asked the Minister for Finance whether, in view of the trouble and expense arising from the deduction of double Income Tax from dividends on investments in Great Britain, he will have a full enquiry made into the whole matter and other arrangements substituted.
CEISTEANNA—QUESTIONS. [ORAL ANSWERS.] - DOUBLE INCOME TAX.
(1) As this question appears to be very much in the public mind at present, I propose to deal with it at some length.
(2) Taxation at the source is fundamental in the British Income Tax system, and as we have taken over the British Income Tax code it is also fundamental in ours. Even if we undertook the tremendous task of devising a new Income Tax system of our own it would not touch the difficulty which the Deputy has in mind, since British Income Tax would still be deducted from dividends on investments in Great Britain held by Saorstát Eireann residents. The Income Tax systems of Great Britain and of the Saorstát are, however, now quite independent of each other, and Saorstát residents have to realise that as long as they hold British investments there must be a certain amount of inconvenience arising from the fact that both Governments have a claim to Income Tax on the dividends. The Saorstát Government must collect from Saorstát residents the Income Tax to which they are liable by law, and tax deducted from Saorstát residents by the British Government does not reach the Saorstát Exchequer any more than French Income Tax or Australian Income Tax though many taxpayers seem to think it does or ought to.
(3) On the other hand, the question of minimising as far as possible the inconvenience to taxpayers consequent on the facts I have referred to has been receiving the continuous attention of the Revenue Commissioners for the Saorstát.
(4) In the first place an arrangement was effected with the British Government last April, the result of which is, broadly, that, after the necessary adjustments have been made, the total tax paid to both the British Government and the Saorstát Government will not exceed the tax which a Saorstát resident would have borne if there had been no deduction of British tax. In other words, there is normally in the long run complete relief from double taxation by the two Governments.
(5) In the second place, a special arrangement was effected with the British Government under which dividends from certain British Government securities, such as Consols, Local Loans, etc., where there is an ultimate liability to both British and Saorstát tax in respect of dividends accruing to beneficial owners resident in the Saorstát, should have tax deducted at the rate of 2s. 3d. British and 2s. 9d. Saorstát, instead of at the standard rates. There is an exception in the case of Stocks inscribed on the Bank of England register, as the Bank of England found it inconvenient to apply this arrangement in such cases. Stockholders can easily get the benefit of the arrangement, however, by transferring to the Bank of Ireland register.
(6) Finally we took power in the Finance Act to enable the Revenue Commissioners to relieve the Saorstát banks of the legal liability to deduct Saorstát tax on British industrial dividends which had already been subjected to British tax at the full standard rate, subject to certain necessary conditions to secure the ultimate payment of the appropriate rate of Saorstát tax by direct assessment on the taxpayer. The arrangement is applied only where the taxpayer desires it, and the effect of it in most cases is that, instead of suffering any double deduction of tax, the taxpayer pays direct the amount of duty due from him to the Saorstát Government after allowance of all appropriate deductions and reliefs. In most cases he is saved the necessity of making a repayment claim for Saorstát tax and is obliged to make only one repayment claim in respect of British tax as before.
(7) There are two suggestions which are constantly being urged on us:—
(1) That as regards British Industrial dividends payable to Saorstát Eireann residents we should simply collect 6d. in the £ here, in addition to the 4/6 British tax deducted in Great Britain, and have a periodical settlement with the British Government by which one-half of the British tax should be paid over to us, so that we should receive 2/9 in the £ and the British revenue 2/3 in the £.
(2) That all repayment claims made by residents in the Saorstát, whether in respect of British tax or Saorstát tax, should be dealt with by the Revenue Commissioners here and that they should obtain from the British Revenue authorities periodically a refund of British tax repaid to claimants.
(8) Suggestions for both these arrangements were made to and discussed with the British Revenue authorities as far back as last March. The British authorities, however, considered that the difficulties on their side were insuperable, and, since it is obvious that such arrangements could only be effected with their concurrence, we had no option but to drop the schemes. I do not wish for a moment to be understood as reflecting in any way on the attitude taken up by the British Revenue authorities. They have in general shown themselves most anxious to be helpful, but the angle from which they are obliged to approach such questions is not necessarily the same as ours, and some things may give rise to serious difficulties on their side which would involve little or no difficulty to us. On the other hand, as it seems to be very widely assumed that the failure to effect the arrangements to which I am referring is due wholly to reluctance on our part, I think it desirable that the facts should be stated.
(9) It should be clear, therefore, that we have taken every possible step to minimise the inconvenience to taxpayers arising from the liability to Income Tax in both countries of dividends received by Saorstát residents from British investments, and that, as far as it lay in our own power, we have left nothing undone in this direction.
(10) For these reasons I am satisfied that no good purpose would be served by instituting the inquiry suggested by the Deputy.
Arising out of that answer and the statement that in the long run the taxpayer does not suffer, is the Minister aware that the run is a very long one at present, and will he take steps to expedite it as much as possible?
We have done all we can, and we will do anything further that can be done. We are nearly as anxious as the people concerned to expedite matters.