Special Committee Corporation Tax Bill, 1975 debate -
Wednesday, 18 Feb 1976

SECTION 31.

Mr. R. Ryan

I move amendment No. 11.

In page 38, subsection (3), to delete subparagraph (i) of the proviso to paragraph (d) and to substitute the following subparagraph:

" (i) paragraph (b) shall not prevent an assessment in respect of income tax at the higher rates and for the purpose of charging to tax at the higher rates any amounts treated as income in accordance with paragraph (c), credit under section 4 (e) of the Finance Act, 1974, (charge to tax of income from which tax has been deducted), shall be given as if, by virtue of the provisions of Schedule D, tax had been deducted (at the standard rate for the year of assessment in which those amounts were paid or credited) from the amounts charged to tax at the higher rates;".

It is a drafting amendment. It puts beyond doubt that building society interest and dividends will be charged to income tax in the case of an individual liable to tax at the higher rates only. Credit for income tax would be at standard rate on the amount of dividends and interest so charged. The amendment obviates any possible contention that there is a conflict between the sub-paragraph and paragraph (b) of subsection (3). The existing section provides that interest and dividends are charged only to the higher rate of tax. That position is being maintained by this amendment.

Mr. Colley

Where an arrangement has been made between the Revenue Commissioners and the building societies the existing position is that on foot of that arrangement there is no deduction on tax except in so far as the recipient is liable above the standard rate. That position is being maintained?

Mr. R. Ryan

The existing position is being maintained for persons liable to income tax.

Mr. M. E. Dockrell

It does not alter the practice of the building society?

Mr. R. Ryan

The building society enters into an administrative arrangement with the Revenue Commissioners under which the society's liability to tax is computed on a special basis.

Mr. Colley

I presume Deputy Dockrell is well aware of the fact that there was a change made a year or two ago in regard to this. Where heretofore building societies could pay the interest with no deduction, now a question of deduction arises where the recipient is liable at higher than the standard rate. I understand that the Minister proposes to maintain that position.

Mr. R. Ryan

There is no definite change from the existing position regarding income tax. The position as described by Deputy Colley is not a new one. It has always been the case.

Mr. Colley

I understood that in a recent Finance Act—the one that introduced the abolition of surtax—the Minister agreed that whereas heretofore building societies could advertise such a rate of tax, that now they can only, strictly speaking, advertise say, 8 per cent free of standard tax. That was the change that was introduced within the last year or two.

Mr. M. E. Dockrell

It does not alter that.

Amendment agreed to.

Question proposed: " That section 31, as amended, stand part of the Bill."

Major de Valera

One of the Minister's colleagues some time ago more or less threatened the building societies with withdrawing certain concessions. Is that the reciprocal reason for putting a statutory basis to a quite workable arrangement? It seems to suggest that the scope of that administrative arrangement by the Revenue Commissioners has been restricted more and more. I got the impression also from some discussions we had on the capital tax Bills that more and more the Revenue Commissioners were being constrained by statute which has firmly put them in the straitjacket. In the explanatory memorandum there is a phrase:

A statutory basis for administrative arrangements that have been entered into between the Revenue Commissioners and the building societies . . .

Is there any reason why, with a well established practice, we go to statute now when the administration of the Revenue Commissioners was highly satisfactory as operated heretofore?

Mr. R. Ryan

The seventh report of the Commission on Income Taxation recommended that the present administrative arrangements would be given statutory sanction. This was referred to in the 1963 White Paper on direct taxation. It was also referred to in the White Paper on corporation tax.

Major de Valera

The only point I am making is that I do not like the innuendo that the Revenue Commissioners were acting ultra vires in the past, which seems to be the suggestion. I would like to repudiate that and to put it on the record that there is no question of it. I am really going on the wording of the explanatory memorandum rather than the Bill we are discussing. In the explanatory memorandum and in some discussions that followed its circulation, one of the Minister’s colleagues implied the very unfortunate suggestion that there might be an element of arbitrariness or ultra vires in this. I would like to repudiate that.

Mr. R. Ryan

I appreciate what the Deputy has said but he knows that his repudiation would not have any standing in court.

Major de Valera

Challenging a thing in court is entirely a different matter.

Chairman

This is backed up by two reports.

Major de Valera

I only wanted to make it quite clear that everything was——

Mr. Colley

I would not press that too far.

Question put and agreed to.