I move:—
That the Dáil agree with the Committee in Resolution No. 1.
Financial Resolutions—Report Stage. - Resolution No. 1—Income-tax and Surtax.
There are a few matters that I want to mention on this Resolution. This is the first Resolution imposing taxation in this financial year. I want to direct the Minister's attention to a practice that has grown up and that has merited observations by the Comptroller and Auditor-General in the Appropriation Accounts for 1935-36, which were ordered by Dáil Eireann to be printed on the 3rd February of this year. In that year taxation was imposed to meet a gross estimated expenditure of £30,577,013. At the end of the year it was discovered that the Departments, together, surrendered to the Exchequer £2,288,572 1s. 2d. The only justification that the Minister has for imposing any taxation is that the Estimates require that certain taxation shall be struck. The justification for taxation is brought before this House in the form of highly desirable expenditure, and inflated sums are provided, for instance, for the building of schools. We are asked, if you want to reduce taxation, "show the head under which you propose to reduce it?" We must increase the taxes in order to meet the Estimates, but when you see the financial year worked out, you are told quite blandly in the Appropriation Accounts that it was impossible to spend the money for which the Estimates were made, so that money for relief works and for social services is returned to the Treasury.
May I ask the Deputy on what official publication he bases the statement which he is now making?
On the Appropriation Accounts for 1935-36, which were ordered by Dáil Eireann to be printed on the 3rd February, 1937.
And, presumably, now referred to the Public Accounts Committee for consideration.
Certainly, but that surely does not exclude their being dealt with in this House.
I am afraid it does.
In so far as one does not enter into the question of any discussion or inquiry that may have arisen at the Public Accounts Committee, it is perfectly open to any Deputy to discuss a public document of this kind in the House.
On a point of order, Resolution No. 11 is the General Resolution which deals with the Budget proposals. I submit that if it were in order to discuss this question at all, it could only be in order to discuss it in the form in which the Deputy is now endeavouring to do on General Resolution No. 11.
The House is dealing with the Report Stage of the Financial Resolutions. A discussion on any one of these Resolutions must be relevant to and confined to the matter thereof. I do not agree with the suggestion made by the Minister that the matter referred to by the Deputy could be raised on Resolution No. 11. There is no precedent for debating the General Resolution on the Report Stage. The Second Stage of the Finance Bill will afford ample opportunity for the raising of general questions.
The point I was making was that the point should have been discussed on Resolution No. 11.
The Dáil is now reviewing what the Dáil, sitting in Committee, did, and surely the Deputy is entitled to refer, in effect, to any part of the Budget, and is entitled to quote the Appropriation Accounts for the preceding year in support of his point. I submit that is perfectly in order.
I differ radically with the Deputy. The Financial Resolutions are now being reported. The first Resolution deals with income-tax and surtax, and the debate must be confined to those two taxes. Similarly with the other Resolutions.
I do not think, Sir, that I will have any difficulty in bringing my observations well within the scope of your ruling. The Chair will agree with me that if the Minister desires to have the income-tax and surtax Resolution reported to the House, he must satisfy the House that the revenue to be raised by this Resolution is necessary. If I can demonstrate to the satisfaction of the House that the estimated revenue is grossly in excess of what the Minister, in fact, proposes to spend——
That matter might have been debated on Resolution No. 11 in Committee. The Deputy surely sees that his line of argument would be equally relevant on any one of the ten Resolutions, and lead to a general debate on each.
I do not propose to tax the patience of the Chair by repeated points of order. The Second Stage of the Finance Bill will afford an opportunity for discussing the matter more fully. I do want to raise this net point, however, that the income-tax Resolution is a result of the Horse-Hen Pact into which we recently entered with Great Britain. We took the tax off horses and put it on hens. Now, that was a very left-handed kind of operation.
Is it contended that we charge horses with income-tax?
I was going to refer to income-tax on horses. One justification can be advanced for the Horse-Hen Pact, and that is that in order to save a very great industry, considerable sacrifices ought to be made by all sections of the community. Even if the poor hen had to shoulder the horse's burden—perhaps the Minister will take further steps to confer so general a benefit on the community—the hen could be reasonably asked to square her shoulders and face the music.
The result of burdening the hen has been to open the market for horses and that should stimulate horse breeding in this country. But one of the most important branches of horse breeding is the maintenance of stallions of proved worth in this country. This peculiar situation has arisen. In Great Britain, a judgment of the House of Lords in a revenue case has decided that a person having a stallion and receiving very large fees in respect of its services can elect to have his stud farm assessed for the purpose of income-tax on a valuation basis. Where the revenues from the stud fees are very considerable, as they sometimes are where a very valuable sire is concerned, this concession is of immense value to the stallion owner. In this country, the law, as at present interpreted by the courts, entitles the Revenue Commissioners to claim that income-tax will be paid upon receipts in respect of stallion fees and not on the valuation of the farm where the stallion is kept. Unless a concession similar to that at present enjoyed by owners in Great Britain is made available here, we are not going to get the full value of the Horse-Hen Agreement, because the men who own immensely valuable stallions and who would be ordinarily attracted to bring them back to this country as the result of the removal of the tariff will be deterred from doing so if, by domiciling themselves here, they make themselves liable to income-tax on their full receipts in respect of service fees.
At first glance it might appear that there was an unanswerable argument against giving the relief I suggest to a body of men who are ordinarily pretty well off. They are big property owners and they own these immensely valuable animals, and one would say that there are many more deserving persons to be relieved, if there is to be a reduction in taxation, than these individuals. But, when you come to examine the question more closely, you find that if you do not provide this relief for that type of person, that type of person will not carry on that business here at all, and the result of that will be that you will destroy in this country that branch of horse breeding which gives more valuable employment than any other department of horse breeding. Further, you may induce owners here who possess these valuable stallions to remove them to Great Britain, with the result that when a horse wins a classic race, instead of having a commentary in all the sporting papers of the world that such and such a great race was won by an Irish-bred horse, reference will be made to the sire as being a horse which is at present in England. The advertising value which is lost as a result of that is of very material consequence to the horse-breeding industry in this country.
The thing I most seriously apprehend in this connection is that the Minister for Finance is going to stick his heels in the ground and simply stick out his chin and say: "The whole thing is nonsense; I will not move an inch." I know that the Revenue Commissioners are very much opposed to this concession. I know that, from the revenue point of view, there is probably comparatively little to be said for it; but, from the business point of view there is everything to be said. If the Exchequer stands out for the few thousand pounds it can hope to collect under the law as it is at present interpreted, the country will be immensely the loser. Therefore, I do very strongly urge on the Minister not to stick his heels in the ground with regard to this matter. The amount of money involved is very small. I think every interested party will subscribe to the representations I am now making; I think everybody who understands the business will subscribe to it; and I do urge most strongly on the Minister in this case to weigh against the expert advice that he gets from his revenue division the representations of ordinary business men in the country and persons who, from the nature of their calling, must take a broader view of this question than the Revenue Commissioners can be expected to take.
It has been suggested that, though the House of Lords or the Court of Appeal in England have, by their decision, made the revenue law what it is to-day in England, there is nothing to prevent the British House of Commons altering the law and bringing it into conformity with the practice here. But it is noteworthy that the Financial Resolutions have been introduced into the British House of Commons and there is no suggestion there that any such alteration in the law was going to be made. If it were intended to alter the law, some steps would have been taken in this Budget, where precautions are being taken against bond washing and a number of other minor artifices which are resorted to for the purpose of defrauding the revenue in Great Britain. Therefore, we are faced with a situation whether we are to make permament this disparity between the revenue practice here and in Great Britain. It will be an immense disaster for the horse-breeding industry if we do make it and, in my opinion, will throw away 70 per cent. of the value that the country may reasonably expect to derive from removing the tariff burdens from the broad shoulders of the horse and laying them upon the slender shanks of the barnyard fowl.
The point which Deputy Dillon has made has already been argued at great length not merely here on previous occasions, but in the Second House, when we had such an institution under our Constitution. All I can say is that there is nothing in the point. The law here is what it has always been interpreted to be by our courts and, as the courts interpret our law, so is our law—we have not changed it. It has been that way for the last 15 or 16 years. By a decision of the House of Lords what was the obvious intention of the legislation, I believe, has been defeated elsewhere and a contrary interpretation has been placed on the law. So far as our Supreme Court is concerned, the law has been interpreted as the Revenue Commissioners now administer it.
No sound case can be advanced, either on the ground of equity or expediency, for the concession for which Deputy Dillon is asking. The net effect, I am aware, would be to take some thousands of pounds out of the Exchequer and to place them in the pockets of a comparatively small number of individuals in this country, and to do that at the expense of the general body of the community. I am satisfied that the horse-breeding industry has not suffered any serious disadvantage by reason of the fact that a person who owns a stallion is taxed upon the actual income which that stallion brings him in, instead of upon the mere nominal value of the land upon which the stallion stands, which, in fact, may not belong to the stallion owner at all. If the horse-breeding industry has suffered during the last three or four years, it has not been by reason of the fact that the owners of stallions are chargeable for income-tax, but owing to the fact that tariffs have been imposed upon the import of horses into Great Britain from Ireland. These tariffs having been removed, with the removal of these tariffs any disadvantage of real practical effect which the horse-breeding industry was labouring under in this country will have gone also.
Is there not a danger of these horses being taken over to England?
Question put and agreed to.