I propose Section 1.
COMMITTEE ON FINANCE. - FINANCE BILL, 1924.
(1) Income tax shall be charged for the year beginning on the 6th day of April, 1924, at the rate of five shillings in the pound, and super-tax shall be charged for that year at the following rates:— s. d.
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In respect of the first two thousand pounds of the income |
Nil. |
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In respect of the excess over two thousand pounds, |
||
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For every pound of the first five hundred pounds of the excess |
1 |
6 |
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For every pound of the next five hundred pounds of the excess |
2 |
0 |
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For every pound of the next one thousand pounds of the excess |
2 |
6 |
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For every pound of the next one thousand pounds of the excess |
3 |
0 |
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For every pound of the next one thousand pounds of the excess |
3 |
6 |
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For every pound of the next one thousand pounds of the excess |
4 |
0 |
|
For every pound of the remainder of the excess |
4 |
6 |
(2) The several statutory and other provisions which were in force during the year beginning on the 6th day of April, 1923, in relation to income tax and super-tax shall, subject to the provisions of this Act, have effect in relation to the income tax and the super-tax to be charged as aforesaid, for the year beginning on the 6th day of April, 1924.
I propose Amendment 1:—
"In sub-section (1), line 17, to delete the words ‘five shillings' and substitute therefor the words ‘four shillings and sixpence.'"
At first sight it will appear somewhat inconsistent and incongruous that a Farmers' Deputy, with a true realisation of agricultural conditions in the country, should propose an amendment which would have the effect of reducing income tax, because as far as our industry is concerned it will at once be apparent that very few farmers are called upon at the present time to pay income tax. But notwithstanding all that, we farmers must think in terms of the Nation, as has been very expressively said here some time back. We must take a comprehensive survey of our financial conditions. And we have to ask ourselves: What is the effect of this five shillings income tax? We look around and we see across the Irish Sea and over the Northern frontier States with an income tax of 4/6 in the £. We see States where conditions of life are easier, where perhaps the amenities of civilisation are more perfect. We see States which have a uniform system with us, and almost identical political institutions. And viewing these facts and seeing that capital is a volatile essence that is not tied to any particular place or country, we can see at once that there must be a large withdrawal of the wealth of this country and its re-investment abroad, to the great loss and injury of this State.
I sympathise exceedingly with the difficulties of the Minister for Finance in his efforts to balance the Budget, but I think that it is a very short-sighted policy to impose taxes which, by their operation, will have the effect of withdrawing capital and the reinvestment abroad of that capital. When capital goes abroad the proprietors of capital follow, and once they go abroad they are lost as tax-bearing agents to this country. Under these circumstances I say that it is wrong, and a very short-sighted policy, to have an income tax at five shillings. The competitive element must enter into the matter. We are in competition with other countries and we must make this country attractive for well-to-do people to live in. The conditions of life are quite suitable for them abroad. This extra sixpence is not very much, you may say, yet the effect of it is to cause people to leave the country. They have left the country and are leaving the country in large numbers. We want to call halt to that. There is another aspect that has to be considered. What is its effect on industry at home? It has the same effect on industry. Industry is strangled and there is no expansion. People will not invest money while taxes are so high. Men must get an adequate return for their money, otherwise they are prepared to leave their money lying idle; they are not prepared to run the chances of insecurity and the risks of high taxation by investing. I expect the Minister will come along in a very short time and tell me the evil result and the evil effect and the reaction on our credit that will ensue as a result of reducing the income tax. Credit is something, but even in the wider sense I deny the implication that the reduction of the income tax will affect our credit. It will not affect the credit of the commercial community; on the contrary it will enhance it. Will it affect the credit of the State? That is what I want to know. Will it affect the ability of our Minister to borrow money to maintain the national services? I do not think that it will, when it is realised that an effort is being made to keep the country on a stable foundation. I do not think it will affect the credit of the country or make it more difficult for the Minister to borrow or compel him to pay a higher rate of interest. By no stretch of the imagination can an income tax of four and sixpence be regarded as inadequate taxation. I deny altogether that the reduction by sixpence of the income tax that he wants to maintain will adversely affect the national credit for borrowing purposes.
In this country we have got now and then to have regard to business methods—even in this Island of Saints and Scholars. Notwithstanding that there are so many scholars, they have lost themselves in the implication and significance of the watermark of the Crown on certain covenanted and uncovenanted documents known as No. 1 and No. 2. And even though some of the Saints have run amok through the country, slaughtering each other, the Minister must still have regard to the businessmen. Businessmen must be protected, and the prosperity of industry must be brought about by any means by which it is possible to bring it about. I hold that it is strangling industry to have to pay an income tax of 5s. in the £. We have to come down to the British level. I wish we could go below it. If all mobile wealth is not to leave the country, and if there is to be an expansion of industry at home, it is essential to reduce the income tax to 4s. 6d. The reduction must come sooner or later. Is it not better that it should come now and give us a chance of recuperation rather than that it should come five years too late? That is the question I want to put to the Minister, and that I should like the Minister to answer.
I should like to support Deputy Connor Hogan. I have already spoken on this matter two or three times in the different stages that the Financial Resolutions have gone through, but I think this is a matter which cannot be emphasised too much. My idea is that the ideal which should be aimed at by the Minister for Finance in his taxation is as far as possible, to keep our taxes on a level with those prevailing in England; that is, to keep our income tax on a level with the British tax, and to keep all our other taxes on a similar level, and to keep them on a level with those prevailing in Northern Ireland. My reason for suggesting that that should be done is because, as far as Northern Ireland is concerned it would facilitate any negotiations which are taking place, or which may take place with regard to the rectification of the Boundary, or, still better, would facilitate negotiations in regard to the removal of the boundary altogether. And as far as England is concerned, it is in order that people in possession of mobile wealth, as Deputy Hogan, says, shall not leave this country and go to England and live on their incomes there, and further to encourage people with incomes from foreign securities to come here and live on their incomes here. I made a speech on a previous occasion, and said that it was my opinion that income tax, like most other taxes, has a tendency to be pushed on to the consumer, and in this country, to the producer. Deputy Johnson differed with me on that statement, but still on consideration I think there is a great deal of truth in it. I believe that income tax is very often pushed on to the consumer.
Thus the man who has to pay 5/- in the £ instead of 2/6 in the £, as income tax, takes good care that his profits are so enlarged that they will be larger after the income tax is deducted than they were when he was paying an income tax of 2/6 in the £. The tax is pushed on to the consumer and producer—to the farmer and the man living in the country—who cannot push it on to anybody else. The original intention, I think, when income tax was introduced, was to make it a tax to pay the expenses of war. As we all know, income tax in England was enormously increased for the purpose of meeting war expenses. We are not meeting war expenses with income tax here. We are meeting the ordinary normal expenses of the country, and I think the object should be to reduce income tax at least to the level that prevails in neighbouring countries. I know the inevitable answer, an answer which is regarded as indisputable by almost everybody in the House, is that the finances of the country cannot stand it. We heard a lot about economies. We heard a lot about the "cuts" that would be made. We know that "cuts" were made in the old age pensions and the teachers' salaries. I, for one, voted for those cuts very reluctantly, and distinctly on the understanding that attempts would be made to have similar "cuts" enforced in all possible Departments of the national service. We have no indication that such "cuts" have been enforced. We have no indication that a Committee of Inquiry will be set up or that the setting up of such a Committee to consider what economies could be enforced, has been considered. That these economies could be enforced I am convinced, and if they were enforced it would be possible not only to reduce the income tax by 6d., but to reduce the sugar tax to the level of the English sugar tax, and the beer tax to the level of the English beer tax. It might be possible to reduce the taxes to a lower level than the English taxes, which in my opinion would be a very desirable object to aim at.
I am not going to follow Deputy Heffernan into consideration of the possible economies which might reduce taxation, for two reasons. One reason is that the Minister knows my remedy—a Geddes Committee—and the second is that it would be out of order. Before he answers the very able argument of Deputy Connor Hogan, I would like to bring back to the Minister's mind his own speech at an earlier stage on this measure, when he referred to our taxable capacity and to the yield of our taxes. There is no doubt whatever that in this problem, with which he is grappling so seriously, the greatest difficulty he has to encounter is the fact that Irish taxation yields a much poorer return than taxation in England. A penny in the £ income tax or a penny in the £ tea tax produces a return than a similar change in the taxes in England. Why is that? part, because we are a poor country, and also, in part—I venture to think in large part—because a very considerable number of taxpayers have gone out of the country in the last five or six years. I do not suppose anybody who is not brought frequently in contact with, and who has not seen all the homes he once stayed in now shut up or reduced to ruins, realises what a loss the country has sustained in this way—the loss of employment, the loss of expenditure that benefited the country towns and the loss of taxpaying capacity. We have been bleeding in that way now for four or five years, and if that bleeding is to be stopped desperate measures are needed. The Minister will have to commit an act of faith and an act of courage, if he wishes to allure these taxpayers back. The concession he made—and wisely made—in regard to super-tax does not appeal to most of them. The number of people who pay super-tax on the rate the Minister has singled out for favourable treatment are very, very few indeed. I could count them on the fingers of one hand. But there are a very large number of people with incomes from £1,000 to £5,000 who wish to spend those incomes in this country, and who are now spending them, not so much in England— though a certain number of them do spend them there—as on the Continent of Europe, where they find that with a little ingenuity they can escape income tax altogether. In Brittany and other centres there are large Irish colonies now—the new Wild Geese. They may be as foolish as their name implies, but I do not know. At any rate, those colonies exist, and I think it would be a good thing for this country, from every point of view, if those people could be induced to return. They would yield revenue to the Minister, customers to the shopkeeper and an element of sport and good humour to the life of the country, which is not without its value. While I appreciate the Minister's difficulties. I do earnestly hope he may be able to make some sort of concession on this measure. Since the European War, the multiplication of income tax to the extent of nearly 400 per cent., has done more to alter the fabric of society in Great Britain and in this country than probably anything that has happened in recent years—an alteration of spending capacity, a cutting-off of many services and amenities that were good to the country as a whole. There has not come, side by side with that, any preponderating benefit in the condition of the working classes. Before the war, I have no doubt, Deputy Johnson would have urged that if you increased the income tax of the capitalist 25 per cent. you would make the world a better place for the worker to live in. But the world is not a better place for the worker to live in at present. Wages are higher, but employment is more precarious and less certain than it was ten years ago. Going about amongst the very poor workers—even amongst the day-to-day labourers—you constantly hear the regret: "The old times were better times."
They always were.
I was just going to say that. Deputy Johnson anticipated me. Our minds very often work on parallel lines but they seldom meet. There is always that element, but that element is stronger now than ever it was. I believe the wise policy of the statesman, particularly in this country, which at base-bottom is a conservative country, is to take his motto back to Methuselah, back to the old days, so far as we can restore them, when people were happier and easier than they are now. As a first step in that direction, I shall support Deputy Hogan's amendment.
The arguments on this Bill were urged in this Chamber a year ago. I suggested then, and I think circumstances have proved the truth of my suggestion, that higher income tax means a lower yield in revenue. I can imagine that while all the arguments might not have sufficient power to penetrate into the Minister's mind, this is an argument he ought to consider.
I suggest that if a year ago income tax had been dropped from 5/- to 4/6, so as to keep on a parity with the rate then introduced in Great Britain, the yield to-day would be higher for the Minister than it actually is. And, further, if he were to drop income tax to the same level as the level in Great Britain, I suggest the yield in twelve months' time will be more advantageous to the Exchequer than the yield is going to be at the level the Minister has now instituted. I have left out of consideration all the other points in the argument. I understand that all these other arguments that might be advanced here—that it would be good for industry and for the health of the country—are arguments that might incline the Minister to say: "These are luxurious considerations that we can only enter into when we have balanced our Exchequer, and the prime consideration for the Minister for Finance is to consider the tax that will yield him the highest amount of revenue."
It is to meet that that I have advanced the argument that I am now putting before the Minister. He knows very well there are many instances of what may be termed the point of saturation. There comes a time when a tax, the higher it is rated, the lower its yield in revenue. That would come in any case. Particularly is it going to come when alongside of this country there is another country to which the citizens of this country can go, especially if they are living on income. They can go and live with greater comfort, with the same amount of money at their disposal in any country they choose. We find that kind of person emigrating in very large measure to-day.
There is one further development of that argument I would like to put before the Minister, and it is this: Not only by dropping income-tax to the same level as that prevailing in England will he get a higher yield in income tax, but he will get a higher yield in other taxes besides, and the benefit gained by a drop in income tax would be extended over an entire range of taxation in the Finance Bill. I noticed at various stages of this argument, whenever it has been brought forward here, there has been perfect quietness, with an occasional ironical cheer, from the Labour Benches; but this is an argument Labour ought to support just as firmly as any other branch in the Dáil.
We support the argument.
Deputy Corish made a speech some time ago in Wexford which was reported in the papers at the time. If he was accurately reported—and the supposition is a very large one those days——
Hear, hear.
—— What he did say was that one of the gravest causes of unemployment in Ireland to-day was the fact that those who possessed capital were leaving the country rather than investing their money in the country.
He was wrongly reported.
Whether he be rightly or wrongly reported the fact is so, and the result is that the kind of person who might be disposed to remain in the country and who, by remaining, would not only help the revenue generally, but also expend money in the country and help industry, is leaving. That is one of the causes of the grave unemployment problem we have to face to-day. I believe it would be a sound measure to bring this income tax, not merely to the same level as prevails in England, but to a lower level. In any case, with Great Britain beside us ready to tempt from this country those who are living here and who have capital to expend, it is not a wise policy.
I only wish to make one further reference before I conclude. It is a reference to a speech made by the Minister for Finance in the Dáil last November. I believe I brought forward the argument I am now stressing early last year. I have not got the actual copy of the Official Debates in my hand, but if the Minister will cast his mind back to that occasion he will remember that he himself used the argument, and said that if we could bring our income tax to the same level that prevails in England, it was a fair consideration that the actual yield might not be any less, and might conceivably be higher. Therefore, for financial considerations rightly within his proper interest in bringing forward this Finance Bill, I suggest he might accept the amendment moved by Deputy Connor Hogan.
I am very pleased that Deputy Connor Hogan has brought forward this amendment. I hope the Minister will take very serious notice of all that has been said. I do not know of a finer argument for the Minister for Finance than some of the statements that I have listened to. They were magnificent arguments in favour of the Minister bringing forward his tentative policy of Protection in his Budget. Deputies have complained that capital has left the country and has been invested elsewhere. They have talked about the unemployed and the need for employment, and they refer to the sixpence less in the income tax duty across the water in comparison with the Free State. They appear awfully sorry that capital is not in Ireland. Still, when the Minister made an effort to bring capital to Ireland and have it retained here, those Deputies adopted a different attitude. If a way were found for giving employment in Ireland and inducing people to place their money here, then the Minister would have power given him to look for income tax, because the people would be in a position to earn so as to pay income tax. With increased industry and with more money invested in the country, there would be a bigger field for income tax. I hope the Minister, whilst rejecting the amendment, will take serious note of what has been said, and on a future occasion when introducing his Budget he will remember how very keen certain Deputies were for bringing capital into Ireland for the promotion of industries. That will give the Minister an opportunity that he can easily avail of for charging income tax on the results of a combination of labour and capital in the country.
Deputy Figgis suggested that it was very important even for those who are wage earners that income tax should be reduced and that that was a very good reason why we should vote for this amendment. If he had argued on a basis of well-grounded estimates rather than upon prophecies he might have carried us a little further. So far as I have been able to examine such figures as have been provided I have not been able to see any reason for thinking that the same revenue would be derivable from a 4/6 tax as is expected to be derived from a 5/- tax. Presumably, the Minister has grounds for assuming that he is going to be better off on a 5/- tax than on a 4/6 tax. If Deputy Figgis had been able to bring forward any evidence in support of his contentions beyond a general opinion it might be more effective as an argument. But then suppose that were true, the question that I would ask the Deputies to face is this, are they going to derive a greater revenue or not. If only the same revenue is obtainable from the income tax payers, then they are not losing anything. The argument runs that by lowering income tax a greater volume of trade and greater production would ensure and there would be more general prosperity.
I ask the Deputies to consider whether this motion had better be deferred until we see whether they are prepared to vote in favour of a reduction of any taxes upon sugar. If they would vote for a reduction of taxes on sugar they can then reasonably suggest a reduction in income tax. Can they do both? Is the revenue of such a nature as to warrant a reduction in both? If not, which are they going to take first? Are you going to reduce taxes on incomes before you reduce your high taxes on sugar? And unless you can prove with absolute certainty, or as near absolute certainty as anything can be, that a reduction from 5/- to 4/6 will mean a maintenance of revenue, then you will not be justified at all in reducing income tax until you have previously reduced the sugar tax very considerably. Deputy Heffernan seems to think that income tax is a tax that can be passed on. I ask how does the civil servant pass on his income tax? To whom? How does the farmer pass it on—and the farmer may occasionally pay income tax? Does he pass it on to the price he gets for his produce, and how? If he could tell us that, we should be very much wiser than we are. Because the thing we have always been learning is that the Irish farmer is not able to determine the price at which his goods are sold. How does that odd farmer who does pay income tax pass it on to the consumer? Again, may I suggest if his view of this matter is correct, all the advantages will lie with the small producer. The small producer earning a small income would have practically no income tax to pay. Therefore all the advantages would be with the small producer rather than with the large producer. The large producer earning higher profits would be handicapped by the income tax.
I suggest that Deputy Heffernan will have to find another way to sustain his argument, for he cannot in the ordinary course of things, as a producer and a capitalist, pass on his income tax. If he were dealing with finance as finance, and as a banker and dictator of financial policy, then there might be something to be said, but as a manufacturer and income tax payer I think the Deputy is quite wrong and he cannot sustain his contention that the tax is passed on to the consumer.
Both Deputy Figgis and Deputy Cooper used an argument in regard to the effect of higher income tax in Ireland than in England upon the national social life which I cannot accept at all. I take it that people that are affected in this matter are either those who live in Ireland and have monies invested in other countries or are able to draw upon properties in other countries of one kind or another.
Or pensioners.
Or pensioners. They are inclined to go to the place where their monies come from. By the lowering of income tax we may induce these people to live in Ireland, although all their thoughts are with that other country from which their money comes. Now I suggest that it is not good policy, and it is not a correct attitude for us to adopt to mould our financial legislation to meet the desires or the fancies of this section of the community who are going to be affected by those considerations. It means if you do that you are asking the State to allow its policy to be dictated by people whose interests are in other countries. I say that is not a good argument to use to the Dáil in favour of a change in fiscal policy. As for those who, living in Ireland, have incomes coming from other countries, if their interests are mainly with the country that their interest comes from, then I think though there might be a certain social loss, it is better to risk that loss rather than to have those people over-influencing the political policy of the country. On the other hand, if there are people who are so much bound up with this country in their industries that they could not afford to leave the country, and who are quite prepared to invest their capital abroad, then I say that we should so alter our financial laws as to make it unprofitable to them to invest their capital abroad rather than at home.
And it is, I submit, bad policy to urge an amendment of this kind on the plea that there are many people in the country whose financial interests and, therefore, whose hearts lie in other countries. If we are going to do that, we are practically saying that the policy and politics and social life in this country is to be diverted or determined by those people whose financial outlook is that of some other place than this place.
Deputy Johnson asked Deputy Connor Hogan whether he was prepared to support a reduction not only in this direct taxation but in indirect taxation as well, which would be a more immediate relief to the working classes and farming community. Is that a bargain? Will Deputy Johnson support this amendment on that arrangement?
If you pass an amendment remitting the sugar duties, then we will see.
Unfortunately that could not be done at this stage.
There will be another stage later on—the Report Stage.
Deputy Johnson asks me whether it is possible, in the financial state of this country, to make a substantial reduction both in income tax and in indirect taxation. I am absolutely convinced that the finances of this country do permit of such. I hope the Minister will accept this amendment of Deputy Hogan, but I am afraid he will not. I am afraid the Government is now getting so deep into the rut of huxtering finance that they are unable to get out of it. The Minister for Finance said, when introducing his Budget, that to make this reduction of 6d. in the £ income tax would involve a loss of half a million to the Exchequer, and therefore it was absolutely impossible to do this if the Budget was to be balanced. But I am convinced that the whole imposing structure upon which the Government places their financial policy is rotten from top to bottom. I am absolutely satisfied, from the figures that the Minister has supplied to the Dáil, that reduction in taxation is absolutely possible if the ordinary Budget of this country is to be balanced.
The Minister said that in the current financial year there would be a deficit of eight and a half millions. That implies that that eight and a half millions would have to be raised by borrowing. But the Minister did not mention the fact in that connection, although he mentioned it in another part of his speech, that there were three and a half millions over in the Exchequer at the beginning of the year from the last loan, so that in reality the sum of money to be borrowed on the present estimates only amounts to five millions. The Minister made an extraordinary statement in answer to a speech made by Deputy Professor Magennis some time ago in which Deputy Magennis pleaded for this very matter of reducing the income tax. He said that the Government was borrowing all the money necessary for the purpose of paying extraordinary expenditure. But that all depends upon what the Minister calls extraordinary expenditure. I am absolutely satisfied that the extraordinary expenditure incurred by this State could be met—
The Deputy must confine himself to the amendment, and must not enter into a general discussion of the estimates.
I am afraid that the main objection urged to this amendment is that it is impossible in the present state of the national finances. It is my contention, and I am absolutely satisfied, that it is possible, and absolutely reasonable, that this reduction should take place, because I am satisfied that the extraordinary expenditure this year amounts to well over £10,000,000, hidden away under all kinds of obscure votes throughout the Estimates. It amounts, certainly, to over £10,000,000, possibly to £14,000,000, considered as extraordinary expenditure in the Estimates of this year. Yet, the actual amount of money we will have to borrow will only be about £5,000,000. And taking into consideration the extraordinary Revenue, such as £2,000,000 from the British for compensation and various other matters, I am satisfied that there must be, and could easily be, a reduction not only in the income tax, but even a greater reduction in indirect taxation for the benefit of the farming and the working community. Deputy Hogan referred to economies which the Government might make.
We cannot go into the question of economies now.
The main argument of the Minister is that he must balance his Budget. The Minister for Agriculture is always holding up to us Denmark as an example to follow. The reason Denmark is successful, and putting us out of the markets we formerly held is, because Denmark has an intelligent financial policy, and for many years Denmark has not balanced its Budget. I am sorry I have not got here the figures; I would like to have them to try and persuade Deputy Johnson that this is a reasonable proposition and that there could be an equal reduction both in income tax and in indirect taxes which he desires. As I say, unfortunately I have not those figures, but at a later stage when I have them available I hope to be able to persuade Deputy Johnson on that point.
I want to persuade Deputy Johnson on this matter of the sugar tax. The way to persuade the Minister for Finance is to get enough votes on your side; then he will agree. Deputy Johnson says that because no reduction is made in the sugar tax, it is impossible to ask for a reduction in income tax. I put the matter to him in this way. He is a protectionist. The tax on sugar is at the moment causing sugar factories to be erected in the Saorstát. That means that these factories will bring employment that would not exist but for the sugar tax. Therefore, that is one reason why in the interests of labour it would be a mistake to take the tax off sugar. Again, to give 6d. in the £ off income tax would mean a loss of half a million, according to the Minister for Finance. The reduction in sugar would only mean a halfpenny in the lb. to the consumer, and I hold that the consumer would not get the benefit. In the fluctuations of trade, it would go to the middleman and the merchant, and not to the consumer. If the reduction could be put at 1½d.in the lb., as in England, it would be to the benefit of the consumer I agree, but when the amount is so small as a ½d. the benefit would not go to the consumer. I am debarred from going into the question of expenditure by reason of the ruling of the Leas-Cheann Comhairle, but I believe that is where the whole trouble is. We should be able to run this country on lower expenditure.
I will take another line of argument. We have on our frontier a country where the income tax is 4s. 6d. in the £. The merchants in that particular area have the advantage of 6d. in the £ income tax, and they are competing against the Dublin merchants, particularly in the West of Ireland. In addition to that, and to cheap overhead charges, they have the advantage of lower railway rates than in the Free State. The result is that they are capturing the trade which, by reason of the locality, should come through Dublin, and the Minister is thereby losing revenue which he would derive if trade were diverted to its proper channels to Dublin. That is a considerable item. The Minister for Finance ought to have the keen business acumen of the men in the North, and he ought to put us on the same level as our friends in Belfast. It affects the farmers, because when trade is bad the farmers get bad prices for their goods. When trade is bad, everybody is grumbling, and there are no prices for anything, and although I admit that the farmers' income tax is based upon annuities, if less than the rateable value, still if we had a community making money they would be able to assimilate the farmers' produce, and give us better prices than they are getting at the moment, and for these reasons it is my intention to support the amendment.
I want also to try and convince Deputy Johnson in favour of the amendment, but I am afraid it will be a very difficult matter. I will try at least to refute his argument to some extent. I am still convinced that to a large extent income tax is passed on to the consumer, and unfortunately the consumers in Ireland are composed, to a very large extent, of the farming community. I am aware that the consumer is also very often a producer and at the same time an income tax payer. The majority of income tax payers in Ireland are the middlemen who come between the producers and the consumers. We know quite well that as far as they are concerned they will measure their profits in accordance with the income tax which they have to pay. When they find that their income tax is £100 a year, instead of £25 which it was some years ago, they will see that their profits, instead of being £200 or £300 a year, will mount up to nearer £1,000 a year. When they make their margin of profit higher than what it was some years ago when the income tax was not as much as it is now, it is the consumer who will have to provide that higher margin of profit in the way of an increased price for the articles which he purchases. The result of all this is that the cost of living is increased. At the present time the cost of living is higher in the Saorstát than it is in the Six Counties or in England. That should not be the case in a country like this which produces so much agricultural commodities. I acknowledge that Deputy Johnson is right when he says that the farmer has no opportunity of passing on the income tax which he has to pay. The Minister for Finance said that there are not many farmers who are income tax payers. I can tell the Minister that farmers who are paying income tax should not be paying it at all, for the reason that they have no income from which to pay the tax. Any of them that are paying the tax are, in my opinion, paying an extortionate duty imposed by the Minister, and principally for the reason that farmers, as a rule, do not happen to be expert accountants. The farmers, I admit, have no opportunity of passing the income tax on to some other section in the community. I admit, too, that civil servants are much in the same position. They cannot pass on their tax to anyone either.
The question is should income tax be 4/6 or 5/- in the pound?
I am arguing that the high income tax is passed on to the consumer and that it is this fact that is tending to maintain the present high cost of living in the Saorstát. I submit that it is advisable to have the income tax rate reduced to 4/6d. in the pound. I want to answer Deputy Johnson with regard to the effect of the present high rate of income tax on civil servants. They cannot pass the tax on to anybody else. Because of the present high rate they are asking through their organisation and their unions, that their salaries should be maintained at the highest possible level. They give us an excuse for that, that a very large proportion of their salary is taken from them in income tax. The result is that their salaries are maintained at their present high level, and eventually the heavy expenditure involved in maintaining these high salaries percolates down to the farmer who has to meet these charges in the shape of income tax which he cannot pass on to anybody else. The prices for his produce are fixed by a market over which he has no control. Therefore, from the farmer's point of view it is desirable that the present rate of income tax should be reduced.
I want to convince Deputy Johnson of a sin which he has committed. His suggestion to Deputy Esmonde was that if we were to wait for the debate on the sugar duty this matter could be brought up. That, as Deputy Johnson knows, would be inconsistent with the rules of the Dáil. If the amendment is negatived now a similar amendment cannot be moved on the Report Stage. The Deputy laid a trap for Deputy Esmonde which, however, the latter did not fall into. I ask Deputy Johnson if he is now going to preach a doctrine of narrow nationalism. I forget the precise number of the International to which Deputy Johnson is affiliated. I do not know whether it is the third, fourth, or fifth International. I had always thought that Labour was telling us to set our eyes on Moscow. I really think that of the two proposals mine is less startling than the suggestion of Deputy Johnson. I do not think the Deputy was quite candid in coming here and saying that you must consider nobody except the actual worker who is the producer in Ireland. On other occasions we have been told to promote direct relations with Moscow and to have a revival of the Council of Ireland.
There is one point I wish to make which none of the Labour Deputies made so far, nor did Deputy Johnson deal with this question of employment, which is at the root of this whole thing. When I found myself confronted with an income tax demand multiplied by four I found that I could not live up to the standard on which I had lived in the past. The result is that I am employing fifteen people less now than I employed ten years ago. Some of these employees had their board as well as wages, and, of course, a certain number of them were thrown on the unemployed labour market. The result of that, too, was that my dealings with business firms have fallen off to a considerable extent. That, I suggest, is the crux of the whole matter. Nobody likes these taxes, and no one is enthusiastic about them except, perhaps, the Minister for Finance. I dislike the sugar tax very much. The reason that there is this opposition to maintaining the income tax at 5/- in the pound is mainly because it has such a disastrous effect on employment. The present rate is largely responsible for the unemployment that we have. I do not say that if we were to reduce the rate to 4/6 that it would solve the problem, but in a residential country such as this was up to some years ago, and as England is at present, the high rate of income tax has had that effect. Deputy Johnson will find that in the more residential portions of England, such as Surrey, there is the same phenomenon to be faced. In my opinion, it is the present high rate of income tax that is at the root of this whole matter of unemployment, and until Labour is prepared to meet that point they ought not to oppose Deputy Hogan's amendment.
I am quite prepared to meet that point. The Deputy is thinking, as I imagined he would, of employment as being created by rich people who are giving employment to personal servants and the like. The Deputy said that we sometimes think on parallel lines, but we never meet. That is exactly true; he is thinking on one scale of life and I am thinking on the other. I do not think that the health and well-being of this country will be secured by having rich men employing servants round about houses and parks and in luxury occupations. No doubt a reduction of annual income on any individual taxpayer may lead him to reduce his expenditure on personal servants and luxury trades, but if you reduce the possibilities of spending moneys by the poorer section of the community you are reducing an amount of employment of a larger number; and unless Deputy Cooper and others can show us that by reducing the income tax you are not going to put on a higher tax still upon the poor, through indirect taxes—unless he can do that, and nobody has attempted to do it yet, I am not going to support this amendment.
I do not want it to be thought that I am in favour of high income tax simply for the sake of taxation, as Deputy Bryan Cooper seems to think is the case. But I am not going to approve of a reduction in tax upon the higher incomes while maintaining taxes upon the essentials of life to the poor. I know that to-morrow morning in the newspapers we shall have headings about the Labour Party in association with Moscow. They will not be able to reproduce in those headings the smile on the face of Deputy Cooper, and it will go abroad that Deputy Cooper has made a statement which, because it was not contradicted, must be accepted as truth. There is no truth in it, of course. We are not receiving any communications or instructions; we are not in close confabulation with anybody in Moscow, or any other part of the world; there is no question of Internationalism in this matter, and if Deputy Cooper had read as much as he pretends on these things he would know that Labour in this country, and in most countries, realises first that its duty and allegiance is to its own before going abroad.
Is that Carl Marx?
I do not know whether it is Carl Marx or not, but it is Johnson, and it is everybody else that ever attempted to speak for Labour in this country. I decline to support this amendment simply on this ground that by reducing the revenue by three, four, or five hundred thousand pounds, whatever it may amount to, whichever prophet may be true, either Deputy Figgis or the Minister—and you have already bound yourselves to spend a certain amount of money—you will have to find that income, unless you go into the markets for loans, by obtaining it from the necessities of the poor, and I am not going to support an increase of taxation on the necessities of life for the poor.
I agree with the last words of Deputy Johnson, very strongly and very emphatically. A year ago I urged that income tax might be reduced, and in arguing that it could with advantage be reduced I agreed with Deputy Johnson then, and I agree with him now, that the duties that chiefly pressed upon the poor should receive first consideration. I suggest to Deputy Johnson, and I suggest to the Minister for Finance, that the situation has materially changed within the past twelve months—materially changed. We have, for example, this one remarkable fact to record, which most deeply influences every consideration in regard to this matter, and that is, that for the first time for twenty-six years our imports have been higher than our exports. That can only mean one thing; it can only mean that there is less production in the country because there is less of the means of production. That has its incidence, and directly affects the proposition that Deputy Johnson put to me, which I accept, and I accept it in the spirit in which he put it to me. I would have agreed a year ago, and did agree a year ago, that a reduction of sugar tax should precede any reduction in the income tax, but to-day I say that the situation in the country is such that if something be not done to encourage the investment of capital in production in this country, relief of sugar tax might happen to be of very little benefit for people who are not able to get even the means to buy sugar. I agree with Deputy Johnson: I am the first candidly to admit that my argument that a lower income tax would yield a revenue at least equal to the income tax set out in this Bill is a hypothetical argument; it must by the nature of things be hypothetical. We have not got the facts upon which to argue. But what we do know is, and what is not hypothetical, is that people are leaving this country. We know more. The Minister for Finance may know—it is very easy to discover information in the city that will soon convince him— that there are a large number of people living in Ireland who have investments in England, and whose investments in England are not only banked in English banks, but are never declared here. The Minister for Finance must surely know that. It is very easy to say that that is a very improper thing to do, but that is being done and will be done while the two countries are so near to one another, and where the income tax in one country is so much higher than in the other. It is an inevitable temptation, and it is a temptation that is being taken advantage of to, a very considerable extent.
I find a very great deal of difficulty in following Deputy Johnson's argument in this particular regard. He spoke about consideration being given to persons whose capital was invested in other countries, and he might have suggested actually in the words, as he did in his argument, that where their treasure was their hearts were also. But that does not follow. I have a particular example before my mind now, a lady who is proposing to leave Ireland. Her capital is not invested in England. Her capital is invested in some South American shares, but the dividends received from these South American shares are no higher than they were in 1914, when the income permitted her to live with a degree of comfort. At the present moment that income is the same but the rate of living is very much higher, and consequently she has to consider the expenditure of every sixpence. She finds that that consideration of the expenditure of every sixpence has persuaded her so strongly that the relief she would get by living in England at a lower rate of living, and also at a lower rate of income tax, is sufficient to take her from this country. That is only one example of many. There is less money spent here, and there is a lesser yield for the revenue as a consequence. There is a lesser circulation of money, and consequently there must be lesser employment. As Deputy Cooper has said—and I join very heartily with him—this question of employment is going to be the test of the success of this State, and I believe that the question of unemployment is the strongest argument to be raised in connection with the considerations put forward here for a reduction of income tax.
Deputy Johnson, in reply to Deputy Cooper, said that his arguments seemed to refer to rich people keeping houses and parks. These are not the only people who have the expenditure of capital. There are also those who have the running and continuance of factories that give employment. Let me give one actual case that came within my knowledge within the past month. I give it to the Minister for Finance. I believe it to be symptomatic; I believe it to be very grave and important in itself, and more grave and more important because of the valuable symptom that it is. A certain company in Ireland that has had the employment and to-day has the employment of a large number of people, whose goods are being sold equally in the Free State and in Great Britain, and the goods, which are at the present moment, or have up to this past week, been manufactured in the Free State, where there is no duty one way or the other, simply because of this relief, because of the relief of 6d. in the £ available in Great Britain, determined during the past month to close up its factory here, and to open its factory in Great Britain, as a direct consequence of the fact that we have an expenditure on income tax higher than that which prevails in Great Britain.
They will tell us it is on account of wages.
They have not brought in the question of wages. I happened to have been present when the decision was taken; it was taken purely on the grounds of income tax, and I presume the announcement will appear in the course of a few days, or weeks, that this particular industry will be removed across the water as a result of income tax. What is the consequence? There are several. One affects the Minister for Finance—that is, he is going to get a lesser yield in revenue, as a result of the loss of income tax by the removal of this firm, and the other effect is that by the removal of firms and factories of this kind unemployment is increased. I feel the full force of Deputy Johnson's argument, that duties that press on the livelihood of the poor should receive primary consideration under normal circumstances, but I suggest that under abnormal circumstances, such as prevail in Ireland to-day, the primary consideration should be, not those duties that press on the actual commodities purchased by the poor, but those duties that press on the monies, salaries and wages, by which these commodities can alone be produced.
A few years ago there was no income tax whatever in the Isle of Man, but I have not yet heard there was any considerable emigration of manufacturers from England to the Isle of Man, and I have not yet heard that there has been any considerable removal of business firms from Ireland to the Isle of Man, notwithstanding that there has been no income tax in the Isle of Man. If there is any income tax there to-day, I think it is very much smaller than in Ireland or England. Before being convinced by Deputy Figgis's argument I would like to have some evidence that, because of the absence of, or because of a lower income tax, in the Isle of Man, we had a steady removal of manufacturing firms to the Isle of Man.
I find it difficult to believe that this motion is put forward seriously. The position is simply this: I suppose I need hardly undertake any reply to Deputy Esmonde—that we have a deficit, apart altogether from any abnormal expenditure on the army or on compensation. We cannot go into the market to borrow money to pay interest on it. We may, and should, borrow money where we can expend it well for development, but we ought to pay out of our revenue the interest on that money. We are not now in a position, and we will not this year be in a position, to pay out of revenue the interest on the money we have borrowed. We will have to borrow to pay the interest. That position is bad enough, and we cannot afford to make it worse by adding half a million to the deficit, and to reduce the income by 6d. would really mean that. I know very well that income tax—especially a high rate of income tax—acts like rust on a machine. It has a clogging effect, and it prevents development here and there. It causes individuals to invest money outside and to decide later on, when they have made more money, that they will go and live elsewhere. It has all these effects, but it would take a great deal of development here to give us the equivalent of what we would lose by a reduction. I do not know exactly what is the production of wealth in the country at present, but at any rate we get something like £5,000,000 income tax on it; I presume the annual production of wealth cannot be less, say, than £100,000,000. It is probably more.
I am only giving a very rough figure to illustrate the point. That is something like twenty times the amount of income tax we get. Is it suggested we will, as a result of knocking off 6d. in the £ in income tax, have a production of something like £10,000,000 worth of additional wealth next year? I think it is pretty obvious we are not going to have that or anything like it. We will not have even a couple of millions. There is no doubt, if we could reduce income tax it might have a stimulating effect, and I believe that we would lose nothing by it in the long run if we could afford it, and that, ultimately, production and development would be stimulated very considerably. But a period of years would elapse, and in the meantime, instead of borrowing a half or million or so to pay what we ought to be paying out of revenue, we would have to borrow a great deal more. That would be very bad economy. If we were to reduce income tax this year or next, in my opinion there would be no alternative but to put up other taxes to meet the deficit. Those taxes would, presumably, be indirect; they would presumably be taxes on articles of common consumption, for you have to put your tax on articles of common consumption if you want to get revenue. We have reduced the old age pensions; we have reduced the teachers' salaries, we have reduced the pay of the police and Civic Guard, and of the Army; we have reduced the scales of certain classes of civil servants, and we are considering reductions in other scales. In face of that, are we going to add to the indirect taxation which will fall on the poor, to reduce the income tax which falls in many cases on people who can well afford it, and, at any rate, on people who can afford it a great deal better than many of those who would be hit by the indirect taxation? I do not think it would add anything to the stability of the country for us to take a line like that in regard to taxation. People have left the country, I know, but I do not believe they have left it because of the extra 6d. on income tax. I believe very few people have left it because of that. They have left it because of other things that have gone on. They have left it because of the instability and feeling of insecurity, and in some cases because of the actual fear of violence. I think a change in taxation that will obviously seem to hit, as you might say, the under dog, is not a change that will produce security or produce the feeling that will lead people to come back to the country, or to stay in the country when they would otherwise be inclined to leave it.
I never realised what an affectionate lover the Minister for Finance is until now. As a matter of fact, he has become pathetically constant to his sixpence. He tells us that in the long run a reduction in income tax will not materially ruin or injure the country in any way, but I wonder does he realise that there is such a thing now and then as throwing oil on the waters, and sustaining a temporary loss in order to ensure a permanent gain. I admit readily that it would mean a loss to revenue, but it is a question of whether it is not better to have this temporary loss at the moment than have a temporary advantage with a very dire resultant hereafter. The Minister says that people have left the country, not because of the incidence of sixpence, but because of general insecurity. Is he making an effort to coax these people back? Many of them would be glad to return home, but before they do so conditions here must be made attractive to them, and there is only one way of doing that, and that is by endeavouring to show that if they come back to Ireland they will not be taxed more highly here than in Great Britain. Deputy D'Alton endeavoured to urge the Minister to maintain the present high level of taxation, and he quoted the opposition of the Farmers' Party to protective tariffs. Surely there is no analogy whatever between a reduction in income tax and protective duties. Remember, if we raise the cost of living in this country it will necessarily affect our exports and prevent them from competing on the same terms with producers abroad. The result will be that you will have only local trade, and the manufactures set up here will only meet local requirements. They will not have foreign trade, and will only have the home market. We cannot be too rigid on this question of finance. We must defer to considerations of expediency. It is for the Minister to take the broad view and to realise that, like the farmers, you must sow the seed and it must perish in the ground before you can realise a gain. We must have this temporary loss to ensure the future financial stability of the country.
Amendment put.
The Committee divided: Tá, 17; Níl, 43.
Tá
- Earnán Altún.
- Pádraig F. Baxter.
- John J. Cole.
- John Conlan.
- Bryan R. Cooper.
- Sir James Craig.
- Osmond Grattan Esmonde.
- Darrell Figgis.
- John Good.
- Connor Hogan.
- Séamus Mac Cosgair.
- Maolmhuire Mac Eochadha.
- Risteárd Mac Liam.
- Donchadh S. O Guaire.
- Mícheál O hIfearnáin.
- Domhnall O Mocháin.
- Ailfrid O Broin.
Níl
- Earnán de Blaghd.
- Seán Buitléir.
- Séamus de Búrca.
- Louis J. D'Alton.
- Máighréad Ní Choileáin Bean Uí Dhrisceóil.
- Patrick J. Egan.
- Desmond Fitzgerald.
- Liam T. Mac Cosgair.
- Tomás Mac Eoin.
- Pádraig Mac Fhlannchadha.
- Patrick McGilligan.
- Eoin Mac Néill.
- Seoirse Mac Niocaill.
- Liam Mac Sioghaird.
- Liam Mag Aonghusa.
- Martin M. Nally.
- Tomás de Nógla.
- John T. Nolan.
- Peadar O hAodha.
- Mícheál O hAonghusa.
- Criostóir O Broin.
- Seán O Bruadair.
- Próinsias O Cathail.
- Richard O'Connell.
- Tomás O Conaill.
- Partholán O Conchubhair. Conchubhair O Conghaile.
- Séamus O Cruadhlaoich.
- Aodh O Cúlacháin.
- Liam O Daimhín.
- Séamus O Dóláin.
- Eamon O Dubhghaill.
- Peadar O Dubhghaill.
- Pádraig O Dubhthaigh.
- Eamon O Dúgáin.
- Séamus O Leadáin.
- Fionán O Loingsigh.
- Tadhg O Murchadha.
- Séamus O Murchadha.
- Pádraig O hOgáin (An Clár).
- Pádraig O hOgáin (Gaillimh).
- Seán O Súilleabháin.
- Caoimhghín O hUigín.
Amendment declared lost.
Question: "That Section 1 stand part of the Bill"—put and agreed to.
Sitting suspended at 6.30 p.m.
The Committee resumed at 7.30 p.m.,
in the Chair.
SECTION 2.
I beg to move:—
To insert immediately before Section 2 a new section as follows:—
"Where tax under Schedule A is charged in respect of a house or building or part of a house or building the annual value of which is ascertained according to the respective surveys and valuations from time to time in force for the purposes of poor rates, no allowance or deduction shall be made under paragraph (b) of sub-rule (1) of Rule 7 of No. V. of Schedule A of the Income Tax Act, 1918, or under section 24 of the Finance Act, 1922, unless it is proved to the satisfaction of the special commissioners that the whole of the property in respect of which the tax is charged (in so far as it is not vacant) is bona fide let by the landlord or immediate lessor and that he has undertaken to bear the whole cost of repairs thereof.”
This amendment ensures in respect of a landlord or immediate lessor, who has undertaken to bear the whole cost of repairs, that he gets the benefit outlined in the earlier part of the amendment, but that in respect of other persons the same advantage will not accrue.
Question—"That the new section be inserted before section 2"—put and agreed to.
New section ordered to stand part of the Bill.
Section 2 ordered to stand part of the Bill.
Section 3 ordered to stand part of the Bill.