electronically.

(3) The requirements referred to in subsection (2) include, in particular, requirements as to the software or type of software to be used to make a transmission.

917F.-(1) In this section-

"asymmetric cryptosystem" means an algorithm or series of algorithms which provide a secure key pair;

"digital signature" means the transformation of a message by an approved person or an authorised person using an approved asymmetric cryptosystem such that the Revenue Commissioners having possession of the message and the public key in respect of that approved person can accurately determine-

(a) whether the transformation was created using the private key which corresponds to that public key, and

(b) whether the message has been altered since the transformation was made;

"key pair" means a private key and its corresponding public key in an asymmetriccryptosystem such that the public key verifies a digital signature that the private key creates;

"private key" means the key of a key pair used by an approved person to create a digital signature;

"public key" means the key of a key pair used by the Revenue Commissioners to verify a digital signature;

"message" means the information referred to in section 917C(1).

(2) This section shall apply solely for the purposes of affixing an electronic signature to an electronic transmission of information which is required to be included in a return to which this Chapter applies and for no other purpose.

(3) The Revenue Commissioners, or a person or persons appointed in that behalf by the Revenue Commissioners, (in this section referred to as the "certification authority") shall assign to each approved person a unique key pair.

(4) The certification authority shall ensure that it uses an accurate and reliable system to create a key pair.

(5) The certification authority shall ensure that an approved person is issued with the private key component of that person's key pair in a secure manner and subject to such conditions as it considers necessary to ensure that the key is not misused.

(6) A private key shall be used by an approved person or an authorised person solely for the purposes of affixing the digital signature referred to in section 917C(1)(c).

917G.-For the purposes of this Chapter, where an electronic transmission of information which is required to be included in a return to which this Chapter applies is received by the Revenue Commissioners, the Revenue Commissioners shall send an electronic acknowledgement of receipt of that transmission to the person from whom it was received.

917H.-(1) A hard copy shall be made in accordance with this subsection only if-

(a) the hard copy is made under processes and procedures which are designed to ensure that the information contained in the hard copy shall only be the information to be transmitted in accordance with section 917C(1),

(b) the hard copy is in a form approved by the Revenue Commissioners which is appropriate to the information so transmitted, and

(2) For the purposes of this Chapter, a hard copy made in accordance with subsection (1) shall be authenticated only if the hard copy is signed by the person who would have been required to make the declaration, sign the return or furnish the certificate, as the case may be, but for paragraph (a), (b) or (d) of section 917C(3).

917I.-(1) This section shall apply where the obligation of any person to make a return to which this Chapter applies is treated as fulfilled in accordance with section 917C(1).

(2) Where this section applies the Revenue Commissioners and a revenue officer shall have all the powers and duties in relation to the information contained in the transmission as they or that officer would have had if the information had been contained in a return made by post.

(3) Where this section applies the person whose obligation to make a return to which this Chapter applies is treated as fulfilled in accordance with section 917C(1) shall have all the rights and duties in relation to the information contained in the transmission as the person would have had if that information had been contained in a return made by post.

917J.-(1) This section shall apply where the obligation of any person to make a return to which this Chapter applies is treated as fulfilled in accordance with section 917C(1).

(2) In this section, "proceedings" means civil and criminal proceedings, and includes proceedings before the Appeal Commissioners or any other tribunal having jurisdiction by virtue of any provision of the Acts.

(3) Where this section applies a hard copy certified by a revenue officer to be a true copy of the information transmitted electronically in accordance with section 917C(1) shall be treated for the purposes of any proceedings in relation to which the certificate is given as if the hard copy——

(a) were a return or, as the case may be, a claim made by post, and

(b) contained any declaration, certificate or signature required by the Acts on such a return or, as the case may be, such a claim.

(4) For the purposes of any proceedings under the Acts, unless a Judge or any other person before whom proceedings are taken determines at the time of the proceedings that it is unjust in the circumstances to apply this provision, any rule of law restricting the admissibility or use of hearsay evidence shall not apply to a representation contained in a document recording information which has been transmitted in accordance with section 917C(1) in so far as the representation is a representation as to-

Is the security obligation on the taxpayer or on the Revenue Commissioners? Will Revenue provide a password to the taxpayer, or is the obligation on the taxpayer to keep his affairs secure?

Mr. McCreevy

I understand from my officials that the obligation will be on Revenue. I will be interested to see how the system will work to meet the point the Deputy raised. I am not an expert in technology, but I am sure computer personnel in Revenue have been thinking about this.

The committee went into private session at 4.21 p.m. and resumed in public session at 4.23 p.m.

Amendment agreed to.

Mr. McCreevy

I move amendment No. 175:

In page 281, before section 190, to insert the following new section:

"190.-Section 884 of the Taxes Consolidation Act, 1997, is hereby amended by the insertion of the following paragraph after paragraph (a) of subsection (2):

'(aa) such further particulars for the purposes of corporation tax as may be required by the notice or specified in the prescribed form in respect of the return,’.”.

Amendment agreed to.

Mr. Noonan

I move amendment No. 176:

In page 281, before section 190, to insert the following new section:

"190.-The Taxes Consolidation Act,1997, is hereby amended by the insertion after section 933 of the following new section:

'933A.-The Appeal Commissionersshall accept as prima facie evidence the findings of fact of a Tribunal of Enquiry established under the Tribunals of Enquiry Acts or the content of any sworn evidence given to, and accepted by, any such Tribunal.’.”.

This amendment speaks for itself. It arises from the controversial appeals case involving Mr. Haughey's tax affairs. The amendment seeks to bring about a situation whereby the findings of tribunals of inquiry established under the Tribunals of Inquiry Acts would be seen as prima facie evidence on which the Appeal Commissioners could rely if the Revenue Commissioners have raised an assessment against a taxpayer.

Mr. McCreevy

I appreciate and sympathise with what Deputies are saying in this matter. We know the circumstances from which this issue arose last December. The case in question is the subject of a rehearing in the courts. The amendment raises wider issues extending beyond the Appeal Commissioners and would also have implications for the courts and for tribunals generally.

Several issues would arise. First, findings of a court of law are, as a rule, only binding in subsequent proceedings between the original parties involved, and then only if the issue is the same in both proceedings. This amendment could in certain circumstances operate against Revenue. It could result in it being bound by findings of fact ascertained in proceedings to which it had not been a party.

There is a requirement in the Constitution that parties before the courts and tribunals, such as the Appeal Commissioners, have a right to due process of law. On the basis of preliminary advice, this right could not be guaranteed in subsequent proceedings dealing with a taxpayer's affairs by any amendment, such as this one, which remitted binding effect to be given to the report of a tribunal established to decide one set of matters. There appears to be no circumstances in which it would be practicable and possible to limit a subsequent inquiry or judicial investigation by a court or tribunal unless that court or tribunal were describing exactly the same issue in exactly the same terms as the earlier tribunal.

Second, if the amendment were accepted, it would also have to apply to rehearings of an appeal by a Circuit Court judge. To this extent, the amendment may have constitutional implications. It is the function of the courts under the Constitution to administer justice and evaluate facts as they see fit. It would not, therefore, be possible to restrict the discretion in the manner proposed.

Third, circumstances may have changed since the date of a tribunal report. For example, if a witness whose evidence was accepted by a tribunal was found to have committed perjury in subsequent proceedings but before the hearing by the Appeals Commissioners, it would not be right in such circumstances to refuse to allow Revenue to challenge the original evidence.

It appears strange to limit the amendment to the Appeal Commissioners. Why should they be singled out from all other tribunals and courts of law? Should an amendment be required to the law in this area, it will probably be necessary to amend the Tribunals of Inquiry Acts and not the Taxes Consolidation Act. For these reasons, the amendment would require careful consideration and detailed legal advice. I am not, therefore, able to accept it.

Mr. Noonan

The Minister mentioned an alternative method of dealing with this matter. Does the Minister intend proceeding with an examination of the possibility of amending the Tribunals of Inquiry Act?

Mr. McCreevy

I have no proposals at present to do so.

Amendment, by leave, withdrawn.

Chairman

As it is now 4.30 p.m. I am required to deal with the Dáil amendment to the timetable order of 25 February.

Mr. McCreevy

Before the Chairman does so, I wish to advise the committee that I intend to table an amendment on Report Stage dealing with certain procedural aspects of the dividend withholding tax and an amendment dealing with the provision to Revenue of certain information by public sector bodies. There may also be an amendment to strengthen the provisions in the Bill dealing with the supervision of qualifying convalescent homes by the Department of Health and Children. I may also introduce Report Stage amendments to cover Deputy McDowell's amendments Nos. 178, 179, 181 and 182.

Chairman

In accordance with the Dáil amendment to the timetable order of 25 February, divisions on amendments postponed earlier will be taken in sequence before the final question is put. The first is amendment No. 171 to section 189.

Amendment put.

The Select Committee divided: Tá, 7; Níl, 8.

Tá

Belton, Louis.
Deenihan, Jimmy.
McDowell, Derek.
Mitchell, Olivia.
Noonan, Michael.
Ryan, Seán.
Stanton, David.

Níl

Ahern, Michael.
Browne, John (Wexford).
Dennehy, John.
Fleming, Seán.
Foley, Denis.
Lawlor, Liam.
McCreevy, Charlie.
Ryan, Eoin.

Chairman

The next division relates to amendment No. 173 to section 189.

Amendment put.

The committee divided: Tá, 7; Níl, 8 .

Tá

Belton, Louis.
Deenihan, Jimmy.
McDowell, Derek.
Mitchell, Olivia.
Noonan, Michael.
Ryan, Seán.
Stanton, David.

Níl

Ahern, Michael.
Browne John (Wexford).
Dennehy, John.
Fleming, Seán.
Foley, Denis.
McCreevy, Charlie.
Ryan, Eoin.

I am required to put the following question in accordance with an Order of the Dáil of 25 February 1999: "That the amendments set down by the Minister for Finance to Part VII of the Bill and not disposed of are hereby made to the Bill. In respect of each of the sections undisposed of in Part VII, that the section, or as appropriate the sections, as amended is hereby agreed to and that the First Schedule, the Second Schedule, the Third Schedule, the Fourth Schedule, the Fifth Schedule and the Sixth Schedule and the Title are hereby agreed to."

Question put and agreed to.

SELECT COMMITTEE ON FINANCE AND THE PUBLIC SERVICE debate - Thursday, 4 Mar 1999

Finance Bill, 1998: Committee Stage (Resumed).

SELECT COMMITTEE ON FINANCE AND THE PUBLIC SERVICE debate -
Thursday, 4 Mar 1999