Dáil Éireann díospóireacht -
Thursday, 22 Apr 1937

Vol. 66 No. 11

Financial Resolutions—Report Stage. - Resolution No.2—Income-tax and Surtax.

Mr. MacEntee

I move:

That the Dáil agree with the Committee in Resolution No. 2.

The House will remember that in the course of the Budget statement I said that I proposed to ask the Dáil to legislate to provide broadly that in future the income of an infant and an unmarried child, which is derived from the parent under any settlement made by the parent, or as a result of a transfer of investments made by the parent, so long as the child is an infant and unmarried, and the parent is alive, be treated, as far as income-tax and surtax is concerned, as the income of the settlor.

Paragraph 1 of the Resolution before the House gives effect to this principle. Paragraphs 2 and 3 contain provisions as to adjustments in respect to income-tax and surtax to be effected between the settlor and the trustee of the child. Paragraph 4 provides for arbitration by the special commissioners, in the event of a dispute between the settlor and the trustees with regard to any adjustment to be made under paragraph 3. The necessity for paragraph 5 arises mainly from the fact that surtax is charged at different rates on each section of the taxpayer's income, and that paragraph provides that the transfer of the income shall be deemed to be the highest part of the income of the settlor. For instance, if a person had an income of £10,000 and settled £1,000 of that income on a child, that £1,000 would be taxed as if it were part of the £10,000 of the parents' income. Paragraphs 6 and 7 are consequential. Paragraph 8 specifies the settlements to which the Resolution relates, and paragraph 9 defines the word "child."

Mr. MacDermot

When a similar Resolution was introduced last year in Great Britain an exception was made, or was subsequently created by legislation, in favour of irrevocable settlements entered into before the passing of the Resolution. Is it proposed to make similar concessions in this country?

Mr. MacEntee

It is not proposed to do so.

Mr. Dillon

In regard to paragraph 4, does the provision restrict the right of appeal to the special commissioners only to operate to withdraw any right which heretofore existed in petitioners to go from the special commissioners to the High Court?

Mr. MacEntee

The revenue is not involved in paragraph 4. It is merely to allow the special commissioners to come in to arbitrate as between the settlor in the one case and the trustees of the settlement in the other. In effect, of course, the beneficiaries of these trusts happen to be one and the same persons under this Resolution for the purposes of the income-tax code.

Mr. Dillon

What is the purpose of withdrawing this matter from the courts in the ordinary way? Why should special commissioners of this kind be set up for this purpose. I take it that the purpose of paragraph 4 is, if there is a dispute between the settlor and the person acting for the trust, as to which money shall be charged at the higher rate of income.

Mr. MacEntee

No, that is provided for.

Mr. Dillon

What questions will arise?

Mr. MacEntee

If the Deputy looks at paragraph 3, he will see that if a person obtains.

"in respect of any allowance or relief a repayment of income-tax in excess of the amount of repayment to which he would, but for paragraph 1 of this Resolution, have been entitled to, an amount equal to the excess shall be paid by him to the trustee or other person to whom the income is payable...."

It is only if any question arises as to the amount of any payment, or any apportionment to be made under that paragraph, that the special commissioner is appointed there as arbitrator. It is a cheap and convenient tribunal to settle cases between these two parties, the settlor and the trustee. It may often, possibly, be in the one family.

Mr. Dillon

I have an instinctive dislike to the appointment by statute of arbitrators without making provision for appeal to a higher judicial tribunal. There is a marked tendency on the part of the Revenue Commissioners to set aside the courts on every available occasion, and to draw into their own hands the right ultimately to determine matters arising out of their procedure, which, I think, is a highly objectionable departure. The fact is, that when we come to examine a highly complex Resolution of this kind, it is not always easy to elucidate at first the exact significance of these terms. I understand that this question will arise on the Finance Bill, and that there will be an opportunity to go into it, and that an amendment may be moved if desirable, but, between this and consideration of the Finance Bill, I would be grateful if the Minister would examine this point which occurs to me. Under paragraph 9, the word "child" includes "step-child," an adopted child, and an illegitimate child. Is it desirable to include the illegitimate child, because one could imagine that good settlement ought to be made, that the strongest pressure will be brought to bear to make provision for a child in that position, and that it ought not to be made the subject of the penalties envisaged here. It is not a matter to be determined immediately, but it is worthy of consideration. Our object is to prevent fraudulent settlements for the purpose of avoiding the proper incidence of income-tax on individual property. It is not to discourage a genuine settlement which, both from the point of view of public policy and domestic concern would be desirable. The number of cases that would arise is infinitesimal. I do not press the point now, but I mention it as one that deserves reflection.

Mr. MacDermot

At first sight it seems to me that the suggestion of Deputy Dillon would be rather contrary to public policy. A man who is living with a woman who is not his wife is already given a very great advantage under the income-tax laws over a man legally married and if, in the face of that, you are going to say that a man with six lawful children is to be excluded from the benefit of any settlement like this while a man with six illegitimate children can make such an arrangement, it seems to me you are endowing a mode of life that the State would not wish to endow.

Question put and agreed to.