No. 1—INCOME TAX.

I move—

(1) That income tax shall be charged for the year beginning on the 6th day of April, 1927, at the rate of three shillings in the pound.

(2) That super-tax shall be charged for the year beginning on the 6th day of April, 1927, at the same rates as those at which it was charged for the year beginning on the 6th day of April, 1926.

(3) That the several statutory and other provisions which were in force during the year beginning on the 6th day of April, 1926, in relation to income tax and super-tax shall have effect in relation to the income tax and super-tax to be charged as aforesaid for the year beginning on the 6th day of April, 1927.

(4) It is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1927 (No. 7 of 1927).

The Minister's statement will, no doubt, give satisfaction to a certain number of people, but I think the number of people is limited. The actual number is not yet available. I do not know whether the Minister can give the House any idea of the number of persons who are income tax payers and who will thereby receive some relief from this particular Budget statement and the resolution that is now before us.

I noted that the Minister adopted the usual attitude of the Ministers for Finance in this country and the Chancellors of the Exchequer in other countries. He seemed to create the impression, or endeavoured to create the impression, that the national credit was the equivalent of national prosperity; that when we have national loans at round about par, or a little above par, that is an indication that the country is in a state of prosperity. I am willing to agree that it will add something, or, at least, it will prevent some decline in prosperity which a fall in the national loan might possibly entail, but I think it is quite wrong to let the argument go without comment that simply because the national loan stands at 101, that is evidence of national prosperity.

So far as one can gather from observations, from the reading of statistical returns and from comments from business houses and agriculturists throughout the country, the state of the national loan in the market is not by any means a reflection of the state of economic prosperity in the country. I am sorry that the Minister's statement does not show an appreciation of the necessity for some positive act on the part of the Minister to remedy the very appalling state of things economically that we hear about or see in the country.

The reduction of income tax to 3/- will, no doubt, be heard with great satisfaction by a considerable number of people. I am not going to find fault with it, but I think it would be much more pleasing and much more beneficial if there had been some discrimination instead of making a flat-rate reduction—if there had been some discrimination and if some relief were given to that section of income tax payers who would re-invest whatever they save through this reduction in Irish productive industries. To speak of this reduction of income tax as being a necessary stimulus to industrial activity is, I think, fallacious. I do not know whether it is possible to analyse the figures that may be in the hands of the Minister, but if it were I am pretty confident in saying that the reduction in income tax will, in a comparatively small measure, find its way into productive enterprise or in re-investments. The economic effect will rather be that the saving of the shilling in the pound will be spent on new imported luxuries, with no economic effect of a productive kind in this country. That is perhaps too sweeping a statement— not no economic effect, but a small economic effect. I am willing to concede the point that there will be a minority of people, who have been endeavouring to live simply and within their means, who will continue on the same scale of living, and such relief to them as is occasioned by this reduction may find its way into capital expenditure in productive enterprises. But I think the chances are that the amount of stimulus that will be given by this reduction will be very small and that a much greater benefit would have been achieved had there been some discrimination and even greater relief given where it could be shown that the income had been re-invested in Irish productive enterprises.

The Minister has made a statement which I am not sure that I can appreciate to the full. It seems to me to be very doubtful wisdom and rather like a pre-election dodge to make a paper appearance of a surplus. He is disposing of half-a-million pounds, or thereabouts, and he finds that half-a-million pounds by saying: "We are going to think of the Army expenditure in normal times as being half-a-million pounds less than it is at present, and we are going to consider that half-million pounds, which we are taking for the relief of income tax, as being abnormal, and borrow for the purpose of meeting that sum of money." I cannot appreciate the Minister's argument that it is fair to take the Army Estimate of £2,183,000, reduce it mentally by half-a-million pounds, and say: "We shall borrow that sum because it is abnormal," and to do the same with £53,000 worth of Army pensions, and borrow against that for the purpose of finding money to remit to income tax payers. I do not think it will stand examination by any careful finance expert. It is rather, I suggest, a financial dodge, the dodge of a Chancellor of Exchequer or Minister for Finance who wants to put before the country a somewhat popular Budget, at least to that part of the community which pays income tax, and to say: "Well, we are going some day in certain circumstances to reduce the Army to smaller proportions, and we are going to borrow one-fourth of this current year's expenditure."

I do not want at this stage to repeat the queries which I put to Ministers on more than one occasion, but I will suggest, for the consideration of the Dáil, that if this Army, which is going to be transformed, is in fact to be a protective force, to be, in the words of the Minister, "sufficient to protect the wealth and territory of this country against external attack," that there will be a considerable sum of money required for defence work, which is not merely the maintenance of men, but defence works, expenditure of various kinds which are not contemplated in the £2,183,000 which form the sum in the Estimates as required for the Army. If there is to be this protection against possible external attack you will have to meet that out of current revenue, and you are not justified in borrowing £500,000 odd to meet the expenditure on the Army for this year and treat it as non-recurrent.

I am sorry that the Minister has not given us some hint or promise that it was the intention of the Government to provide moneys to meet the very clamant needs of hundreds of thousands of people in various parts of the country. There are many people who will not have much thought of the finance statement of the Minister, will not be very pleased to know that income tax is to be reduced by £500,000, and that no definite, positive steps are to be taken to relieve them of the very imminent peril of death by starvation. The Minister has taken some credit for his promise to meet the calls of his critics by setting up a Departmental Committee, to be presided over by some Ministers, with a view to retrenchment in Civil Service charges. I take it that the assurances that were given last year and in previous years, time after time, were really not warranted, because I think it will be remembered that all that he is now promising has been in operation for two or three years past, that there has been a very rigorous examination of departmental expenditure, and that the result of that examination has been to confirm the Minister in his frequent statements that the utmost economy is being exercised. Therefore I take it that the promise regarding a Departmental Economy Committee is merely so much fudge, because it has already been in operation, and I would prefer to take the Minister's assurances in previous statements to that of this particular statement. If we were only to add the number of times together that such assurances have been given, the majority has it, the economy has been practised, there is nothing further to be gained by this new Committee, simply by the fact that it will be presided over by a Minister.

But I would suggest that it might be worth the Minister's while to take some trouble to find out whether some economy of the right kind, economy because of public satisfaction, economy in more contented service, could not be achieved if he were to consider the situation within the Civil Service, consider with a little more sympathy the calls and pleas and demands of civil servants for consideration of their grievances. I have reason to believe that there exists in the Service a considerable amount of irritation and dissatisfaction, and that will not be removed by examinations into economy; it is much more likely to be removed by some sympathetic consideration of the claims that the Civil Service is putting forward.

Credit was claimed by the Minister, and I have no doubt that from his point of view as a collector of taxes the utmost credit is due to the Revenue Commissioners for the manner in which they have succeeded in abstracting blood out of stones. I am not sure, though, that, for the sake of giving a somewhat satisfactory report to the House on the Budget day, it is good public policy to attempt that process of abstracting blood from stones. I think it possible that you might be doing much more harm to the economic stability of the country by that particular kind of process, that a little more leniency and a little more consideration of the circumstances of the individual who is called upon to pay is due. I am thinking at this moment more particularly of notices which have been given to workmen in receipt of under £4 per week informing them that for a certain number of weeks they shall have deducted from their pay a sum of 50/-. Now, when you ask a workman who is receiving £3 10/- to £4 per week to hand over £2 10/- per week out of his pay for a certain number of weeks and when you say that it must be deducted, it is not likely to inspire respect for Governmental institutions, and I think that there are other Deputies who could instance a process equally indefensible in respect of other classes of the community.

The statement that the Minister has made will be read by me and by others with care and, I am sure, with a good deal of interest, and we shall have opportunities of examining it and discussing it with more detail and with a better understanding. But I do commend to the House and to the public this idea, that they are not by any means to take to themselves the satisfaction that because the Budget shows a surplus ,and because the National Loan stands at a certain figure which appears satisfactory, that is ample evidence of the general prosperity of the country.

The procedure usually followed on Budget day is that the Minister makes his statement, which is then circulated. The resolutions are discussed. But until we reach the final resolution the debate is confined to the actual resolution before the Committee. On the final resolution, when Deputies have had an opportunity of reading the Minister's statement, as Deputy Johnson suggested, the general discussion is taken on all the matters raised in the Minister's speech. That was the procedure followed heretofore. I think it is the most sensible procedure, and I take it it will be followed again to-day. The resolution now before us deals with income tax.

I was not prepared to deal with income tax alone, but I can see the justice of your remarks. To the ordinary individual, who is living as best he can in these hard times, the Minister's statement will not give very much satisfaction. It is not every individual who receives sufficient salary or wages to pay income tax, and the great bulk of the population are in that position, particularly those whose livelihood depends on agriculture. To that great volume of the people—the poor people of the community—the Budget is barren of anything in the nature of relief. I agree, however, that the reduction of one shilling in the income tax will have two effects. It ought to stimulate industry, and it ought to bring back to this country people with incomes who have been forced out of it by reason of the high income tax, and who, if they come back, will bring so much revenue earning power to the community by giving necessary employment in the way of household staffs, etc. In that respect, I view the reduction in income tax as a matter of great importance. It is a move in the right direction. However, I am very much disappointed that the Minister has not put the farmer in the same position in regard to income tax that he was in previous to the war. Farmers are still paying income tax on their valuation, plus their position as occupiers and owners, and in some cases they are assessed on six times the amount they were assessed on before the war. I contend that the revenue from income tax from farmers is small, and that it would have been a very good electioneering dodge on the part of the Minister if he had removed the payment of income tax from the farming community. Of course, I do not advocate it from that point of view. I am advocating it from the point of view of the disadvantage occasioned to the ordinary farmer when he gets this particular form from the income tax collector. I am supposed to be a judge in these matters, and I am met by a hurricane of papers whenever I go to a fair. Many of the people who receive these demands are not liable to income tax at all. What is the procedure? They go to some person in the city who calls himself an expert and they are charged a couple of guineas for finding out that they are not liable to be assessed. The Minister is wasting time and paper and stamps, and the persons who receive the demands waste their money, and nobody is benefited, while the Government is all the time being railed at. I have to take the side of the farmer and say that it would be good policy on the Minister's part to abolish income tax altogether so far as the farmers are concerned. I suppose I cannot touch on anything else but income tax.

The opportunity will arise again and very soon.

Dealing with the general question, perhaps the Minister will let us know his ideas. He is giving relief in taxation to the extent of half a million. We know that there was a Coinage Act passed last year and the income from the new coinage was supposed to have brought a sum of £600,000 into the Exchequer. No mention was made by the Minister of that £600,000, which he is supposed to get from the new coinage.

Part of it was mentioned.

The Minister mentioned the currency.

Also the coinage.

I was expecting that as a result of the Coinage Act in addition to the reduction in income tax the Minister would have been able to take off a considerable amount of taxation in other directions. However, I will not go further into the matter.

AN LEAS-CHEANN COMHAIRLE: took the Chair.

I do not intend at this stage, because it would be practically impossible, to go in any detail into the Minister's statement. The Minister made his statement at an exceedingly rapid pace, and I, for one, was scarcely able to follow what he said. However, I may have an opportunity later of examining the figures in closer detail. Taking the Budget as a whole, I, for one, could not but congratulate the Minister upon, at long last, taking, shall I say, judicial notice of suggestions made to him by myself and others during the last four years. I am particularly pleased that he has come to see that there is something to be gained by altering at some future date the style of our present Army. He has mentioned that it will be possibly constituted on something in the nature of a territorial basis, besides providing a standing army. I have advocated that proposal time and again here, and I welcome the eleventh-hour decision of the Government in the matter. I am in full accord with the proposal that we should have a defence force, as the Minister said, in accordance with our capacity, and also that a proportion of that force should be not in the nature of a standing army, but rather in the nature of a national reserve. I am also pleased that the Minister has thought fit to regard a certain amount of the present expenditure on our defence force as abnormal expenditure, and to provide for it by way of borrowing. I myself made that suggestion this time last year, but I was not listened to. He has further stated that there is to be something in the nature of a Geddes Committee appointed. That proposal was made from all quarters in the House which are not occupied by Government supporters, and it was time and again turned down. Of course, we now know what is going to take place on the 8th of June. So, naturally, the Minister is coming to see that he had better do something to show the people that the Government pays some regard to suggestions that are made from other than Government benches.

The only proposal by way of reduction in taxation is one along the lines of a decrease in the amount of income tax. It is not necessary for me to labour the case that has been made for this by almost every non-Government speaker, both inside and outside the Dáil. My complaint about this proposal in the Budget is that it is the only thing in the nature of relief that the Government proposes. When this Government came into office one of their first actions was to dock the poor old age pensioners of some of their paltry pittance, and now, when they find themselves in a position to relieve some of the citizens, I thought that they might have considered at the closing stages of their term of office the revocation of that unwarranted action of theirs at the opening stage. But no. We are to have a reduction of one shilling in income tax, which is very welcome, and, to my mind, a very belated and almost death-bed act of repentance on the part of the Government.

Which would the Deputy prefer to have—the old-age pensions increased or the income tax reduced?

I do not think it would be necessary to have a choice of either one or the other. I think that the alternative is not exclusive, and that probably both could be done. But the Minister has decided at long last to reduce the income tax, and he says that it will cost something like £500,000 for the coming year, and possibly a million in the subsequent year. That means that we have £500,000 according to his calculation, more or less to play with for the coming year. That is all very well, but what about the other £500,000, which will have to be found for the subsequent year? There is nothing that I can see in the Minister's proposal to show that the general expenditure in the year 1928-29 will be substantially reduced from the estimated expenditure for the coming year. The statement of the Minister was made in such a hurried way that it is practically impossible to debate it now, but the Minister has gone some way towards meeting demands which have been persistently made from all quarters of the country and of the House for the last four years. I regret he has not seen his way to do something towards a reduction in the spirit and beer duty. That reduction has been proposed here year after year. I myself have pointed out that probably a reduction in those duties would not mean anything like a proportionate decrease in the amount of revenue which would be obtained; in fact, that if something is not done shortly to relieve those industries of this burden of taxation, this taxation in itself will probably eventually destroy the existing industries. Much has been said and claimed on behalf of the Government about what has been done for the starting of a new industry in the shape of the manufacture of sugar in the County Carlow and elsewhere. I think it is the duty of any Government to take care of, and to secure, the welfare of existing industries, especially industries which give rise to a large amount of employment, agricultural employment especially, throughout the country before they embark upon entirely new ones.

On a point of order, when I was speaking I was prevented from referring to anything but income tax. I had intended to speak of several other things, but now Deputy Redmond has been allowed to wander over the whole general subject. I do not object to Deputy Redmond speaking, but I do object to the fact that I was prevented from speaking while he has been allowed to do so.

The general discussion will take place to-morrow on Resolution 8.

I am much obliged to Deputy Wilson for calling attention to my general wanderings, because I was not aware that he had been stopped. I can assure him it was none of my business to stop him, and that I would be only too pleased if he were allowed to go on. This discussion is confined, as I understand, to the question of income tax, but I was only endeavouring to show that there could have been other means of relieving taxation, not in substitution for the income tax relief, but alongside the income tax relief. The only complaint I have is not with the reduction in income tax, such as it is, but that there has not been a reduction elsewhere.

I rise principally to remind the Minister for Finance of a promise which, I think, he made the year before last in his Budget statement. At that time the Minister made a definite promise to the House that, if and when there was a surplus to be distributed, the old age pensioners of the country would have first claim on it. His exact words were that "some revision of the Old Age Pension Act of 1924 will have to be given precedence to any reduction of taxation, however much required." If the Minister thinks that he has now £550,000 to play with, as he appears to think he has, I think he should have honoured the promise he made to the House. The Minister and the Government pretend to take no notice of what they usually call Press clamour, but this Budget proves, beyond all doubt, that the Press has won a victory; that the Press clamour has been responded to by the Government on the eve of an election. There is £550,000 in relief for the people who pay income tax. There is nothing in the Budget for the people who have no incomes on which to pay tax. I think the general opinion will be that this is a most uninteresting and tame Budget so far as the majority of the people of this country are concerned. There are fifty or sixty thousand people in this country to-day who not only have no incomes, but many of them have no food. There is nothing in the Budget to hold out any hope of relief to these people. The line taken by the Government has been to rob the poor, to put it very bluntly, in order to assist the rich or the comparatively rich. We were told that the old age pensions had to be reduced because the country was too poor to afford to continue to pay the pensions which had been awarded by another Government. The Minister and the Government expressed their regret that they had to do that, but the Minister gave a very definite promise to this House and the country that immediately they were in a position to do so the cut then made would be restored.

What I would like to know is, how far this House or the country can place any reliance upon promises given by a Minister? I am sure the Minister will not try to deny that he made the promise. It should be noted by the House that it would take less than half of this sum of £550,000 to restore the shilling. I do not suggest that the Minister would be able to put the old age pensioners in this country back into the position they were in prior to the passing of the 1924 Act for £250,000, but he certainly could restore the shilling cut to all the old age pensioners in this country for less than £250,000. But no, the Minister thinks that this will be a much more popular thing and will get Press publicity, and draw forth the plaudits of the "Irish Independent" and of the "Irish Times" and other papers to support the Government for the coming election. I think the people of this country have every right to feel that they have been badly, treated in this matter. I feel that the House ought to say whether the payers of income tax who had already got relief to the extent of a shilling in the pound are to get relief to the extent of another shilling in the pound at the expense of the blind and the old people in this country. That is the position in a nutshell. I was rather surprised to hear Deputy Wilson talking about farmers who pay income tax. Indeed I may say that I was pleasantly surprised, because I thought, from what I had heard going through the country, and in this House, and from what I know myself about the farmers of the country, that very few of them were able to pay income tax.

But they have to pay it.

As far as I could understand, very few of them could pay income tax. If the Minister were to consider the people who are not able to pay income tax he could have given greater and much more deserving relief to them than he is giving by way of reduction of this sum of £550,000 to the income tax payers. As I said at the outset, I rose principally to remind the Minister and the House of the definite promise the Minister made to the House the year before last. I shall be interested to hear what the Minister has to say on the matter when he comes to reply, and as to how he proposes to get out of the definite promise which he then made.

It is somewhat gratifying that the reduction in income tax should have been made in advance of Great Britain by the Irish Free State. It will demonstrate the confidence that the Ministers have in the capacity of the public to believe that they have, as was stated in the opening passage of the Budget speech, securely established the Free State on a sound financial basis. I think that as an advertisement it is magnificent. Deputy Morrissey is not alive to the fact that the Ministers were afraid to adopt another line of advertisement. They might very well, and I am sure they did consider the possibilities of it, have entertained the idea of restoring the shilling to the old age pensioners, but they realised that that would be declared on all hands to be a trick to restore the voting power of the Ministerialists in the country. They were afraid that that should be urged against them and so they dropped it. They knew also that the reduction of the income tax would be complained of while nothing was done by the old age pensioners and the national school teachers on whom a draft had to be made in the lean years, but they came to the conclusion that of the two the less obvious and the less open to derisive criticism would be this which could be defended so well from the side of those who are interested in the economic recovery of the country. I have always held, since I had the honour of being a member of this House, that the direct tax is the proper tax. I am sorry that, while I have been able to convince the Ministry of the error of their ways in regard to financial policy in one or two important respects, I have failed utterly in regard to this.

Surprise was expressed just now that farmers pay income tax. It ought to be a matter of surprise that more citizens are not called upon to pay income tax. We have steadily reduced indirect taxation, with the result that the vast majority of the people have no means, directly, of being aware of what the Government costs them: of how much they are mulcted in to pay for the expenditures in the State according to the policies pursued in this, that or the other department of the Government. People are not aware, to begin with, that it is their Government, and that the Government ought to be carried on according to their needs. I must say, with a certain amount of conscious exaggeration, that it is only the income tax payer who knows fully how the shoe pinches in the finances of the State. We all counted upon a recognition of the income tax payer's right to have a reduction in the special form of discrimination between earned and unearned income. We have followed, for some years, the newer British procedure which was a reversal. Formerly a difference was made in the amount of the tax according as it fell on earned or upon unearned income, and when the two were joined together the case of the earned income taxpayer was met somewhat by relieving a fraction of his total earned income from taxation. In the Free State that has been kept at one-tenth. We had counted upon it being increased to one-sixth. That form of relief is very desirable inasmuch as it meets the equities of those whose income is an earned income and, consequently, are being bled in respect of their capital as well as of their dividend. It is unfortunate that the rentier, as he would be called in France—the man living on dividends, rents or annuities which come from property inherited—should be on exactly the same footing in regard to income as the man who earns what comes in to him by way of income, and which is not, therefore, a dividend in any sense.

I hold that it is most desirable to discriminate effectively between those two, and that the measure of discrimination which is at present in operation, to wit, that exemption of one-tenth, is really not sufficient in the Free State. A large body of the Civil Service pays income tax and, while complaints are made everywhere, almost universally, about salaries, account is not taken in this ignorant, rash, and uncritical comment upon the cost of running the Government of the State. A large number of civil servants pay income tax, and their salaries are therefore larger to the eye than to the recipients. I believe that every class of citizen should have the fact of his citizenship in this respect brought home to him with equal clarity as it is to civil servants. I think it a pity, therefore, to leave the incidence of income tax precisely as it was. The farmers have been harried for income tax at the same time as they have been harried for annuities and debts both to banks and other creditors, and, in so far as this reduction of income tax will give them relief, I think we must all be very grateful. I do not know if Deputy Johnson is absolutely in earnest. Surely he realises that there is no way in which a stimulus to production and to the restoration of vitality in existing industries is so effective as in relief from income tax?

I dissent from that proposition entirely.

Very good. Everyone knows that included in the cost of an article manufactured, when it comes to be sold, must be income tax.

Heavy income tax is a direct handicap upon production, especially in industry. That can be demonstrated. In the effort which we are making at present for the re-creation of national life and for the provision in towns of forms of occupation which will stop emigration, we who are interested in that, particularly those of us who believe in national protection as a great instrument for the regeneration of the country, must welcome reduction in income tax. Therefore, by that reduction, even those who pay no income tax must benefit. The relief is immediate, no doubt, in the case of the taxpayer and somewhat more remote in the case of the employee, but undoubtedly anything that tends to relieve the employer of labour and that gives a greater incentive to enterprise and to the investment of money, particularly that leaves money free for investment, will help to revive industry and give a larger volume of employment.

The super-tax affects, unfortunately, only a very few, and the few have correspondingly few friends. If there was a division made and distinction drawn between earned and unearned income tax I should certainly advocate a reduction of super-tax in respect of earned income. I believe that that will give relief to very few. It is obvious that the man in the street will consider that the Minister's utilisation of the surplus for a reduction of income tax is an effort to placate the city voter and to disregard the man in agriculture. I believe, giving the Minister credit for the best intentions, that his purpose in this respect was really inspired by the desire to do something for the development of industry. He was looking rather to the yield that would come in later years to some successor of his when bringing in a Budget. Some of us in this House have repeatedly argued that a reduction in income tax would really give a greater yield after the lapse of a few years. That was an argument which I put forward in advocating a reduction of sixpence in the pound some years ago. The Minister complained that if he were to make such a reduction his revenue would fall by so many hundreds of thousands of pounds. I had faith in the rehabilitation of the country. I looked forward to progress, and was confident that a reduction, even of sixpence, would give a greater yield to-day. A reduction was made, and the result is a better and fuller reduction to-day.

It is perfectly true that that surplus would not be available now if the Executive Council had not followed another line of financial policy than that on which they originally set out, and in which with a certain amount of obstinacy they persevered. I think I am entitled to call this Budget, especially in regard to its better features, a Clann Eireann Budget, because in the Provisional Parliament my first difference with the President, who was then Minister for Finance, was with regard to his slogan, "we must balance the books." I found it necessary then to differ from him, and point out that a policy of balancing books is a sound policy if the expenditure of a particular year is met out of the income of that year, but attention must be had, and due regard paid, to a distinction between recurrent and non-recurrent expenditure. When that distinction was made, and when certain charges were met by loan, the Minister found that a certain amount of buoyancy was created. Having been taught by that experience, he is following it up this year, and, because this wiser financial policy has been followed by the Ministry, they can now dare to make a reduction of one shilling without fear of a recoil detrimental to the future of the State.

We can only talk on income tax at the moment, and I do not propose to say very much. Every Deputy is prepared to welcome any reduction in taxation, and it is in that spirit that I say that I am glad to see that the Minister has had the courage to face up to this matter in the way he has. I am in agreement with Deputy Wilson that the great majority of the people will not get any direct benefit from a reduction of the income tax. The best we can hope for is that the anticipations of the Minister will be realised, and that this reduction will make for increased endeavour in the way of reviving and expanding our industries. I am at a loss to understand the policy enunciated by the Minister when he points out in his statement that a reduction of one shilling will cost us £550,000 this year, and, in subsequent years, according to calculations, it will cost something about one million.

Thus, what we are doing to-day the Minister calculates will cost one million. In order to do this to-day, we must calculate upon having one million to spare when the next Budget is introduced. That is, undoubtedly, a very big step, and I feel that the Minister should give some indication that he has proof that his anticipations in that respect will be realised. In another part of the Minister's statement, when dealing with the beer and spirit duties, he gives an indication that the Executive Council have had under consideration a reduction of those duties, but that inasmuch as they could not give a reduction in both duties unless they were to absorb this total sum of £550,000, they decided to give no reduction.

A great deal more than that.

I want to know from the Minister whether the financial policy enunciated in the Budget is going to put us up against the proposition that next year, in order to carry on the policy to which he has given expression, we must have one million instead of £550,000. Will we be able to have that one million for the relief of income tax payers alone, and, if having that one million as being essential to continue this policy, will it also mean that there will be no possibility of relieving taxation in any other direction? I am glad that it has been possible to have a reduction in income tax, but I think there are other fields that have to be explored, and, in my view, reduction of taxation in other ways would have a greater influence on the life of the people than would those steps which the Minister has taken. The steps which the Minister has taken to-day create a situation for future Ministers which will make it practically impossible, or, at least, very difficult to give remission on other taxation. I have been trying to examine that aspect of the question, but I find it difficult, and, if it means that this bold step—a step which I recognise demands a certain amount of courage and which, I hope, will have good results—will affect a comparatively small number of the total citizens of the Saorstát, will that step have such influence on our financial policy as to make it likely that future Ministers will not be able to make a remission of taxation in other fields?

I do not think that the rule of keeping to the resolution has been very closely observed. I think that most speakers have strayed off from the resolution before us to deal with other matters.

I mean to stick to this motion, and say on it the few words that I have to say. Later on, when we have an opportunity, I shall deal with other matters. I think that this reduction of 1/- in the income tax will have a very great effect for good in the country. I think it will bring a lot of money back to the country, and that it will give people here who are held back from doing productive works by the awful drain of income tax a chance of giving more employment. Long ago I thought that if the income tax could be brought down to 1/- or 1/6 it would have a great effect in giving additional employment throughout the country.

Deputy Magennis always makes a very interesting speech. It is always a pleasure to listen to him. And with a great deal of what he said on this matter I agree. He claims that he urged the Minister long ago to reduce income tax but that he would not listen to him. I think the Minister showed great wisdom in not listening to him. It would have been a very great mistake, in the state the country was in, to embark on any rash change until he was quite certain how financial matters stood and that the country could stand it. I am very glad he did not listen to clamour in that way.

Deputy Morrissey alluded to the old age pensions. We would all like to see the old age pensions restored to the state in which they were, but I think it would be a great mistake to give back the shilling just now; it would be judged very adversely throughout the country. We hope that it will be done in the near future. But substantial taxes have been taken off commodities that the old age pensioners use largely, and which should be a great relief to them. The taking of the tax off tea and the reduction of the tax on sugar to a very small amount, was of great assistance to them. I think, in the circumstances, that the Minister was perfectly right in not proceeding to give back the shilling that was taken off the old age pensions until he was certain the country could bear it. I am quite certain, however, that it will be one of the first things that will be done later on.

Why is it not done, if it is to be one of the first?

I think the time is not opportune for it. It would have been very much misunderstood, and I am very glad the Minister is not acceding to any clamour on that matter. I am sure that this reduction of a shilling in the income tax will have a very good effect all over the country, and that it will give a stimulus to trade and employment.

I intend to confine my remarks at this stage to the income tax aspect of this Budget. I may have an opportunity, at a later stage, of dealing with the general financial conditions existing in the country. I must say that I congratulate the Minister on the reduction in income tax, but I want to be honest in the matter. I believe that it will not be a popular reduction. I believe that the other reductions which the Minister might have made, or the addition that he might have made to the old age pensions would be far more popular from a vote-catching point of view. While I believe that certain advantages will accrue to the general population, and that production will probably be stimulated to a small extent by this reduction, if I were to have a choice between this reduction in income tax and other reductions that might be made I would not put it first, but I am very glad to see a reduction in taxation of any kind. I believe that any form of reduction of taxation, as I think Deputy Magennis pointed out, will be of advantage to the poorer classes of the community. It would be of advantage to the consumer, and very often the farmer is the consumer. I am in agreement to a large extent, but not altogether, with Deputy Magennis and, perhaps, Deputy Johnson's theory in that regard. I believe that income tax is largely passed on to the consumer. It is not altogether passed on, because there are people with certain fixed incomes who will not pass it on. This reduction will be of direct benefit to civil servants. There is no doubt about that. But we do not see that there is going to be anything taken off the salaries of civil servants to correspond to it.

With regard to the old age pensioners, I must say that I am perfectly in agreement with Deputy Morrissey when he says that any surplus money should have been put to the advantage of the old age pensioners rather than to the relief of the income tax payer, and I base my claim in that respect on a promise made by the Minister. It is in the records of this House that the Minister promised that when an excess revenue was available the first use that would be made of it would be to give back to the old age pensioners what had been taken from them. I voted for the reduction of the old age pensions reluctantly, as I stated at the time, in the hope that if there was a possibility in the future of returning to them what was taken, advantage would be taken of it. The Minister has, in my opinion, violated a promise in that regard. It is not the first promise that the Minister made in a Budget speech that he afterwards violated. I may say it ought to be a lesson to the Minister in regard to making promises. I can point to two definite promises made by the Minister which he has seen fit to break. I say that a promise made ought to be kept, and it is an obligation on this House and on the country that any surplus revenue should be put to the advantage of the old age pensioners. I am only referring to the reductions and not to the change in the calculation in regard to means. I think there is ample money to allow the shilling to be returned to the old age pensioners.

I would like to call the attention of the Minister to a point in regard to the double income tax payments. I understood from a statement made by the Minister last year that the arrangement which was arrived at with the British Exchequer with regard to the double income tax payments was, to a large extent, consequential on the maintenance of the rates of income tax on a level basis in this country and in England. This changes the level. The income tax in England is still at the old rate, while in this country it is down to 3/-. I want the Minister to tell me if that is going to have any effect on the reciprocal arrangement that has been made, and whether he has been in touch with the British Exchequer authorities in that regard.

That matter will arise on the next motion.

I intended to quote from the Minister's speech in that regard. Perhaps I had better finish. The Minister stated: "It is quite true, I believe, as a necessary consequence of this arrangement, that the income tax in the two countries cannot be very far apart." Later he said: "On the other hand, if we reduce our tax so low that very serious loss would be suffered by the British Exchequer by people coming here, they, on their part, might terminate the agreement." Undoubtedly benefit will accrue to this country if we can induce people to come over to live here because of this reduction in income tax. I believe that there are considerable possibilities in that direction. This reduction will induce people to come here, people such as those who take charge of packs of hounds and engage in sporting matters of that kind.

I am rather inclined to agree with the suggestion made by Deputy Magennis that the exemption scale in regard to earned income is too low in this country and that we ought to be on a par with the scale allowed in England. The Minister might consider the question of raising the exemption scale on earned income from one-tenth to one-sixth. I want to make one passing reference to the statement made by Deputy Magennis in regard to the taxation on unearned income. I understood the Deputy to suggest that because, in his opinion, unearned income is inherited, there ought to be a difference between the rate of taxation on unearned income and earned income. I want to point out to the Minister that very probably a good deal of the unearned income is not the result of inheritance. Very often it is the result of the hard work and savings of the people who get the advantage of it, and because of their business enterprise, and I cannot see how it would be possible to differentiate between the man who had inherited the money and the man who earned the capital that produced the unearned income.

As an income tax payer on a small scale, I appreciate the reduction which the Minister is giving. It is certainly an advantage to the country and an advantage to me personally.

Will you put it into productive enterprise?

I think, however, before he embarks upon this reduction, he might have restored the shilling taken from the old age pensioners. Certainly I would have been quite willing to give my quota if I had been asked to give it in that direction.

I welcome the reduction in the income tax, which may be an inducement to capitalists to open their purse strings and start industries in the country that otherwise they are a little timid about doing. Those industries would give employment, and our great outcry for the past two or three years has been regarding the lack of employment. I am sorry, at the same time, that the old age pensioners were not considered. I will venture to travel outside the proper sphere and to say that I am a little disappointed that the Minister did not reduce the tax on stout—the poor man's food and drink. That is all I will say on that matter now, lest I be called to order. I am glad the Minister reduced the income tax, because many people asked themselves why they should invest money here in face of such high taxation. These people will now have no excuse. It is a pity, however, that there is not some differentiation between the man who has to earn his income and the man whose father earned it for him. I am sure that, now that we are going to the country, we will be tripping over one another in order to get in popular amendments. When the Minister sees the old amendment that I have been putting in constantly for the last three years, I hope he will say: "Lest he should not come back any more, I will not refuse him this time."

The reduction of a shilling in income tax may have the effect that Deputies Wilson and Daly predicted, of encouraging people to invest money here, but I wonder how many people will be employed as a result. Deputy Wilson suggests that people who will come to live here will have to employ servants for their domestic convenience, but I wonder what was the real reason why the Minister reduced income tax and forgot his promise of two years ago to the old age pensioners. He was, no doubt, looking to himself. If we take a salary of £1,700 a year we find that a reduction of 1/- in the £ will mean to the Minister and his colleagues £85 per year. The jobs of the Ministers will be worth £85 a year more. That may have been a great inducement to the Minister to bring about the reduction. If we take count of all the Ministers, we find that the saving to them amounts to about £850 a year. The Minister has left the Chamber. He cannot stand criticism. He knows I struck the nail on the head. However, this reduction will be welcomed throughout the country.

I notice that when the Minister was applauded the applause did not come from Deputies interested in the worker. The applause came from those who are regarded as capitalists, to whom a shilling in the £ reduction will mean a great deal. It is all very well to shout over a shilling in the £ reduction in income tax, but, as Deputy Morrissey has said, this is all Press propaganda. I think income tax should be abolished completely on all salaries up to £400 a year. The man who earns from £300 to £400 a year is least able to pay income tax. If the Minister abolished income tax on all salaries under £400 a year, he would be doing a good turn to a greater number of people than he is benefiting by this reduction. Deputy Johnson has cited the case of a man earning £4 a week who must pay £2 10s. 0d. per week as arrears of income tax. I know a man in my own constituency who is earning £3 10s. per week and who is compelled to pay 30/- per week arrears of income tax. That is why the Minister says he is getting in the income tax. He has made every employer in the country an income tax collector. We were looking forward to getting something worth while this year—something which would enable people to live in the country. We now get a reduction of a shilling in the £ in income tax, which will help a certain class and a certain class only. We hear nothing about the 80,000 people with their families who are starving in the Saorstát. There is no response to the appeals made by Deputies here on behalf of those people. The Minister for Finance has reversed the role of Robin Hood and he is robbing the poor to give to the rich. I hold that the Minister reduced the income tax for his own and his colleagues' personal gain. Eighty-five pounds a year is no bad increase in salary. I hope the people will realise this, and that they will accept this as an election stunt on behalf of the Government. "Live horse and you will get grass" seems to be the policy of the Government as regards the majority of the people. This is merely a stunt on the eve of an election. Who knows but in 1928-29 there may be an increase of 2/- in the £ in income tax? We have no guarantee that there will not. However, I am pleased that the Minister gave this reduction. It may mean that a few people who left this country will return. Even if it only gave a livelihood to a few domestic servants, it would be worth while.

I do not propose at this stage to deal with the Minister's speech. I will confine myself to the resolution about income tax. I am not in a position to say whether or not the country can afford the reduction. I cannot say at present whether, owing to the expenditure that the Minister has definitely committed the country to this year, he can afford to let revenue go under any head. But I am not resisting the proposal to reduce income tax by a shilling. A reduction in taxation, no matter in what direction, is very welcome. I have not been able to analyse the effect of this reduction, with the smaller allowances here, as compared with the higher scale of tax in Great Britain and larger allowances. At a later stage I propose to deal with that.

It appears to me that a reduction in income tax must affect us externally and internally in the political sense. Externally, I trust it will have some effect upon our relations with Northern Ireland, and that the hard-headed men in the North will come to understand that it is in their interests to join in with us here. If this reduction is to be taken as a gesture, then it is a very welcome gesture. There is the further point that the reduction will tend to increase the rate at which capital will be invested here. Needless to say, that will not take place this year. The increase of investment will be a very slow process. Industry requires something more than a low income tax to be solidly established. It must have plenty of raw material, cheap labour— I speak in a comparative sense—and cheap power. These are the essentials of increased production. But we cannot expect very great results this year or even in this generation. However, it is a step in the right direction to make a reduction. People with fixed incomes who have withdrawn from this country may be induced to return, and under that head we can look for substantial and material benefits. Furthermore, people heretofore domiciled abroad may take up residence here and, of course, their expenditure here will increase the purchasing power of the community. That will help to counterbalance the loss of revenue involved by this reduction. You will have more wealthy people in the country, and that will mean that you will get greater results from a smaller tax, with a smaller cost.

I think no man can say that this is a popular Budget. It does not give relief to the majority of the people. This reduction will affect but a limited few. I think the Minister should have given relief in other directions. Why not reduce the tax on boots? That would give immediate relief to a very large section, particularly the agricultural section. I think that position should have been faced. While a 3/- income tax may be very useful, I would not hesitate to make it 3/6, but not higher, in order to give benefits to a wider circle of the people. In confining benefits merely to a few, the Minister has not done what is best; after all, the many have to be taken into consideration. I have not been able to analyse what extent of relief the Minister's one shilling reduction in income tax will give to a man with an average family and possessing a salary of £250 or £300 a year.

What is an average family?

I should say the Minister's family—three or so— would be average. I have not been able to analyse the position whether the Britisher with an allowance of one-sixth as compared with an allowance of one-tenth here is in a better position. The people who should first get the benefit of reduced income tax are those with small, fixed salaries. The majority of people here are in that category. In England there is a different system. Incomes of £2,000 are there as plentiful as incomes of £200 or £250 a year here. It is for the man with a very small salary that we must cater. The country business man, the clerk, and the wage-earning class of better standing—these are the people who need benefits such as reduced income tax. The Minister has not made the case whether he is giving those people the benefits they are primarily entitled to.

I welcome the announcement of the Minister that he is reducing the income tax by one shilling. I believe that will have a very far-reaching effect in the country. There is one thing we want more than another here, and that is to encourage wealthy people to live in the country. If we have wealthy people coming to live here from other countries, that will help to create industries here. I have no doubt about it that just at the time when the Shannon scheme will be capable of providing electrical power for industries you will have large numbers of wealthy persons coming to live here, and this reduction in income tax will, in my opinion, prove a big attraction. It is a rather large reduction in income tax, and I have no doubt that it will be an eye-opener for the people in Northern Ireland. As regards the present hostility and opposition on their part to coming in where they ought to be, I believe this reduction in income tax will have far more effect than all the political intrigues or arguments that could be brought forward by any party in the State. I am very confident about that.

I believe the persons who are going to gain most by the reduction in income tax are those connected with labour organisations. The most important matter in Ireland at the present time is, to my mind, the provision of employment. I do not think conditions were worse for a long period than they are at the present time. Many persons who might have been anxious to start industries and so give employment were possibly handicapped heretofore by the high rate of income tax, but now that difficulty is removed. I am surprised that there should be any opposition from the Labour Benches, because workers generally will be the persons who will benefit. I am very pleased and delighted with the Minister's announcement of the shilling reduction.

Whilst with other Deputies I am very pleased about this income tax reduction—and I hope it will confer all the benefits on the country that the Minister indicated in his speech—still I think the Budget, to some extent, is a very sectional one. From time to time in the House we have been told that sectional ideas are not the thing. To my mind the Budget confers benefit only on one section, and that section comprises the well-to-do people in the country. It confers an enormous benefit on them, and the majority of the people are left completely without any benefit. The favoured few, so to say, are reaping an extraordinary benefit. I hope this benefit will react in every way the Minister has described. For my part, when there was last a reduction in income tax, I never could see that increased benefit to the country at large that we were told of. Let us hope that this extraordinary relief to income tax payers that the Minister has spoken of will be made apparent in some fashion.

I have not so much sympathy with the income tax payer at all. After all, where are we to look for taxes to keep up the State if not from the people who have incomes? Is it to the few half-starved people throughout the country we are to look for revenue? Unless a man reaches a certain standard and has a certain salary, he is not compelled to pay income tax. Some people may say that this Budget is not sectional, but I hold it is entirely sectional. Take the farmers, for example. I do not think there is a farmer in the country who, if he kept correct accounts, is entitled to pay one shilling income tax at the moment. We know what the farmers have gone through. This, perhaps, may be a little outside the mark, but we know what the farmers during the last two or three years have suffered through depression in their industry. The farmer who has kept accounts for the last three or four years could not be compelled to pay income tax. The whole Budget is completely sectional. I would be more pleased if the Minister had made a division of benefits amongst the community at large, and had not taken into consideration only one section.

I do not want to occupy too much time, at this stage at any rate, in speaking about the question of old age pensions; but, as it has been mentioned, perhaps I will be permitted to read to the House exactly what I said two years ago:—

We have not proposed to apply any part of the gross surplus towards supplementing the Old Age Pension Vote, because we feel that the situation does not permit of any increase in recurrent expenditure; that, in fact, existing expenditure can continue to be borne only if conditions improve. Substantial reduction in taxation is, consequently, necessary above all else, but if the situation is found to have improved at the end of the year, we believe some revision of the Old Age Pension Act, 1924, will have to be given precedence of any further reduction of taxation, however much required. Meantime, the tea and sugar reductions will be of some benefit to old age pensioners.

At the end of the year what exactly happened was that we imposed two new taxes, the additional duty on wine, which is estimated to bring in £100,000 this year, and the betting duty, which is estimated to bring in £250,000 this year. Really, at the end of the year the position had not improved, and so far as we are able, even with the help of these two new taxes, to propose the reduction which is now proposed, we do it because we are making new arrangements about the Army, and are reducing expenditure on the Army. The conditions that were suggested in the statement with reference to the old age pensions have not come about. Undoubtedly, there has been an improvement in this sense, that taxes, the yield of which was falling very rapidly, have begun to steady and perhaps have stabilised. Various sorts of improvements have taken place, but not the sort of improvement that was suggested in that particular paragraph. I hope that will come, and undoubtedly there are signs that the general economic depression which has been over the country is passing off.

Will the Minister give us some evidence of those signs? It would be very valuable if we could have some evidence in that respect.

The particular revenue figures I gave are a certain indication of it. Deputy Johnson asked me how many income tax payers there were. I cannot give him the exact figure, but I should say there are between 60,000 and 70,000. If we were only to give a benefit to 60,000 or 70,000 we would not be justified in applying as much money as we propose for that purpose; it is because we believe that though the direct benefit goes to a comparatively small number the ultimate benefit will go more widely over the people of the State. You are not going to improve the economic condition of the country very much by a reduction of, say, a penny an ounce in tobacco or by a reduction in regard to drink. If there is any validity at all in the argument that heavy taxation handicaps production and militates against economic progress, it is certainly a heavy income tax does it.

I do not agree with the people who say that the whole or a greater part of the income tax is passed on. I think income tax is one of the taxes which are difficult to pass on, and it is quite different from customs or excise duties. On the other hand, industry is really built up and extended by the profits made in industry. I admit that the fruit of any reduction in income tax will only be applied in part to the extension of industry. There are people who, as Deputy Johnson said, when they get more money because the income tax is reduced will spend it on some luxury with no great effect; but there are many others who will do the opposite, and there are many who will be encouraged to do the opposite.

There must be, if it can be got at all, an encouragement in enterprise. There must be some improvement in production. The best that we can do when we find any sum to our hand for the reduction of taxation is to apply it in such a way as we think will give us these economic results. I think it is very desirable, if you can do it, to let the man who uses tobacco have it at a penny an ounce cheaper, but in our particular condition it is more important to aim at stimulating industry, making the wheels go faster. We cannot do it by direct means; at least, we can do no more by direct means than we have been doing.

I do not think it is in any way unsound to regard this extra half million on Army expenditure as abnormal. Undoubtedly in 1923 when I spoke, and nobody would have challenged it, the position was abnormal and the money we were spending on the Army at that time—£10,700,000—was abnormal. The difference is not so great now, but what we are spending is abnormal. We have already paid out of revenue great sums in respect of abnormal expenditure on the Army. As I pointed out in my statement, our net national debt is only something over £12,000,000, when we allow against the gross sum the amounts that have been advanced to the Shannon scheme, for local loans and other things of that sort. So that it is quite clear that we have already paid out of taxation great amounts of abnormal expenditure, and we are now justified in borrowing for abnormal expenditure for which perhaps we might not be justified in borrowing at all if in the beginning we pursued a different line and if every penny that we could put to borrowing during the abnormal years had been so put.

We have done a great deal in the matter of procuring economies in public administration, and if I were to take up the time and it were in order, I could quote a great many instances. But what I said in the Budget speech is exactly correct. We have not gone over everything. We have not taken the Estimates and gone through them sub-head by sub-head, and even divided the activities for which each sub-head provides and asked for each of them to be justified. We have heretofore rather gone where we could see on the surface that economies were to be got. We have not carried out the kind of microscopic scrutiny that I think we must now carry out, because unless we can succeed within the next two years in bringing about some appreciable reduction in expenditure, unless economic conditions improve more rapidly and more generally than I can see justification for believing that they will improve, not only will we not be able to give any other reductions in taxation but we will have to look for revenue to meet the expenditure and to fill the gap that will be left by the disappearance of certain revenue that we have, revenue that has been coming in in respect of arrears of income tax.

It is quite impossible to do the variety of things that Deputies suggest we could do. It is, perhaps, not worth, while to deal at great length with the suggestion made by Deputy Redmond, that we could do something for the drink traffic and increase old age pensions as well as reduce the income tax. I do not think that that suggestion was made after any great study or with any great seriousness. Deputy Heffernan referred to my statements last year about the reciprocal arrangements that had been made and my statement that the existence of these arrangements made it impossible to have any very wide difference in the rate of taxation here and in Great Britain. I feel that if there was a greater difference than one shilling, it might lead to the arrangements being reconsidered, but I believe that that would really depend on the effect of the difference and whether or not it led to large numbers of people coming here to have the benefit of the lower rate. Deputy Connor Hogan said that there were other taxes we might have reduced, and referred to the tax on boots. This is an Income Tax Resolution, but I will answer that point. The tax on boots is one of the protective tariffs, and I certainly am quite clear that none of these could or should be reduced for a reasonable period. I have always set that period at seven or more years.

When people have been induced to invest capital and instal plant, and when they have faced the difficulties of training operatives and getting industries going, it would certainly be most unfair and would damage any prospects of future industrial development if one of these protective taxes were changed before it had got a fair chance. I have already answered the point that Deputy Doyle made about a sectional Budget. The Budget is the best plan that we can devise, not merely for relieving the taxpayer, but for so relieving the taxpayer that industry will be fostered and employment will be given, that there will be something more than merely making a particular luxury cheaper, although that is very desirable and is quite a proper thing to do. But we did not feel that the making of one of the common taxed luxuries a little cheaper would meet the bill in the present situation.

Will the Minister say whether the double income tax arrangement with Great Britain will be continued for the year 1927-8 as it is at present?

Will the Minister further elucidate the point that the shilling reduction will amount to a million pounds next year?

As I said, I do not think that it will amount to quite a million. I believe that the effect of as large a reduction as a shilling will mean that the loss will not be quite proportionate, and that instead of being a million it will probably be £900,000, or even £850,000. I do not see, unless great economics can be effected, or until there is an improvement in conditions, prospects of further reductions following. The Deputy is right there.

Motion put and agreed to.