I oppose this section. At the outset of Committee Stage debate I suggested to the Minister and to his advisers that in view of the fact that we are going to have a second Finance Bill in the autumn of this year, that this particular section and all of Chapter 7 — the anti-avoidance sections — should, in fact, be referred to that time. The reason why I make this point is because there is great unhappiness amongst the professional practitioners in the tax accountancy area, an unhappiness I gather that has already been conveyed formally to the Revenue Commissioners. Time does not allow us to go into the details of it. Therefore I am not going to argue the technicalities, but quite clearly what the professional tax advisers are properly saying to us, and with a certain degree of desperation, is that this legislation is made up on the trot. That is quite clear because we are getting amendments from the Department of Finance on Committee Stage and signals that amendments that we have not even seen will come up in Report Stage. I do not recall anything as strong as what we are currently hearing in relation to this whole area, and specifically to section 52, although the argument also applies to the other chapters. Without interfering with the quality of the merits or demerits of the components, it is not going to affect in any serious sense the revenue anticipated for the coming year. Therefore, the Minister should take cognisance of the representations that have been received. I rest my case on that point.
SECTION 52.
I want to say that I share Deputy Quinn's concern about this section. The Consultative Committee of Accountancy Bodies of Ireland said, "We recommend deferral of the implementation of the section to give time for the consideration of alternative and less extreme means of addressing this situation". What they say, and I am quoting from a document which they circulated to Members, is "the consequence of the section is that many companies, who would not have any exposure to corporation tax, could now be faced with a tax charge on notional income as well as a surcharge and penalties".
A recent edition of Business and Financecarried a very good example of precisely how section 52 would apply. I am indebted to Frank Brennan and Seamus Howley, both Fellows of the Institute of Taxation in Ireland, for the example which they give. I will quote it briefly.
"An example of the difficulty which could be encountered is as follows: O'Brien Investment Limited owns O'Brien Wholesale Limited and O'Brien Transport Limited. In the year ended 31 December 1993, O'Brien Wholesale Limited had a profit of £40,000 while O'Brien Transport Limited has a loss including capital allowances of £60,000. In the normal course of events a group relief claim would be lodged whereby the losses in transport could go against the profits in wholesale. If accounts are not lodged within the appropriate time by each company, then wholesale will have a tax liability on its £40,000 profit, an interest charge for late payment and a surcharge of 10 per cent for late filing of returns".
It goes on to say:
"This section is particularly important since there may be a tendency to overlook the lodging of such forms in a timely manner. This could be brought about by reason of the fact that no tax is payable and, consequently, one may not be worried by the surcharge."
Therefore, you would have a company that considers it has no tax liability because it has, within the group, losses to offset against profits, but, presuming themselves not to have a tax liability, they make a late return, these drastic consequences are visited upon them and notional income is attached to them. I think it is drastic. The Consultative Committee of Accountancy Bodies are right. I think the Institute of Taxation are right and we should consider deferring this section, particularly since we will have an opportunity to consider the matter later in the year.
I support what the previous speakers have said. The kind of deferral I want would be not to a Finance Bill in the autumn, but to a separate Act of the Oireachtas. For example, the 1967 Act, which gives the opening position on anti-evasion measures, was an Act of the Oireachtas. The Finance Bill is a money Bill. We know that a money Bill cannot be amended, for example, by the Seanad, but a money Bill under the Constitution cannot be referred by the President. We have a situation developing here where the most extravagant powers could be used by the Revenue Commissioners, in circumstances where their constitutionality cannot be tested because they have been brought in under the guise of the money Bill. I do not think that should be done. The parliament of a democratic country should not proceed in that way. It is back door method of giving powers to the Revenue Commissioners. I believe that once we move to self-assessment, the Revenue Commissioners will need extra powers. Were we draw the line on the extra powers is a matter for debate. Self assessment cannot work unless the Revenue Commissioners are given adequate powers to police self assessment.
And adequate training.
And adequate training, and there must be a random audit sample to put a fear of the Revenue Commissioners into non-compliant taxpayers. There is a question about where we draw the line. There are very extravagant powers being sought under Chapter VII in particular and here also. I feel it should be brought in as an Act of the Oireachtas, so that it will be subject to the scrutiny of both Houses of the Oireachtas and be capable of being referred to the Supreme Court. It is a serious situation when we have backdoor openings.
In Chapter VII, for example, the Revenue Commissioners are to be given more powers than the Garda Síochána in certain instances. They will be given powers of search, which the Garda Síochána do not have. They will be given powers to instigate arrests, which the Garda Síochána do not have, and they will be given powers related to evidence which are not contained in normal law at the moment. The law on evidence, on search and on the powers of arrest will be disregarded if Chapter VII is inserted. That is not subject to scrutiny and it is not possible to test its consitutionality, as I understand it.
I believe it is an overall commentary on the way we manage our affairs as a society that you have this degree of opposition to people having their business organised in time.
No. You are misrepresenting the situation.
I am not misrepresenting anything but I read the submission which we received this morning.
It is a bit like saying you have five minutes to get your bags loaded and to get onto the plane, it just will not work.
No, generally the trend is to encourage. The submission makes the point that they do not have any objection to encouraging people to produce accounts on time. It is all about encouragement. We should be aiming for a situation — especially since we are putting greater emphasis on self assessment — where we have compliance in the medium term. It is a commentary on the way we run the business of the country.
You are attaching a notional income to a taxpayer that he does not have and then taxing him on it because he forgot to return a form.
I just want to respond to this. I will certainly look at this but let us be very clear what we are talking about. We are talking about companies who are not returning their accounts nine months after the due date. The reason they are not returning them is that they are not profit making and they want to hold back to reliefs. Companies that are profit making and who would be surcharged at 10 per cent, can return their accounts within the nine month guideline. The reason the others cannot do this is because you cannot get 10 per cent surcharge on profits that are zero. If there is — as the accountancy profession are saying and as Deputies are saying — something in this that is unreasonable or unfair or, is not intended——
They are looking for something less extreme.
——then we will certainly look at that on Report Stage. Deputy Quinn is saying they are given five minutes to get out. Let us take the comparison of two companies where one has made a loss and the other a profit. The company that has made a profit knows that if they do not reach the nine month guideline they will have a 10 per cent surcharge, so they meet the deadline. However, the other company, because they know the 10 per cent surcharge cannot be implemented, do not bother. That is what we are talking about. The accountancy profession, as Deputy Quinn rightly said, are jumping up and down over this.
Minister, let us take two revenues——
We will look at that aspect of it and I will report back if there is something justified in it.
Take two revenue services, one revenue service has to go to a court and get an order before it can invade people's premises, and another can turn up with the Gardaí and have people arrested on sight.
That is not in this section.
It is not in this section but the point is that measures can be taken without resorting to the sort of extreme powers which we are conferring on the Revenue Commissioners.
I am doing what I have been asked to do, I am staying with the section.
This is an extreme power.
Section 52 is about companies that have nine months to comply and are not complying.
Section 52 is another extreme power which the Revenue Commissioners are seeking to take. You are looking for draconian powers in every section of the Bill.
We have reached 1.30 p.m. As it is now 1.30 p.m. I am required to put the following question in accordance with the order of the Dáil of 12 May 1992:
"That the amendments set down by the Minister for Finance to Chapters IV and V of Part I of the Bill and not disposed of are hereby made to the Bill, and in respect of each of the sections undisposed of in the said Chapters that the section or, as appropriate, the section as amended, is hereby agreed to."
Tá
- Ahern, B.
- Kirk, S.
- Ahern, D.
- Martin, M.
- Dennehy, J.
- Power, S.
- Hilliard, C.
- Roche, D.
Níl
- Finucane, M.
- Noonan, M.
- Flaherty, M.
- (Limerick East).
- Hogan, P.
- Quinn, R.
- Mitchell, G.
- Rabbitte, P.