Dáil Éireann díospóireacht -
Thursday, 10 Jun 1948

Vol. 111 No. 6

Finance Bill, 1948—Committee.

Question proposed: "That Section 1 stand part of the Bill."

Mr. MacEntee

On the section, it is sometimes salutary to browse among the Dáil reports and consider the thoughts and declarations of the great men who preceded us on these benches. This section is intended to give effect to the Resolution which was adopted by the House, against the opposition of this Party, by which the standard rate of income-tax which, until the 6th day of April of this year, stood at 6/6 in the £, is to be increased to 7/-. Last year, the Government then in office, a Government which has been characterised as being disregardful of the interests of the general taxpayer, proposed that the income-tax for that year should be at the rate of 6/6 in the £. That motion was duly adopted by the Dáil and was embodied in the Finance Bill for the year. That became the law and was the law until the Minister and the House faulted it.

It will be interesting to recall what the present Minister for Education, then the Leader of the Fine Gael Opposition, said about the proposal to maintain income-tax at the rate of 6/6 in the £. I do not propose to weary the House by reading the whole of his pronouncement on that proposal, but I think I might repeat some passages from it. They sound very ironical and somewhat cynical in the light of what has transpired since then. Deputy Mulcahy, speaking on Resolution No. 1 in this House on the 7th May, 1947—the reference is Dáil Debates, Volume 105, column 2262— said:—

"I wondered for a moment—just for a moment—at the applause that the Minister's statement received from the Government Benches, because the Minister proposes to put his hand to the extent of £5,374,000 deeper into the taxpayers' pockets during the coming year than he did last year..

"At the Social and Statistical Society the other night a Dublin citizen read a paper on general Government expenditure and there are some interesting figures to be taken out of it at this moment. He disclosed that the expenditure of the Department of Agriculture in 1929-30 was £430,000; in 1939-40 it was £865,000, and in 1945-46 it was £985,000."

This year, of course, it is even more than that, but I did not notice in what the Minister said any proposal to reduce the provision which was being made for the Department of Agriculture any more than I noticed it in what the Minister for Local Government said in introducing the Estimate for his Department. I did not notice any proposal to make any reduction in the £1,139,950 which is being asked for the Department of Local Government. If the proposal to fix the standard rate of income-tax at 6/6 in the £ was opposed on the grounds of extravagance last year, what are we to say to the proposal to increase the 6/6 to 7/- in this year without giving, so far as we can see, the public any better value for it?

Now, I know that if our proposal to stabilise the cost of living by subsidising the essential foodstuffs of the people had been adopted, it would have been necessary for us to increase in this year the standard rate of tax to 7/- in the £ just as it would have been necessary for us to maintain the additional duties on beer, spirits, tobacco and entertainments imposed under the Supplementary Budget. But these additional taxes were being imposed for a definite purpose, let me repeat it again, to subsidise the essential foodstuffs of the people, and in order to stabilise the cost of living and enable the people to provide the necessaries of life for themselves and their families. That policy has been abandoned. We now find a Government in office which, so far from making provision to maintain the subsidies, is taking steps to reduce them. We find that the Minister has already proposed to discontinue the subsidy for margarine and oatmeal and farmer's butter, I think, and is now, by permitting the price of bread to be raised, going to reduce the subsidy in respect of bread. The original proposals of the Government, therefore, in relation to the cost of living having been abandoned, there is no justification in my view for maintaining this tax which presses so heavily on a very large section of the community.

If the policy of maintaining the cost of living steady has gone by the board, and it is undeniable that it has, then there is no justification for increasing the standard rate of tax in this year. This proposal is not only not capable of being justified, but it is highly inequitable and anti-social. I suppose that the number of people in the country who will be called upon to make returns in respect of income-tax would be between 130,000 and 140,000, and of those a comparatively small number, I think about 3,800 or 4,000, are people who are assessable to surtax, that is people whose incomes range above £1,500 a year. Their aggregate income might be taken to be between, I think, £11,000,000 and £12,000,000. Of the others—the number may be 135,000 or 125,000 and in a matter of this sort it is difficult to be accurate within 5,000 or 10,000—but if we take the remainder to be 125,000 income-tax payers, they have actually an income of about £60,000,000 between them, so we have 125,000 people whose aggregate income, before it is subject to any deductions or allowances in respect of earned income, personal allowances, or children's allowances, amounts to about £60,000,000, or an average of roughly £470 or £480 per income-tax payer.

These people in general are married people, with family responsibilities. The mode of life of the vast majority of them must be very thrifty and frugal. They are people who have to maintain a certain position, who have to try to see that they and their children are well clad and who have to make certain provision for the education of their children. They are expected to do that because perhaps of their employment or the occupation they follow. They are subject therefore to greater necessary living expenses in some respects than a great many people who do not come within the net of the Revenue Commissioners in respect of income-tax. These people, if they have any regard for their family responsibilities, must naturally live within a very narrow and restricted budget. Many of them have to live within a budget so narrow and so restricted that they cannot afford either to drink or to smoke. Many of them, the heads of families and fathers of families, are in the position that they must stint themselves in order to provide for their children even the same sort of meagre opportunity in life as they themselves got. Even many of those of them who are not married have to live thriftily also, and, because they want to contribute adequately to the family income and perhaps to maintain aged parents and other dependents, cannot frequent the public-house and cannot smoke extensively or expensively, as do many of the people who do not come within the income class at all.

Yet, what do we find? We find this thrifty element in the community are to be victimised, and victimised for one reason only. The reason it is necessary to increase the standard rate of income-tax this year is that the Minister incontinently reduced other taxes —taxes upon entertainment, upon tobacco and upon beer. That is the position which has been created. Because the Party opposite entered into commitments with the licensed trade in the City of Dublin in regard to the beer and spirit duties, the thrifty income-tax payer, the man with an average of about £480 a year, who does not smoke and does not drink is to pay an additional 6d. in the £ this year. I say that is unjust and anti-social. This income-tax class, this thrifty middle-class, which ought to be fostered and encouraged, is being penalised in order to make drink cheaper for the tippler and the toper. I cannot think that that can be justified, but that is the reason why it is necessary for us in this year to increase the standard rate of tax from 6/6 to 7/.

Let me repeat—because I do not want to be misrepresented in this matter—if our policy of subsidising essential foodstuffs for the people had been persisted in, if our policy of trying to develop the natural resources of the country had not been jettisoned, if the things we thought it was essential in the national interest to do were being done, if the general scheme of taxation which we had formulated were being retained, we should have no objection to increasing the rate of tax, because we think that the community as a whole would have benefited from the policy we were pursuing; but when that policy has been abandoned, when the cost of living is to be permitted to rise, when civil aviation is being crippled, when mineral exploration is being abandoned and when the rate of interest to local authorities is being increased, then we can see no justification for increasing this tax. It is increased in order, as I have said, to make drink cheaper for those who are able to afford or who think they can afford it. It is being increased in order to reduce the duty on tobacco and, therefore, the nominal price of cigarettes in the Twenty-Six Counties.

I put it in another way—it is being increased in order to subsidise the smuggling of cigarettes and tobacco from the Twenty-Six Counties into the Six Counties, because, if the tobacco duty had been retained at what was a reasonable rate, having regard to conditions elsewhere, it would not be necessary to increase the standard rate of income-tax. It would have been quite possible for the State to carry on its services in the present restricted and limited way which the Minister for Finance proposes without increasing the rate of tax. Not only would it have been possible to do that, but there would have been a very large sum left over to continue the food subsidies.

The Minister has abandoned food subsidies. He has secured the abandonment of every constructive development we had in contemplation. He has made no additional provision for housing or any other public service. He has even indulged in petty economies which should make him blush for the meanness of them. Yet, at the same time, he asks that the frugal lower-salaried middle class who constitute the bulk of the income-tax payers and who no doubt vote Labour and Fine Gael just as they vote Fianna Fáil, shall be penalised in order that he may fulfil the undertaking which he gave to the licensed trade in Dublin during the period of the last general election. For that reason, we intend to oppose this section.

Mr. T.F. O'Higgins

I have been in the House only a very short time, but I seldom heard a more hypocritical speech than that which Deputy MacEntee has delivered. He objects to the income-tax rate proposed in this Bill. It is the rate which was proposed by his Government last year, and, faced with that, he says:—

"We suggested this rate for a certain purpose, because we intended to subsidise necessary articles of diet and thereby give relief to the people."

He went on from that to deal with some extraordinary class of people who have a wage income of something like £480, who neither drink nor smoke because they cannot afford it, who are living on the brink of starvation, while the rich workers and wage earners disport themselves in the public-houses and smoke cigarettes and tobacco.

This unfortunate section, living under these difficult circumstances, must remain at home and have not a single pleasure for themselves. Is Deputy MacEntee serious when he makes his speech along these lines? I do not know Deputy MacEntee's source of information, but I do know that under modern conditions in this country there are very few people, indeed, no matter how low their income may be—even if it is only £1 a week—who do not at least indulge in the simple pleasure of smoking 20 cigarettes a week, and that is low enough. If the House examines the particular measure proposed it will be clear to members that the extra 6d. in the £ in income-tax means an additional burden on the man with an income of £480 a year of something around £4 10s. a year. If we take that man and assume that he has such an extraordinary wish to keep his money entirely for himself as not to spend it on beer or anything like that, but that he indulges himself in smoking one packet of cigarettes a week we will find that he would be charged, even at the present rate, something between £4 and £5 a year. The relief introduced by the Budget of 4d. off the packet of cigarettes does bring him a measure of relief which, if he indulges himself in three or four packets a week, is almost the same as this particular imposition of 6d. in income-tax. I think that opposition to this tax might well come from any Party in this House other than that from which it has come. The Party that set the whole line of 7/- income-tax in the £ is the Party which is setting the opposition. It was part of their general scheme of taxation, and in that I agree with Deputy MacEntee, but I think there is no justification for his present opposition.

The burden which it imposes on the salary-earners of the class he mentions is lightened by reliefs already given to these people by this Government— reliefs in reducing taxation on cigarettes and beer. For that reason I think that the House should disregard the opposition expressed by Deputy MacEntee. We should disregard the reasons he has given us for his opposition and we should doubt considerably the motives that have prompted him to speak.

Mr. Derrig

I should like to support the statement of Deputy MacEntee. In doing so, many I remind the Minister that nobody would be more eloquent than he himself and his colleagues in the Fine Gael Party would be were they in our position on the front Opposition benches dealing with the proposal to increase income-tax. They would have emphasised to us, with an eloquence that I would not attempt, the unfortunate state of the white-collar workers in the City of Dublin. Anyone who has had Ministerial responsibilities and who has come into touch with the civil servants or the teachers, as I have ——

Captain Cowan

There is no doubt about that.

Mr. Derrig

—— must realise that the white-collar workers are in a very much weaker position not alone economically and financially than some of the other sections of the community. They are also in a comparatively weak position to enforce their demands upon the community as compared with some of the other sections who, as Deputy MacEntee said, have not quite the same responsibilities. They have not to maintain the same standards and their demands—expressed in the concessions which the Minister was able to make to them of reductions in regard to beer, cigarettes and so forth —would seem to indicate that the policy of stabilising wages and of trying to keep the cost of living at a certain minimum figure did not affect them to the extent that we, when in office, considered was the case. If it had affected them to the extent that Deputy Norton, now Tánaiste, second highest member of the Government and representative of Labour as well as being Minister for Social Welfare, impressed upon us on many an occasion—if the pressure of the cost of living was so great and was pressing on the ordinary household—it is quite clear that the position would have been accepted if there had been any real sincerity in the protestations against the taxation that we had been compelled to impose. If there had been any real sincerity behind the protestations it would have been accepted that the workers' budget in regard to food— the breakfast table, the dinner table and the tea table for himself and his family—was far more necessary and more important and fundamental in his budget than the commodities upon which the Minister gave remission. The classes which Deputy MacEntee speaks for are not in a position to enforce their demands upon the community.

The Minister for Finance said in one of his statements upon his present financial proposals that he had in mind trying to recover to some extent the position which these white-collar workers occupied before the war. I doubt very much if it is within his power or within the power of any Minister or Administration to put that class into the position they were in before the war. In saying that I am not going on the argument that it is not, in fact, possible to give them or any other class of the community full compensation for the increased cost of living since before the war. What I do say, however, is that the tendency that has set in in Great Britain, the repercussions of which we are feeling here and of which we are going to feel more in the future, is that the entire redistribution of the national income is being changed in a way that we are not aware of. It is being changed in a way that we do not appreciate, and in a way that we cannot realise its consequences, in favour of those classes that are organised in a particular way. It is being changed in favour of those classes that are carrying on an essential service; that are in a position to stop this service if they do not get their demands and that are, therefore, in a position to extract the maximum that their organisation and their abilities enable them to extract from the national pool. The classes that Deputy MacEntee has in mind are not in that position. They are liable to be forgotten, but they are an important stabilising influence in the community and they contribute greatly in preserving the framework of our society. Their education, their ideas, their general background, make them an important stabilising influence. Every Government and every Administration ought to do what it can to strengthen that particular section of the community. In the way in which the world is at present and in the movements with which we are faced, it is still more necessary that their position should be strengthened.

I feel that we are in duty bound to oppose the Minister's proposal to increase the income-tax upon this particular section of the community, having regard to the fact that, when we made the proposal, it was part of a general scheme of taxation which was bound up with a policy for the maintenance of the cost of living at the figure at which it obtained last May and that any increase beyond that would, as far as possible, be set at naught by action of the Government in increasing the subsidies, if necessary, or taking such other action as was necessary to prevent the cost of living going higher. Everyone knows that the particular classes that are suffering, and to which we have made reference from this side in connection with this section, have received no reduction in the cost of living. Deputy O'Higgins must be a very innocent man if he thinks that there are not considerable numbers of persons in receipt of regular salaries or incomes who have nothing else but their monthly cheque. Their taxation is deducted at the source; they are not in a position to manipulate their accounts or to have a double set of books, one for the Revenue Commissioners and one for their private use; they have to pay the maximum that the State imposes upon them, in the most direct and most inconvenient manner. These things have been emphasised here in debates again and again by the Taoiseach and, I think, by the Minister for Finance himself, and by others who are at least as well acquainted with the position as we are, if not more so. They are in touch with the professional classes, with the administrative classes and the people on small incomes here in the City of Dublin, just as well as we are. These people have had additional expense for education, they have had additional expenses in regard to the public services, as the local rates have gone up, they have additional expenses in regard to household affairs, as every demand that they make for skilled assistance in any way has gone up greatly, and there is no reduction in the cost of living, no reduction in the cost of the necessities which these people are constrained to confine themselves to if they are not going to find themselves in serious financial difficulty.

Sir John Esmonde

Deputy MacEntee has painted a very sorrowful picture of the head of a household in receipt of an income of £480 a year. He has taken that person as being representative of the individual who will be worst hit by his alteration in the rate of income-tax and he has based his entire argument upon that hypothetical case. I wonder if Deputy MacEntee has examined the real result of the income-tax charges upon an income of £480 a year. In the short time at my disposal here I have worked out the exact difference in tax which that person would have to pay, assuming, as Deputy MacEntee assumed for the purpose of his argument here, that the individual is the head of a household, that he is married and has one child subject to relief. At that moderate estimate of the reliefs to which he would be entitled, it might be of interest to the House to know that the additional taxation imposed upon the average man whose battle is now being fought by the Opposition is the sum of 1s. 1½d. per week. I think that the head of that household is much more concerned in bringing down the cost of living and the various items which he has to pay for week after week. If, as a result of this Budget, the cost of living can be brought down —as I believe it will—that particular individual will regard the payment of 1s. 1½d. per week extra as a very good investment, indeed.

Mr. Connolly

It was extremely interesting to hear Deputy MacEntee as the champion of the middle-class. He appears in so many rôles that it is difficult to follow him at times, but in this new rôle he found himself in such grave difficulties that he had to stoop to arguments which could not recommend themselves to this House. He defended the opposition to the increase in income-tax by an argument which, on the face of it, was very specious. In order to buttress up that argument, he had to bring in very many factors and at each one he strained more and more, until he came to the point that the relief in regard to the imposition of taxation on cigarettes, amounting to 4d. a packet, was designed by the Minister for Finance to encourage the smuggling of cigarettes from this country.

Mr. MacEntee

I must protest against that. I did not say "designed". The Minister often does foolish things, without intending to do them.

Mr. Connolly

The Deputy practically insinuated that the sole purpose behind the reduction in the taxation was that it would improve the trade in smuggling cigarettes from this country to the North.

Mr. MacEntee

It has done that—and the Deputy knows that too, if he ever visits his constituency.

Mr. Connolly

I am perfectly well aware that there is a service in this country for the prevention of smuggling, that there was a difference of incidence in quite a number of commodities before this Government came into office and that these differences undoubtedly promoted the trade of smuggling from my constituency to the North, but the same service as now exists dealt with it as capably then as it does now. That shows how difficult it is for Deputy MacEntee to find some real basis for his opposition to the increase in taxation. The Labour Party endorses such an increase in taxation. There is no validity in the argument that this would bear heavily upon the white collar brigade, many of whom support the Labour Party and other Parties in this House, as Deputy MacEntee has said. We are defending their interests because the Minister for Finance has made it perfectly plain that there is a necessity for this increase in taxation.

The argument, as advanced by Deputy MacEntee, is that there is a mass of 125,000 people who are being taxed, apart from those who are assessable for surtax; he contends that these 125,000 people will be reduced as far as their incomes are concerned by the extra sixpence in the £. In order seriously to consider that argument, Deputy MacEntee should have told the House some other facts and given the House some further figures in connection with the main figure that he quoted. He should have told us how many of these 125,000 people pay at the full rate; he should not have left it so that readers of the Irish Press to-morrow would get the impression that these 125,000 people are each going to pay £12 per year extra by reason of the increased tax; he should have told us, as Deputy Sir John Esmonde did, that there are exemptions for earned income, that there are reductions in the assessing of the tax, that there are rebates for children and dependents and that there are a number of other factors which considerably reduce the actual impact of the tax on these 125,000 people. Very few of these would pay anything like that sum on the basis of our present taxation.

As against that, Deputy MacEntee should also have told us what number of these 125,000 people neither smokes nor drinks. That is germane to his argument. Yet he adduced no facts or figures from it. He should have taken a Gallup poll in order to ascertain roughly what percentage of these 125,000 taxpayers smoke, how much they smoke and how much of a reduction is made in their smoking and how much that reduction eases their family burden from the financial point of view. I am sure he will agree with me that the majority of the white collar brigade are men of steady habits. They are men who require the solace of tobacco at a regular rate; they may smoke 20 cigarettes a day. No matter how cheap cigarettes become it is unlikely that they will exceed that 20 per day; no matter how dear their cigarettes become it is unlikely that they will reduce that 20 per day. He should, therefore, have made some attempt to estimate the number of those who would obtain relief on their regular quota of cigarettes. He should have extended his inquiries then to ascertain the number of those who take their steady pint per day and who look upon that pint either as a form of food or as an appurtenance to their recreation and as something to which they are entitled. He should then have worked out the saving effected by these by the reduction in taxation. In that way, he would have achieved a more correct balance. He might have then given us a serious argument. Even with the extra sixpence in income-tax these white collar workers have a relief in their family budgets and that relief they are able to devote to the purchase of essentials for their wives and children. In that aspect, therefore, the family budget is now in a better position than it would have been had this Government not come into office.

That is the reason why, without going into more detail or further argument, the Labour Party supports the increase in income-tax quite apart from the principle held by the Labour Party that the levying of income-tax is primarily a matter of the redistribution of income and that the level of it should be as high as possible without interfering with the natural economics of the country in order to provide the maximum amount of social benefits for distribution over the greatest number of the population.

Mr. McGilligan

Deputy MacEntee opened this discussion by calling attention to some remarks of Deputy General Mulcahy last year objecting to an increase in income-tax at a time when increased taxation as a whole had risen by £5,000,000. That is not the situation at this moment. The analogy to that extent fails. The Deputy has also said that whatever taxation was put on by the last Government in its last year of office had as its main objective the granting of subsidies on essential commodities and that that also has been abandoned. There never was a greater travesty of fact than that. The subsidies were on when I first came to examine the financial accounts. Subsidies on foodstuffs were running at about £15,000,000 odd a year. They are still at the £15,000,000 point. The Deputy challenges that income-tax is an unsocial and iniquitous tax.

Mr. MacEntee

I did not say that.

Mr. McGilligan

The whole tenor of the argument was that it is unsocial.

Mr. MacEntee

I said this increase was.

Mr. McGilligan

This increase was. This increase was announced by the Deputy's colleague in October last. It was announced by him——

Mr. MacEntee

As part of a programme.

Mr. McGilligan

As part of a programme. When I left Government previously in 1932 income-tax was at 3/6 in the £. The first effort that the Deputy made in his first Budget was to put on three sixpences at one go. Although a little bit amazed at his own effort, after that he, and his successors after him, got to the 7/- in the £ mark before they left office. Income-tax had been doubled. I do not know at what point 6d. becomes unsocial and iniquitous. Is it each sixpence? If so, the Party that has been dislodged from Government managed to put on seven of such sixpences in their time.

The Deputy is very eloquent about the white collar brigade and the middle class. There is no doubt that, while society generally in this country has been distorted by the activities of Fianna Fáil when they were operating as a Government, no class suffered more at their hands than the white collar people. I agree with one remark made by Deputy Derrig, that it is hardly likely that this generation or the next generation will see the middle-class people put again at the point they once occupied and to which their talents entitle them in any moderate society. It is rather absurd for the Deputy who, in his 15 years of endeavour, brought about that situation to expect us, his successors, to remake and refashion the whole picture in a bare three months. Nobody has ever asserted that it would be possible to undo the harm of 16 years in three months. All that can be done is to show the tendency towards recovery and to take some steps towards recovery. Some of those steps have been taken already.

In that context the Deputy spoke of the narrow and restricted budget of the family man. He pictured a man who could not pay his debts and who had to save on the education of his children. That is apparently developing now in the mind of the Deputy since he got freedom to think as a member of the Opposition. For years he was told that that was the situation. For years in opposition we pointed out not merely the sort of fact he is alleging now in regard to people having to save on such important matters as the education they propose for their children, but we even showed how the health of the community was breaking down and certain diseases were having a serious effect on the people because of the way their standard of life had been degraded and because of the hardships they had been made suffer since 1939 in a very definite way, and to some degree prior to that period.

The Deputy introduced as an example the head of a family with £480. One would have expected from a Deputy who previously had been Minister for Finance some acquaintance with the income-tax code and its incidence. A married man with three children does not pay any income-tax until he reaches the level of £530 a year. If the head of a family with £480 happened to be a married man with three children he would not have to meet any obligation in respect of income-tax. The income-tax charges of a married man with two children would be increased by 1/- in the year. He would have to meet an increase of about a farthing a week. If he had one child he would have to pay income-tax and the increase would be about 16/- or so.

When one puts that against the benefits that people have had through a remission of taxation amounting to £6,000,000, arising out of such things as beer and tobacco, the charge is not very considerable. The Deputy, however, says that if the beer tax, the tobacco tax and the entertainments tax had been allowed to remain there would be no necessity for the sixpence. It is rather peculiar that the Budget which announced the imposition of the increased beer and tobacco and entertainments duty also announced the sixpence. The Minister for Finance who imposed these extra obligations on those who smoked or drank or went to picture-houses also forecast the imposition of this sixpence.

The Deputy had the usual argument that the remission of the beer duties which was accomplished was largely due to the publicans. Those duties were remitted because the people who form the Government and the supporters who helped them were responsive to public opinion. The Deputies who support the Government found as they went through their constituencies right through the country—and they are a fairly representative body—a public opinion that was antagonistic to those duties and it was in response to that appeal that these duties were taken off. People may have the gibe that publicans were met and this could be phrased as a commitment to publicans, but I counter that with the argument that certain other people met big business and big business flaunted itself in the newspapers during the election as being in favour of one Party. That Party sold itself unavailingly to big business. As Deputies will understand when we come to a later amendment, Deputy MacEntee is still apparently under the thrall of big business, because he has an amendment to relieve big business to a considerable extent.

Finally, the Deputy came to the point to which Deputy O'Higgins adverted, but Deputy O'Higgins omitted one thing which ought to be put into the full swing of Deputy MacEntee's argument. He objects to the removal of the extra taxes on beer, stout and tobacco and apparently has before his mind the picture of the £480 family man who neither smokes nor drinks or never goes to a picture-house. I was interested to note that the Deputy brought in aviation. Apparently we have the thought of the family man with £480 who cannot drink, smoke or go to the pictures but who can take an odd trip to America on the Aerlinte service. He is a peculiar type if he is saving for that particular pleasure.

Mr. MacEntee

That is not worthy of the Minister. Sometimes he is funny, but he is absurd now.

Mr. McGilligan

I thought the Deputy's argument absurd and it is his absurdities I am trying to bring out. He referred to what he called the sacrifice of aviation. The only aviation that I know was sacrified is the transatlantic service.

Mr. MacEntee

Sabotaged.

Mr. McGilligan

That is not a term that I would use. We sacrificed a non-paying service which never showed any likelihood of paying. That was what we cut out.

Mr. MacEntee

Non-paying, like the Shannon scheme from 1928 to 1933.

Mr. McGilligan

The cutting out of that air service was a definite economy. The analogy of the Shannon scheme scarcely applies, because the reference is made to a period when that great scheme was not paying simply because the machinery was not in operation.

Mr. MacEntee

And Aerlinte was not in operation.

Mr. McGilligan

The difference between the two schemes was that, first of all, a great German firm and, secondly, three European experts agreed that the Shannon scheme would pay its way in 1932. It did so.

Mr. MacEntee

It did not.

Mr. McGilligan

It did, in 1932.

Mr. MacEntee

No, not until after 1933 did it begin to pay interest.

Mr. McGilligan

It was to be a remunerative scheme and it is a remunerative scheme. It has been classified by Minister after Minister speaking from these benches as possibly one of the few fully remunerative schemes the country has adopted. Any comparison made between that and Aerlinte, of which nobody was able to say that he ever thought it likely to pay, is futile.

An Ceann Comhairle

Would the Minister or the Deputy relate this to income-tax?

Mr. McGilligan

I am amazed I allowed myself to get so far away from income-tax. The Deputy took me away from it and it is an attractive road down which to pursue the Deputy.

An Ceann Comhairle

The Minister should not allow himself to be led so easily.

Mr. McGilligan

Deputy Derrig addressed the House and his theme was sincerity. It is very difficult to listen patiently to Deputy Derrig talking about sincerity, but sincerity underlined as Deputy Derrig underlined it by an appeal as to what was happening to the teachers is certainly going beyond the extremity of brazenness that even Deputy MacEntee can go to. Deputy Derrig wound up with the statement that middle class people are the people who are nearly all, according to him, of the type who get a monthly cheque from which income-tax is deducted at the source and he makes an amazing comparison between them and other people whom he does not mention who keep two sets of books, one showing true profits and the other for the Revenue Commissioners. I am rather afraid that Deputy Derrig was hinting at business people and Deputy MacEntee ought to warn him that business people are very much favoured by a Deputy who is a colleague of Deputy Derrig.

Question put.

The Committee divided: Tá, 70; Níl, 53.

Tá

• Blowick, Joseph.
• Brennan, Joseph P.
• Browne, Noel C.
• Browne, Patrick.
• Byrne, Alfred.
• Byrne, Alfred Patrick.
• Coburn, James.
• Cogan, Patrick.
• Collins, Seán.
• Commons, Bernard.
• Connolly, Roderick J.
• Corish, Brendan.
• Cosgrave, Liam.
• Costello, John A.
• Cowan, Peadar.
• Crotty, Patrick J.
• Davin, William.
• Desmond, Daniel.
• Dillon, James M.
• Dockrell, Maurice E.
• Donnellan, Michael.
• Doyle, Peadar S.
• Dunne, Seán.
• Esmonde, Sir John L.
• Fagan, Charles.
• Finucane, Patrick.
• Fitzpatrick, Michael.
• Flanagan, Oliver J.
• Flynn, John.
• Giles, Patrick.
• Halliden, Patrick J.
• Hogan, Patrick.
• Hughes, Joseph.
• Keane, Seán.
• Keyes, Michael.
• Kinane, Patrick.
• Kyne, Thomas A.
• Larkin, James.
• Lehane, Con.
• Lehane, Patrick D.
• McAuliffe, Patrick.
• MacBride, Seán.
• MacEoin, Seán.
• McFadden, Michael Og.
• McGilligan, Patrick.
• McMenamin, Daniel.
• McQuillan, John.
• Madden, David J.
• Mongan, Joseph W.
• Morrissey, Daniel.
• Mulcahy, Richard.
• Murphy, Timothy J.
• O'Gorman, Patrick J.
• O'Higgins, Michael J.
• O'Higgins, Thomas F.
• O'Higgins, Thomas F. (Jun.)
• O'Reilly, Patrick.
• O'Sullivan, Martin.
• Palmer, Patrick W.
• Pattison, James P.
• Redmond, Bridget M.
• Reidy, James.
• Reynolds, Mary.
• Roddy, Joseph.
• Rooney, Eamonn.
• Sheldon, William A. W.
• Spring, Daniel.
• Sweetman, Gerard.
• Timoney, John J.
• Tully, John.

Níl

• Allen, Denis.
• Bartley, Gerald.
• Beegan, Patrick.
• Boland, Gerald.
• Brady, Brian.
• Brady, Seán.
• Breathnach, Cormac.
• Colley, Harry.
• Collins, James J.
• Corry, Martin J.
• Crowley, Honor Mary.
• Davern, Michael J.
• Derrig, Thomas.
• De Valera, Vivion.
• Flynn, Stephen.
• Friel, John.
• Gilbride, Eugene.
• Harris, Thomas.
• Hilliard, Michael.
• Kennedy, Michael J.
• Kilroy, James.
• Kissane, Eamon.
• Kitt, Michael F.
• Lahiffe, Robert.
• Lemass, Seán F.
• Little, Patrick J.
• Lydon, Michael F.
• Brennan, Thomas.
• Breslin, Cormac.
• Briscoe, Robert.
• Buckley, Seán.
• Burke, Patrick.
• Butler, Bernard.
• Childers, Erskine H.
• Lynch, John.
• McEllistrim, Thomas.
• MacEntee, Seán.
• McGrath, Patrick.
• Moylan, Seán.
• O Briain, Donnchadh.
• O'Grady, Seán.
• O'Reilly, Matthew.
• Ormonde, John.
• O'Rourke, Daniel.
• O'Sullivan, Ted.
• Rice, Bridget M.
• Ruttledge, Patrick J.
• Ryan, James.
• Ryan, Mary B.
• Sheridan, Michael.
• Smith, Patrick.
• Traynor, Oscar.
• Walsh, Richard.

Tellers:—Tá: Deputies Doyle and Keyes; Níl, Deputies Kissane and Kennedy.

Question put.

Question agreed to.

SECTION 2.

Mr. MacEntee

I move amendment No. 1:—

Before Section 2 to insert a new section as follows:—

Sub-section (1) of Section 18 of the Finance Act, 1920, as amended by Section 2 of the Finance Act, 1947 (No. 15 of 1947), shall be construed and have effect as if the words "three hundred pounds" were substituted therein for the words "two hundred and sixty pounds" and the words "one hundred and sixty pounds" substituted therein for the words "one hundred and forty pounds".

This is an amendment which I am sure will meet with the ready acceptance of the Minister for Finance. It is an amendment which is conservative in its terms. It does not go so far as the amendment put down by the then leader of the Opposition and the present Minister for Education in relation to this particular question of the personal allowances last year. Perhaps the leader of the Opposition, Deputy Mulcahy as he then was, was a little more optimistic about the receptivity of the then Minister for Finance than we are, or perhaps we have more regard for the exigencies of the Minister for Finance, a little more regard for his circumstances and for his responsibilities than the leader of the Opposition last year had for those of the then Minister for Finance.

This is a proposal to increase the personal allowance now payable in the case of married men at the rate of £260 to £300 and the personal allowance which is payable in the case of single persons at the rate of £140 to £160. Last year the Opposition thought that the personal allowance in the case of married people should be increased, I think, to £400 and in the case of a single person to £260. It will be seen, therefore, that our proposals, if they err at all, err on the side of moderation; that is to say, moderation from the point of view of the Minister for Finance. Income-tax payers who are suffering in present circumstances may perhaps think we have not gone far enough. However, we have very carefully considered this amendment and we feel that justice would demand that there should be a substantial increase in their personal allowances.

No doubt, the House is aware of the theory upon which these personal allowances are based. It is assumed that before income-tax is levied the person must live and, accordingly, a figure is struck below which it is felt it would not be possible to expect the person to pay tax and, at the same time, maintain himself in good health and in a condition to earn his living. The Minister, I am glad to say, has not forgotten the terms in which he visualised the condition of this community last year. He has reminded the House that, when he was in opposition, he painted the plight of the community in the most doleful terms he could conceive. He told us the health of the community was breaking down; that people were hard driven. Indeed, in that connection, I think I could not describe the plight of the income earner in more moving terms than were set out to this House by the present Taoiseach, speaking on the Finance Bill last year. According to column 855 of Volume 106 of the Official Reports, Deputy Costello, as he then was, said this:

"In the case of a man earning his living by his own efforts at a profession or a clerical occupation, he gets no allowance for the wear and tear of the machine which produces the income which is taxed for the benefit of the State. He gets no allowance for the wear and tear of his health, mind and body. He gets no allowance for the fact that, if he gets ill—certainly in the case of a professional man and, in many instances, in the case of those engaged in clerical occupations—the income entirely ceases."

Then he went on to say in respect of the classes for whom he spoke:

"They have had a very hard time during the last few years in particular. Those on salaries have had to exist in circumstances amounting almost to cruelty. In the case of professional men, in some instances they have been able slightly to increase their fees, but, speaking generally and broadly, the fees of professional men have certainly not been increased in any way commensurate with the rise in the cost of living or the fall in the value of money in the last five or six years."

A point which no doubt will appeal to the Minister for Finance.

"These people have to put aside out of their income sufficient to meet disaster and adversity due to ill-health. They have to make provision for their families, and that has put upon their resources in the last few years an almost intolerable strain. Most of these people are obliged to adopt the method of saving by means of insuring their lives. As I pointed out in the debate on the Budget proposals, they have paid premiums over a considerable number of years in pounds, when each of them was worth £1 in purchasing value. Those policies of insurance for which they have been paying over a large number of years will mature either on their death or before it, if that is the particular type of policy effected, at a time when the maturity value of the policies has been at least halved from the point of view of its actual value or purchasing power."

No doubt it was the influence of the Taoiseach in the counsels of the Opposition Party then which moved Deputy Mulcahy to put down an amendment to increase this personal allowance from £260 to £400 last year. When that amendment was defeated, he became perhaps more realistic and put down an amendment on the Report Stage similar to that which we have put down to increase the allowance from £260 to £300. That in fact is the proposal we are now submitting to the House. The mere fact that the then Opposition made two attempts to increase this personal allowance shows how strongly they were convinced that such an increase was warranted in the circumstances of the time. The Minister for Finance has already reminded us of the doleful picture he used to paint to us of the plight of the people, particularly of the plight of those who were in the salaried class, drawing small salaries, and of the professional men and those engaged in clerical occupations, by whom Deputy Costello was so greatly moved. I have no doubt that the Deputies who were then in Opposition were speaking sincerely and that it does not require any words of mine to bring home to them the merits of this proposal. I am sure that they are not so optimistic as to expect us to believe that the position of these people, whose circumstances were so desperate up to the 18th February of this year, has suddenly been improved, that their incomes have undergone a substantial increase, that the purchasing value of the £, upon which such emphasis used to be laid by the present Minister for Finance, has suddenly appreciated, that the purchasing value of the £ which we were told was worth half its 1938 value has been doubled since February 18th.

I do not think they would be optimistic enough to expect us to accept an argument of that sort from them. They know that in fact, since 18th February, the purchasing power of the £ has further declined, that the cost of living has gone up, that these professional classes and these people in clerical occupations, for whom the Taoiseach spoke last year, are faced with a further increase in the cost of living, that bread is going up, we are told, as a result of the settlement of the bakers' strike which was arrived at under Government auspices and which, we are led to believe, was in fact rather imposed upon both parties by the Government.

In consequence of that, there is going to be an increase of a farthing on the cost of the two pound loaf. I am told that that farthing will more than three times over meet the increase in the wage bill of the bakers concerned and that the balance which will be available over and above that required to meet the increased wage bill is going to be appropriated by the Exchequer for the purpose of reducing the subsidy on bread.

In these circumstances, the Minister for Finance, if he was sincere last year, if he really meant what he said about the plight of these people last year, must accept this amendment. I know, of course, that there will be difficulties. I suppose Deputy Esmonde will get up and tell us that, if this amendment is accepted, it will only mean perhaps 3/- per week per head—he may put it even a little more or a little less. He may even go so far as he went on the last section and say that it will mean 1/1½d. per week per income-tax payer. I do not know, I cannot imagine, what sort of arguments the fertile brain of Deputy Esmonde will conceive in order to bolster up his Minister, but I would like to remind the Deputy, who thought so little of 1/1½d. per week, that we had a strike which deprived the people of bread for a prolonged period for a sum very little more than this 1/1½d. per week.

We had a strike on a question as to whether operatives were going to get 2/- per week more and that strike was a strike which inflicted a great deal of hardship upon the people. The parties concerned in it certainly thought the sum of 2/- per week of vital importance. The Government thought that too since they virtually compelled the strike to take place because of it, and I think Deputy Esmonde must have shared the opinion of his leaders that the 2/- per week was of vital importance because he supported the Government which stood by and allowed the bakers' strike to take place.

In the light of these facts, there is no use in discussing the amendment in the terms of a debating society. If I did strike an average of £480 it was because that was the average income of the income-tax payers. I was not relating my argument to the particular individual who earns just £480 a year and no more and no less. I was merely indicating that the general body of income-tax payers are not wealthy people, that they are men of moderate, and very often, very restricted means and that, whether the saving is 1/1½ per week or something a little more than that, it is a matter of importance to them because they have very little margin between what they earn and what is required for the maintenance of themselves and their families. As the Taoiseach said in that speech of his, they are unable in many cases even to maintain themselves in good health and if anything happens to them their earning capacity at once ceases and they have nothing to look forward to except perhaps a future of penury and hardship.

In these circumstances we cannot discuss this question in the terms in which Deputy Esmonde and Deputy O'Higgins discussed it. It is not worthy of them. It is the sort of point which one could make at a debating society; but here, in the council of the nation, it is not an argument that should be advanced. The real point is this: If, as we have been told so frequently, the purchasing value of the £ has declined by 50 per cent. so that to-day the income of a man who has £500 or £600 or £700 is only equivalent in purchasing value to an income of £250, £300 or £350 in 1938-39, are we not bound upon the principle to which I referred at the beginning of my speech to increase considerably the personal allowance before we call upon that man to pay any tax? That is the principle upon which this amendment is based. I say we have been moderate because, even if the House does make the personal allowance £300 instead of £260, that £300, upon the basis of the arguments which have been so often adduced in this House by the present Minister for Finance and which were adduced by General Mulcahy last year, is equivalent to only £150 of pre-war income. I concede at once that that in itself represents a reduction of about one-third in the real value of the personal allowance. My answer to those who would ask me that question is that we have to have regard to the circumstances in which the Minister for Finance finds himself, and that we are putting this proposal forward in a responsible way to meet the hardship which the rise in the cost of living has imposed upon all classes of the community, but particularly on those who have small incomes and are within the income-paying class. With the exception of those who are too frugal or too poor to spend money on drink or tobacco, the others pay their share of the general body of taxation.

I was making the case on the last section for those who have to live thriftily and, therefore, cannot contribute to the ordinary duties of customs and excise as people who drink and smoke do. When I said that I was sneered and scoffed at, and told that there was virtually no person in the community who abstains from drink and refrains from smoking. Of course, if I were to accept that argument I should refuse to believe the evidence of my eyes. I have seen in the records of some temperance societies great pride taken in the fact that there are many Deputies in this House who wear the pioneer pin and, therefore, do not drink. What is the use of Deputy O'Higgins who himself, I think, is a pioneer—I am not saying that in a scoffing or sneering way—and what is the use of other Deputies who for one reason or another deny themselves the pleasures which the majority of the members of this House, including myself if Deputy Cowan wants me to say that, partake of: what is the use in pretending that, in fact, there are not in this country a very large number of people who, for one reason or another, do not smoke and do not drink? Some of them do not do it because they believe they cannot afford it. Some in that category may make a virtue of necessity, but in any event there is that large class of abstainers. Leaving them to one side there are I concede —perhaps they are the majority of income-tax payers—those who are able to and do indulge in smoking and do have an odd glass. I am not suggesting that they do it to excess but to the extent which they do those things they contribute their share to the general revenue of the Exchequer through the customs and excise duties.

Therefore, when we come to consider income-tax, which is a tax upon a comparatively narrow section of the people over and above all the other taxes which they pay, we ought to deal with them justly and sympathetically. That is what I am suggesting to the Minister for Finance to do in this amendment. I know, of course, that the Minister for Finance has his difficulties. He is not a member of a homogeneous Government. He is a member of a sort of hotch-potch Government. They call it an inter-Party Government; we call it a coalition Government; other people may call it a mixum-gatherum Government, but in any event it is a Government which is not united by any common principle. Its only nexus is that it is in opposition to Fianna Fáil and to everything that Fianna Fáil stood for, including, of course, the political principles and the economic principles of Fianna Fáil. Therefore, I know that the Minister for Finance is not a free agent in this matter. I know that he has to depend on the support of Deputy Larkin and on the support of Deputy Connolly. Deputy Connolly shook his first at the Minister for Finance in almost the same way as Deputy Larkin shook his fist in the face of the Taoiseach when he spoke on the General Resolution. Deputy Connolly said: "We want this income-tax to be as high as we possibly can; we want the standard rate to be as high as possible," and I think that is Deputy Cowan's view, too.

Captain Cowan

When did I say it?

Mr. MacEntee

I have read some publications by the Deputy, some compositions of his, and I know what his views are.

Captain Cowan

I hope you benefited by them.

Mr. MacEntee

I benefited by them all right.

Captain Cowan

So did this Deputy.

Mr. MacEntee

Deputy Connolly, when he is present, is the watch-dog here for Deputy Larkin. He sits side by side with Deputy Larkin. He is Deputy Larkin's familiar spirit.

An Ceann Comhairle

What has that to do with the amendment?

Mr. MacEntee

It has go a great deal to do with it——

An Ceann Comhairle

I do not see it.

Mr. MacEntee

——because Deputy Connolly warned the Minister for Finance that they wanted the rate of income-tax to be as high as possible for the purpose which they had in mind, the purpose of equalising everybody, as they say, but at the same time he is careful to maintain the Party leaders at the top. He wishes the Minister for Finance to maintain the income-tax at the highest possible level and to give no concession because he wants to use the income-tax as a weapon for the redistribution of the national income: that is to say, he wants to use it as a weapon to take from those people money which they have earned and which is the fruit of their labour and to give it over to some people who have not got it whether through their own fault or not.

An Ceann Comhairle

The Deputy should keep to the amendment.

Mr. MacEntee

No.

An Ceann Comhairle

This amendment is not on income-tax in general. Its scope is limited.

Mr. MacEntee

This amendment is not on income-tax in general, but it does propose at any rate to ensure to the limited extent to which the personal allowance will be allowed to operate that the principle which Deputy Connolly enunciated in the debate on the section is not going to be made effective. I want restrictions on that principle. I think the man who earns money is the man who has the first claim on it. While I am prepared to say that it is our duty to relieve hardship—it is because I believe that that I put down this amendment—and while I concede that it is the duty of the State to relieve hardship, to succour the sick and to provide for the aged, I still think that there are very definite limits beyond which we should not endeavour to go. I repeat that the person who has the first claim on his own earnings is the man who has made them. The man who has first claim on the fruits of his labour is the man who has laboured, and that is why I say that, before the State comes along and takes anything from the income of any person, it ought in present circumstances, in view of the fact that the cost of living has considerably increased, and increased even since the 18th February, grant an increase in the personal allowance.

Mr. Lynch

I support the amendment. I think the Minister must agree that it is a moderate one. It calls for a moderate relief for certain people, people who cannot be regarded as being within the category of those with large incomes. This is an instance in which Deputy MacEntee cannot be accused of seeking to benefit big business interests, because it cannot be argued that this proposal to increase the married allowance by £40 and the single man's allowance by £20 tends to give relief to anybody other than the small wage earner. I support this amendment on behalf of one class whom the increase in the single man's rate would benefit.

The difference between the married allowance and the single man's allowance is directed against bachelors, and perhaps well directed. Nevertheless, if the cost of living goes up as it has gone up between 1947-48, bachelors, married men and single women are entitled to relief. Mention of single women brings me to a class against whom the difference between the two rates of allowance operates very unfairly. There are a large number of women in the country who, for one reason or another, are either single or widows. The latter have to fend for themselves when their husbands die and it cannot be argued that the difference in the rates affects them in the same way as it affects the bachelors. The State cannot hope to have any social benefit out of the small rate of relief in favour of widows. Take the woman earning £5 a week. Her total relief at present is £140, and this amendment suggests that that be increased to £160. In that case, at least, the amendment has a great deal of merit. On the Minister's own admission, the £ is worth only about half its former value and in these circumstances the amendment is so moderate that the Minister should accept it.

Mr. McGilligan

Deputy Cowan was told by Deputy MacEntee to beware of composing documents because they might get into the wrong hands. If Deputy Cowan wants a copy of one of Deputy MacEntee's compositions, I refer him to the Finance Act of 1932, in which he raised the rate of income-tax from 3/6 to 5/- in one go. I do not know whether that was supposed to be in the interests of the middle classes or not.

Mr. MacEntee

Would the Minister remind the House of what the cost-of-living figure was then?

Mr. McGilligan

It was undoubtedly very low.

Mr. MacEntee

The figure was 155 and it is now over 300.

Mr. McGilligan

What Deputy MacEntee has succeeded in doing is that he has not merely kept the rate at the three sixpences above 3/6, or 5/-, but he has put it up to 7/- and has brought about the cost-of-living increase about which we hear so much bitter complaint. The last Deputy who spoke is a new Deputy. I am sorry he was not here last year because he might have used his efforts on Deputy MacEntee, or his colleague who had charge of the finances of the country. It was last year, in June, 1947, that the allowances were fixed at £140 and £260.

Mr. MacEntee

And last year you put down an amendment with regard to those allowances.

Mr. McGilligan

That was Deputy MacEntee's and his colleague's view of the proper allowances—£140 and £260.

Mr. MacEntee

They were increased last year.

Mr. McGilligan

They were increased to £140 and £260. There was the liberality—they were increased by £20 each.

Mr. Lynch

The cost of living has gone up since.

Mr. McGilligan

Since June, 1947?

Mr. MacEntee

Yes.

Mr. McGilligan

It had not gone up by October 1947, because the purpose of the Supplementary Budget was to try to keep at some point the terribly increased cost of living, and, when that was being done, Deputy MacEntee and his colleagues did not think of raising the allowances above £140 and £260. They kept them at that level, although the pivot of the Supplementary Budget was the fact that the cost of living had enormously increased. It takes some brazenness on the part of Deputy MacEntee to argue that these allowances should be increased.

Mr. McGrath

Evidently, you think they were right.

Mr. McGilligan

I did not think they were and I do not think they are right still, and, at the earliest possible moment that I can afford to change them, they will be changed.

Mr. McGrath

You were of that opinion.

Mr. McGilligan

I was, and still am, strongly of the opinion that the life of these people has been terribly distorted by Fianna Fáil and it will take years before any attempt can be made to put them in anything approaching their old position. It cannot all be done in three months. A man can start a forest fire in five minutes, but it might take years to put it out. I cannot remake all the distortion of life caused by 15 years of bad government in three months. That is what I am being asked to do. We will do it in time, but it will take time. If anybody can say seriously to me that the cost of living has gone up since 18th February last, I will admit that he has some argument, but it has not.

Mr. MacEntee

It has.

Mr. McGilligan

It has not. The cost of living has not gone up. How can anybody say it has gone up when over £6,000,000 in taxation was remitted? Taxation adds to the cost of living. If anybody feels that extra taxes to the amount of £6,000,000 can be imposed, without affecting the cost of living——

Mr. MacEntee

If the Minister means that the cost of drinking has gone down, he is right.

Mr. McGilligan

The cost of a drink, as part of the cost of living. That is so.

Mr. MacEntee

The cost of food and clothes has gone up.

Mr. McGilligan

The cost of food and clothes, so far as I know, has not gone up.

An Ceann Comhairle

On this amendment, the Minister did not interrupt anyone.

Mr. MacEntee

He did not, I agree.

Mr. McGilligan

I have always put it to you, Sir, that debates are much more interesting when there is a certain amount of interruption. I do not mind it, because I want to get the Deputy back to the point that, in 1947, he and his colleagues fixed the allowances at the point at which they now are, and that, when they recognised that the cost of living had gone up enormously in October, they did not change them. I believe it will be possible to change them later on, but all these things cannot be done in a particular year and certainly not in the first year of government.

We took the weaker people first. We had to deal with the old age pensioners, widows and orphans and such people. We are also paying attention to certain lowly paid people in the Civil Service. By degrees, we will advance to the others, but there is an order of priority and we are meeting it as well as we can. The two amendments which Deputy MacEntee has put down would cost something short of £1,000,000 in a full year. I cannot afford that. I have thrown away other millions. I believe that these millions were properly given back to the people and that they have brought about an easement in their lives. I cannot give away another £1,000,000 at this moment, but there will be some return to these people sooner or later.

Mr. Kissane

The Minister has made no case at all against the amendment. The Leader of Fine Gael last year came in here and put down a certain amendment, and we must take it that he was sincere in doing so, because nobody is supposed to do anything in vain. If in the circumstances obtaining then, Deputy Mulcahy, as he then was, now the Minister for Education, thought fit to put down an amendment which went much further than this amendment, surely the Minister for Finance to-day cannot hold that Deputy MacEntee is unreasonable in putting down this amendment. I hold that the cost of living has gone up since the time when Deputy Mulcahy, who is now the Minister for Education, put down that amendment last year. The cost of nearly all the commodities the householder has to purchase at the present time has gone up. There is an unanswerable case for this amendment which the Minister has not met.

Mr. S. Collins

I have said before in this House and I repeat it now that I have a deep-rooted objection to distortion. That is exactly what the present Opposition tactics are on this amendment.

A Deputy

There is no distortion.

Mr. S. Collins

I am perfectly in sympathy with everything that Deputy Lynch has said and, indeed, with everything that Deputy Kissane has said. There is the difference, however, that you cannot gull anybody into the belief of anything but the fact that the last Government—in the teeth of an extremely meteoric rise in the cost of living—fixed these allowances at a time when they were forced by Supplementary Budget to get an immense quantity of money. This Government took office faced with what may best and accurately be described as the chaos that was left by the previous Government. Out of that wreck the Minister for Finance reduces what was Fianna Fáil's estimated expenditure by £6,000,000. Then there is piffle talk about the fact that he has not in some way or other arrested the cost of living. Let it be driven home that I for my part am very anxious to see these allowances go up. The sooner however the people of Ireland realise that it is the concerted ambition of every member of this inter-Party Government that it should happen—and it will happen when the real priority cases have been met—the better. The case the Minister has just made is in my submission absolutely real and simple. The Minister is ruthlessly going to arrest the lunacy in finance matters of the previous Government. As he has said, he is, at the earliest possible time the clearing-up of that mess will permit him, going to give substantial increases in these allowances. These were conceived and set down and were absolutely and unequivocally established by the previous Government at a time when they had got themselves involved in such a financial mess that they had to seek money by way of Supplementary Budget.

The Committee divided: Tá, 56; Níl, 66

Tá

• Allen, Denis.
• Bartley, Gerald.
• Beegan, Patrick.
• Boland, Gerald.
• Bourke, Dan.
• Brady, Brian.
• Brady, Seán.
• Breathnach, Cormac.
• Brennan, Thomas.
• Breslin, Cormac.
• Briscoe, Robert.
• Buckley, Seán.
• Burke, Patrick.
• Butler, Bernard.
• Childers, Erskine H.
• Colley, Harry.
• Collins, James J.
• Corry, Martin J.
• Crowley, Honor Mary.
• Davern, Michael J.
• Derrig, Thomas.
• De Valera, Vivion.
• Flynn, Stephen.
• Friel, John.
• Gilbride, Eugene.
• Gorry, Patrick J.
• Harris, Thomas.
• Hilliard, Michael.
• Kennedy, Michael J.
• Kilroy, James.
• Kissane, Eamon.
• Kitt, Michael F.
• Lahiffe, Robert.
• Lemass, Seán F.
• Little, Patrick J.
• Lydon, Michael F.
• Lynch, John.
• McEllistrim, Thomas.
• MacEntee, Seán.
• McGrath, Patrick.
• Maguire, Patrick J.
• Moylan, Seán.
• O Briain, Donnchadh.
• O'Grady, Seán.
• O'Reilly, Matthew.
• Ormonde, John.
• O'Rourke, Daniel.
• O'Sullivan, Ted.
• Rice, Bridget M.
• Ruttledge, Patrick J.
• Ryan, James.
• Ryan, Mary B.
• Sheridan, Michael.
• Smith, Patrick.
• Traynor, Oscar.
• Walsh, Richard.

Níl

• Blowick, Joseph.
• Brennan, Joseph P.
• Browne, Noel C.
• Browne, Patrick.
• Byrne, Alfred.
• Byrne, Alfred Patrick.
• Coburn, James.
• Cogan, Patrick.
• Collins, Seán.
• Donnellan, Michael.
• Doyle, Peadar S.
• Dunne, Seán.
• Esmonde, Sir John L.
• Fagan, Charles.
• Finucane, Patrick.
• Fitzpatrick, Michael.
• Flynn, John.
• Giles, Patrick.
• Halliden, Patrick J.
• Hogan, Patrick.
• Hughes, Joseph.
• Keane, Seán.
• Kinane, Patrick.
• Kyne, Thomas A.
• Larkin, James.
• Lehane, Con.
• Lehane, Patrick D.
• McAuliffe, Patrick.
• MacBride, Seán.
• MacEoin, Seán.
• McFadden, Michael Og.
• McGilligan, Patrick.
• McQuillan, John.
• Commons, Bernard.
• Connolly, Roderick J.
• Corish, Brendan.
• Cosgrave, Liam.
• Cowan, Peadar.
• Crotty, Patrick J.
• Davin, William.
• Desmond, Daniel.
• Dockrell, Maurice E.
• Madden, David J.
• Mongan, Joseph W.
• Morrissey, Daniel.
• Mulcahy, Richard.
• Murphy, Timothy J.
• O'Gorman, Patrick J.
• O'Higgins, Michael J.
• O'Higgins, Thomas F.
• O'Higgins, Thomas F. (Jun.).
• O'Leary, John.
• O'Reilly, Patrick.
• O'Sullivan, Martin.
• Palmer, Patrick W.
• Pattison, James P.
• Redmond, Bridget M.
• Reidy, James.
• Reynolds, Mary.
• Roddy, Joseph.
• Rooney, Eamonn.
• Sheldon, William A. W.
• Spring, Daniel.
• Sweetman, Gerard.
• Timoney, John J.
• Tully, John.

Tellers:—Tá: Deputies Kissane and Kennedy; Níl: Deputy Doyle.

Amendment declared lost.

Mr. MacEntee

I move amendment No. 2:—

Before Section 2 to insert a new section as follows:—

Sub-section (4) of Section 3 of the Finance Act, 1932 (No. 20 of 1932) shall be construed and have effect as if the words "one hundred and fifty pounds" were substituted therein for the words "one hundred pounds".

In moving this amendment, I am fortified by the fact that an amendment similar in principle was put down last year by the present Minister for Education and then leader of the Fine Gael Opposition, to the Finance Bill of that year. As in the case of amendment No. 1, we are, perhaps, more realistic and more responsible than our predecessors on these benches were.

This amendment relates to the quantum of income which is chargeable at the half-rate. At the present moment, as the House is aware, the first £100 of chargeable income is charged at half the standard rate. Last year Deputy Mulcahy put down an amendment to raise the limiting figure to £200. We have not gone as far as that but have taken the middle way and we are asking the Minister for Finance to agree that the first £150 of taxable income should be chargeable at 3/6 instead of 7/-. I think we are justified in doing that, in view of the general circumstances of the time, in view of the fact that this year the standard rate of tax has been increased from 6/6 to 7/-.

All of us are aware that for people with limited incomes the income-tax is an onerous tax. It is all very well to say that a man who has an income of £2,000 or £3,000 should be glad that his tax is so heavy, since it indicates that his income is ample, but we cannot take that attitude when considering a person who has an income of £480, £500, £550 or £600. His means are certainly limited and if he happens to have family responsibilities, some of which are not sufficiently recognised under the income-tax code, in the shape of dependents, who may not be children, his living conditions may be very, very stringent indeed. In those circumstances, I think we would be justified in regarding his case with sympathy and I trust that the Minister for Finance, who was so concerned about the plight of the white-collar classes, as he used to describe them last year, will not harden his heart and reject this amendment. It is by the standards which they set last year, when in Opposition, a conservative amendment, a moderate amendment and a realistic one. We recognise that the Minister must get the money from somewhere, but we do think that he ought not, even though his needs may be great, press too heavily upon those whose needs may be greater and who have not his capacity or his resources for meeting those needs.

There is not very much more I can say on this amendment in addition to what I have already said on the amendment which the House has regrettably disposed of by rejecting. Quite obviously a great deal of the talk we heard during the course of the election was not sincere. It was just a hollow sham and a bait thrust out to catch the unthinking multitude and the multitude, having swallowed it, have now got the hook in their gills.

Mr. O'Leary

Forget about the elections.

Mr. MacEntee

I know you are anxious to forget about them and, when the next election takes place, you will be forgotten.

Mr. O'Leary

You will not be here at all.

Mr. MacEntee

I shall ignore that remark and I shall devote myself to the serious proposition that is before the House. I know it does not matter to Deputy O'Leary what we do with the income-tax. It does not matter to him.

Captain Cowan

That is a very improper observation after you have fortified yourself with a pension. It is disgusting.

Mr. MacEntee

I do not know exactly——

Captain Cowan

I am sure he is doing more work than you are for whatever he gets.

Mr. O'Leary

I am sure I am.

Captain Cowan

He is a better type.

An Ceann Comhairle

Order!

Mr. MacEntee

I do not think people who live in glasshouses should throw stones. I have not ever heard that Deputy O'Leary was ever very tender about personal considerations where other members of this House are concerned; nor, reading some of the election literature which was circulated by Deputy Cowan and some of his colleagues, have I any reason to believe that they ever refrained from personalities or discussing public issues except in terms of the most scurrilous personalities.

Mr. C. Lehane

No scurrility approaches yours.

Mr. MacEntee

A Deputy in the general election issued a pamphlet headed "The Price of the Pint". In that it was said that the tax on the pint must be maintained in order that the establishment of the Head of this State could be maintained, in order that Ministers' salaries would be maintained and in order that Deputies' allowances would be maintained. One of the Deputies who interrupted me in the course of my speech issued that leaflet and is now drawing a Deputy's allowance. That was a very scurrilous leaflet. But I want to get away from all that——

Mr. C. Lehane

The Deputy stands over every word of it and does not retract one word from it.

Mr. MacEntee

I hope he distributes his allowance now in order to reduce the price of the pint.

An Ceann Comhairle

Order!

Mr. MacEntee

I am sorry I provoked this. I again put this amendment to the House. I think there is a good case for it. It is the Minister's own and I do not think the Minister will reject his own advocacy in favour of the proposal.

Captain Cowan

The Deputy who has just sat down has talked about hollow shams. I think the exhibition we have had from him this evening is a most hollow sham. The Deputy has talked about sincerity. There is no sincerity in his approach to this problem. I regret that he should have considered it desirable or advisable to speak in the way he did about another Deputy of this House. That may give satisfaction to Deputy MacEntee but I think we should endeavour to have a higher standard here.

Mr. O'Leary

We will never have it while he is here. He should be put out.

Captain Cowan

Perhaps I should not worry too much about it because I am in this House and probably I owe my success to Deputy MacEntee.

Mr. C. Lehane

His own Party know that.

Captain Cowan

It is a strange thing that every candidate against whom Deputy MacEntee directed his very poisonous pen was returned. I think that was an indication from the general public that they disliked Deputy MacEntee's tactics. I came into this House to contribute what I could towards improving things generally. Since I came into this House I have discovered that the great majority of the Fianna Fáil Party are sincere and honest. I have discovered that.

An Ceann Comhairle

Would the Deputy now, please, come to the amendment before the House?

Captain Cowan

I have discovered that and I was glad to discover it. I sincerely hope that there is a future before that Party but there can be no future for it while it is directed by Deputy MacEntee. Now I have always accepted the Chair's ruling and I certainly accept it now. I do not intend to follow in Deputy MacEntee's footsteps and indulge in personalities.

This whole Budget position and the Finance Bill which gives effect to it is supported by the Clann na Poblachta Party because we believe that it is the best the Minister can do this year. We all appreciate the difficult problems with which he is faced. There are things that he has to do with which we in Clann na Poblachta do not agree. But we must look at the picture as a whole.

An Ceann Comhairle

The Deputy has got to look at the amendment now.

Captain Cowan

And, looking at that picture, we realise that we cannot support this amendment that Deputy MacEntee has put down. I do not think there is anything further I want to say. My only reason for intervening in this debate was to express my disapproval that the time of the House should be wasted in the way Deputy MacEntee wasted it this evening.

Mr. McGilligan

This amendment has been described as realistic. It might have been realistic in somebody else's hands, but not as put down by Deputy MacEntee. Deputy MacEntee must know that this half rate chargeable on the first £100 is his own arrangement. When he got possession of the finances of this country in 1932 the half rate was permissible on £225 but the Deputy reduced it to £100. He described the income-tax as an onerous tax and while he did that he raised it by 1/6.

Mr. MacEntee

Certainly.

Mr. McGilligan

The Deputy now puts forward a demand that in those days, first of all, we should remit the 6d. which he put on and, secondly, that we should allow the half rate to be chargeable on a higher amount of the income than what he fixed. Therefore, I say it might be realistic in the hands of anybody else, but it is not in the hands of Deputy MacEntee.

Mr. MacEntee

This is the second time the Minister used that argument. I assume that when I speak on another amendment later that I will be justified in dealing with the argument the Minister has used both on the section and on two amendments.

Mr. McGilligan

I do not know what justification the Deputy can put forward if he sets out to deny what I am saying. He reduced the amount of income-tax on which the half rate was payable from £225 to £100. It is his work we are dealing with. In 1947 certain changes were made and he did not think of doing this then. In October of 1947 when the cost of living was the foundation for new charges he still did not think of doing this. At the time when he helped to put taxes worth £6,000,000 on certain things that people are accustomed to use, consumable goods, he did not make this alleviation. Why does he want to do it now? My point is that I cannot do it now because it would cost £600,000 in the full year and I have not that much to spare.

Mr. Lemass

The Minister for Finance should be able to think of some better argument on these amendments beyond that he is leaving the position just as Fianna Fáil left it. I do not think that is a good argument.

Mr. McGilligan

Is it a bad argument?

Mr. Lemass

The world did not stop still when Fianna Fáil left office.

Parliamentary Secretary to the Minister for Finance (Mr. Donnellan)

You thought it would.

Mr. Lemass

The Minister speaks as if it did, because he tells us "I am proposing to leave the arrangements with regard to income-tax as Fianna Fáil left them." I do not think that is good enough. The Minister must have considered his Budget. He must have asked himself what rate would be appropriate for this year. We are quite prepared to justify the arrangements we made. In 1948 the Minister must have said that the 7/- standard rate is appropriate to the circumstances of the year and the general structure of the tax revenue of the State. Having considered it on that basis, having decided on that basis, surely he should come here to defend it on that basis and not merely on the ground that Fianna Fáil proposed a 7/- rate last year. There was a rate of 7/6 the year before and last year it was reduced to 7/-.

Deputy Connolly argued that the rate of income-tax should be based on the principle of putting it as high as possible. Does the Minister accept that argument or does he agree that the income tax should be kept as low as possible consistent with a balanced Budget and the proper distribution of the tax burden? If there was ground for resisting last year the proposal to increase the proportion of income chargeable at the half rate it was because of the rate of tax prevailing and the general circumstances of last year. The rate of tax was reduced in the Budget of last year; it is being increased now.

Mr. McGilligan

It was increased in October.

Mr. Lemass

It was not increased in October. The Finance Bill last year provided for an increase this year. Consider in relation to that proposed higher rate this question of allowances. Surely the alteration of the standard rate should have suggested to the Minister that he should reconsider the allowance. If he did, can he not justify his decision on the grounds upon which he reached it and not upon this ridiculous ground that what is good enough for Fianna Fáil is good enough for McGilligan? That argument may be good politics but it is not good enough for the Dáil.

The Dáil is entitled to have from the Minister a considered statement of the reasons on which he thinks it is not desirable to alter this provision of the income-tax code, having regard to the circumstances of the year and the higher rate prevailing this year. The records of the Dáil should contain the considered statement of the Minister's views and not these purely political jibes.

Mr. McGilligan

It is all very well for a Deputy to stroll in here after the arguments have concluded and make remarks such as Deputy Lemass has just made. Why should I repeat my arguments for his benefit if he did not see fit to be here? The Deputy can read later what I said. I am not supposed to remake my points just because the Deputy steps into the House.

Mr. Lemass

I was here and I listened to the earlier discussions.

Mr. McGilligan

The Deputy did not hear me say that it was proposed by the Government to remake the shattered situation in the lives of middle-class people in this country, a condition brought about by Fianna Fáil, and that we are directing our steps towards that but that we could not do it this year? Did the Deputy hear that?

Mr. Donnellan

He hears it now.

Mr. Lemass

That is the standard argument of the Minister and of his colleagues on all occasions.

Mr. McGilligan

Deputy MacEntee pretends to be sincere when he puts down this amendment. Why did he not think of it last year and why did not Deputy Lemass think of it?

Mr. Lemass

It was thought of.

Mr. McGilligan

Deputy Lemass was a member of the Cabinet last year and that Cabinet put on the extra 6d. Did he consider increasing the amount on which the half rate would be allowed? If he did, then those who had considered it favourably were silent in the House.

Mr. Lemass

On the contrary, they gave a very complete defence of their position.

Mr. McGilligan

They did not raise the allowance and they did not raise the amount on which the half rate was chargeable and they did not say why they did not raise the allowance or the amount on which the half rate was chargeable. It comes badly from the mouth of any prominent person in the Fianna Fáil Cabinet to suggest these things now when for so many years they let this situation develop and did not give these alleviations. We have done better than Fianna Fáil ever intended to do, thought they could do or promised to do. We have remitted taxation to the extent of £6,000,000.

Mr. Lemass

You increased taxation by £5,000,000.

Mr. McGilligan

We remitted the emergency Budget duties which cost the people £6,000,000. There was a further gap between revenue and expenditure that had to be met. Into that we have fitted the petrol tax, the one major tax put on, and we have given the ordinary people alleviations in important respects. In addition to that we have looked to the end of the line in order to see who were most deserving in the way of relief. In that way we came to the relief of old age pensioners and recipients of widows' and orphans' pensions. Certain workers were also given relief. We hope to do more in that direction, but we cannot do everything this year. I and my colleagues recognise the hardships these people are suffering and we have observed the attitude of the people who imposed those hardships on them. In any event I am delighted over this: one thing that seems to have chiefly annoyed the present Opposition is that we carried out immediately the very big promises which we had made to reduce taxation.

Mr. Lemass

You budgeted for £5,000,000 more than we had.

Mr. McGilligan

And you would have put on £10,000,000.

Mr. Bartley

This amendment, and other amendments too, have been discussed very largely from the urban viewpoint and I would like to give the viewpoint of a constituency that has reacted very differently to the provisions of the supplementary Budget to the reactions in Dublin City. Here in Dublin people apparently frequent the cinemas in sufficiently large numbers to have rendered the extra taxation on cinema seats somewhat a burden. Take a constituency like West Galway. The new Government has abolished the hand-won turf scheme and part of the reduction of £6,000,000 mentioned by the Minister included the £2,000,000 he mentioned for turf.

Mr. McGilligan

Where is the £2,000,000 for turf.

Mr. Bartley

£1,900,000 was in the Book of Estimates.

Mr. McGilligan

It is still there. I am carrying it.

Mr. Bartley

What I want to bring to the Minister's notice is that the people of my constituency are asking what is the money for. High taxation is being retained when this scheme has been completely thrown up. In the West of Galway there are about 1,000 more unemployed as the result of the stoppage of the hand-won scheme. Putting it at a low average it leaves a loss of earnings of £2,000 a week. These people are asking: "If this money is necessary—and the taxes imposed were put on for this very purpose—why can we not get any benefit from it? If we have our employment taken from us, surely to goodness, some other persons should benefit by our sacrifices." But that is not the case. I would like the Minister to use his influence with his Parliamentary Secretary in order to give some better compensation for the loss of £116,000 a year in wages. £26,000 is provided this year, £6,000 of which was provided by Galway County. I put questions to the Parliamentary Secretary to know if works could not be provided——

An Leas-Cheann Comhairle

The Deputy will have his innings on the Board of Works Estimate.

Mr. Donnellan

I do not think that is correct.

Mr. Bartley

This amendment has a very direct and intimate bearing on the point I am making.

Mr. McGilligan

I would like to hear it.

Mr. Bartley

Tax has been remitted for the benefit of taxpayers but many people do not understand why the money is required. These people were earning from money which was provided by the House; their earnings have been taken from them; their standard of living has been very much reduced. Whatever the people of Dublin may have gained by this it has lost these people very much.

Amendment put and declared lost.

Mr. MacEntee

As it is teatime, we are not dividing.

Mr. MacEntee

I move amendment No. 3:—

Before Section 2 to insert a new section as follows:—

Section 4 of the Finance Act, 1936 (No. 31 of 1936) shall be construed and have effect as if the words "ninety pounds" were substituted therein for the words "sixty pounds".

I suppose I shall again be charged with insincerity if I move this amendment. I shall be charged with insincerity by the people who pledged themselves to reduce taxation during the last election and by Deputies who last year spoke in support of an amendment urging that this allowance which is given in respect of children would be increased from £60 to £120. The Minister for Finance may follow the tuo quoque argument which he has used hitherto in the discussion of other amendments when he charged Fianna Fáil with making various reductions in certain allowances. This is one which it was left to Fianna Fáil to increase. When the situation was that the allowances in respect of children were £35 in respect of the first child and £27 in respect of every other child we made it £60 in respect of every child. I say that not by way of apology for the steps which we had to take in 1932 to deal with the situation that we inherited from our predecessors.

We had a real deficit to face up to running into millions of pounds; we found that the unemployment situation in the country was more acute than it ever was; we found that there had been a callous neglect on the part of our predecessors of the social services of this State; we had to provide money for housing and we provided it on a scale that had never been dreamed of by our predecessors; we had to provide a scheme for unemployment and we provided it that year and financed it out of taxation, when £1,500,000 was spent on employment schemes; we restored the 1/- that they had taken off the old age pension and we paid the debts which they left us. They left us a huge deficit which we had to meet.

If we had taken the Minister's easy way out of it and passed on our burdens and our obligations to our successors we might have borrowed that money to pay the deficits, but we realised that if we were to borrow in order to get out of our temporary difficulty we would be mortgaging the future. We faced up to our difficulties in a way that the Minister has failed to face up to them.

We did increase the standard rate of taxes from 3/- to 4/6 in the £. We did, as he told us during the discussion on the last amendment, reduce the amount chargeable at the half rate from £225 per annum to £100, but we did this in order to provide a sum for social services which they had either curtailed or neglected to provide; we did it in order to meet the grave unemployment problem that existed; we did it in order to restore the old age pension to its former level and in order to make it easier for people to secure the old age pension; last of all, we did it in order to wipe out the deficit which we inherited from the Cumann na nGaedheal Government and I have no apology to make for the fact that we had the courage to do that. We increased the price of the pint and the price of a smoke and defied the licensed trade when we did it. We were never dependent on them or enchained to them as the Minister is. The day will come when there will be in this House a Government which is free of that vested interest and which will be able to rule in the interests of the people and to do justice to the income-tax paying classes as well as to others.

This is an amendment, in any event, which I think not even the present Government will have the hardihood to reject. It was proposed, as the other amendments to the Finance Bill last year were proposed, by Deputy Mulcahy. In the course of his speech presenting it he said, referring to those who are sometimes held up to opprobrium in this House by members of some of the Parties which support the present coalition, that he had no desire to use the income-tax code as Deputy Connolly has—to secure the redistribution of income. On the contrary, he was saying that the income-tax paying class were in a very sad plight, and in column 1338 of Volume 106 of the Official Reports he is reported to have said:

"Many of their insurances are mortgaged, many of them have had to sell houses that they owned under an insurance or under some kind of purchase system in order to keep themselves as far as possible out of debt."

Are we going to be asked now to believe that these sadly afflicted income-tax payers have overnight been able to pay off those mortgages and to liquidate their debts? It is only upon that ground that the Minister can justify the refusal of the proposal which last year his leader put to the House and supported by that argument. Deputy Mulcahy went on to say:

"The cost of sending a child, particularly a child from the country, to Dublin, Cork or Galway to get a university education has increased enormously over what it was in the past."

That is as true to-day as it was last year. In fact, the position has become somewhat worse, because the cost of lodgings is higher and I think the university fees have gone up.

Then this proposal was supported by Deputy Coburn who, on the same page, is reported to have said:—

"Really, the £60 does not at all meet the expenditure incurred by the heads of families in so far as proper rearing and good education of the children are concerned."

I hope Deputy Coburn will support this amendment by his vote. He posed as an independent Deputy. I do not know whether he has formally affiliated with Fine Gael or not. If he held, last year that we would be justified in increasing the childrens' allowance from £60 to £120, surely he can have heard no serious argument to induce him to vote now against this proposal to increase the allowance in respect of children to £90.

Then of course we had the proposal supported by the present Minister for Social Welfare, the then leader of the Labour Party, who said:—

"The present allowance for children under the income-tax code is altogether inadequate, having regard to the enormous increase in the cost of living, especially in regard to children, over the past seven years."

There has been no catastrophic fall in the cost of living since last year. In fact, as I have already stated, the cost of living has tended to go up since the beginning of this year. It has gone up markedly even since the change of Government. There is one thing that is undoubted. It is higher now than it was this time last year—considerably higher. Therefore, if this proposal were justified on social grounds last year, it is doubly justified now.

Then of course we had Deputy Cogan, who is sitting now in the House, and who last year supported the amendment. He said:—

"I do not know how the Minister would attempt to justify his failure to give an abatement in respect of children, having regard to the fact that he has given some relief to childless couples and single persons. There is no conceivable case that could be put up against some relief for parents. We all know that the cost of education is very much higher than it was at any time in history. The cost of maintaining children in clothing is extremely high and parents who send children to a residential school have not only to pay an increased fee but they also have almost to feed them from home, having regard to the inadequate rations available in teaching institutions."

I hope that Deputy Cogan is not going to stultify himself, that he is not going to eat his words of last year. They are here in cold print and he has heard them. I am sure the Deputy was honest and sincere when he made that statement last year, and I have no doubt that he will go into the Division Lobby this year and support our proposal by his vote.

I do not intend to base any case of mine upon any argument that would be used by Deputy Alfred Byrne. Therefore I shall pass him over and only say that he also supported the amendment. It will be interesting to see whether he will support the amendment to-night. Then Deputy Norton came back to the charge again. He was so emphatic in his support of the amendment that he had to make two lengthy speeches, as he was accustomed to do, in support of the amendment. These were followed by the present Minister for Industry and Commerce, Deputy Morrissey, who said:

"The Minister himself made the case absolutely for the amendment. He reminded the House that the allowance for children used to be much lower than it is at present and he proceeded to tell us that it was £35 up to 1932, that it was then raised to £50, and that in 1936 it was increased to the present figure. Can anybody here deny that if this House and the then Minister for Finance considered that £60 was a fair allowance in the circumstances of 1936, £120 can be considered a fair and just allowance to-day?"

That was the case made for this amendment by no less than three members of the present Government—the Minister for Education, who led the Opposition; the Minister for Social Welfare who led the Labour Party; and the Minister for Industry and Commerce, Deputy Morrissey, who was also a Front Bench member of Fine Gael. Surely in these circumstances the Minister for Finance must have been moved by his colleagues to give the position of income-tax payers who have to provide for families some sympathetic consideration and, if he has done so, there can be no justification for rejecting this amendment. I base my case for it, however, on the fact that there has been a notable deterioration in the economic conditions of our people since 1947. When we were introducing the Budget in 1947 we undoubtedly thought that conditions were going to improve. So far from improving, they have in fact deteriorated, and they have rapidly deteriorated since this Government took office.

Mr. C. Lehane

Nobody believes that except yourself.

Mr. MacEntee

The price of meat has gone up, the price of transport has gone up to individuals and business people.

Mr. Sweetman

Do I understand the Deputy to say that the price of cattle going up was a deterioration?

Mr. MacEntee

The price of meat has gone up because the Minister for Agriculture is more concerned to feed the English people than he is to feed his own. The cost of transport has gone up.

Captain Cowan

Certain salaries have gone down.

Mr. MacEntee

I do not think so. The salaries attaching to all posts in the public service remain as they were before the 18th February, 1948.

Captain Cowan

I think they have gone down.

Mr. MacEntee

Salaries of public servants remain in general what they were. Salaries of all those who were in the public service or held public office remain what they were.

Captain Cowan

The Deputy's salary went down.

Mr. MacEntee

I understood the Deputy to have given me a lecture, when we were discussing the last amendment, about referring to the personal circumstances of Deputies. It is not the first time that Deputy Cowan has made a reference of that sort, but I do not mind it; I disregard him. I hope to quicken his social conscience, if he has done.

Captain Cowan

Even the newspapers noticed the Deputy's appearance after the change of Government.

Mr. MacEntee

I do not see what my appearance has to do with this amendment. I do not see what my appearance has to do with affairs of State.

Captain Cowan

Deputy Lemass could take a shock.

Mr. MacEntee

In fact, most people are telling me that since I was relieved, if the Deputy likes, of the cares of office, I have considerably improved in my appearance. I certainly feel improved.

Mr. Sweetman

You have the new look, in fact.

Mr. MacEntee

Precisely. The new look does not suit a lot of people and it ill becomes the Deputies on those benches.

An Leas-Cheann Comhairle

This is all very irrelevant.

Mr. MacEntee

Very irrelevant indeed. I am sorry. Deputy Cowan made me wander a little bit but, after all, I have sometimes endeavoured to follow the Deputy's political peregrinations and they have lead me through strange country indeed on occasions. Here is a proposal, in any event, which last year was recommended to the House by no less than three members of the present Administration. May I repeat them again?—the Minister for Education, then Leader of the Opposition; the Minister for Social Welfare, then Leader of the Labour Party; the Minister for Industry and Commerce, a Front Bench member of Fine Gael, and it was supported by a number of people who are still members of the House and who call themselves Independents. It was supported by Deputy Cogan and by Deputy Alfred Byrne.

Mr. M.J. O'Higgins

Who opposed it?

Mr. MacEntee

I think there can be no difference of opinion on any side of the House as to the merits of this proposal.

Mr. S. Collins

There was last year?

Mr. Donnellan

Who opposed it last year?

Mr. MacEntee

The reason I had to pause was that I noticed the Minister for Finance was smiling at the plight you all are in. He is going to exhibit once again his mastery of the inter-Party Coalition. He has compelled Deputy Con Lehane to vote for the sabotage, the destruction, of the shortwave station.

Mr. S. Collins

We are back to the old chestnut.

Mr. MacEntee

He has compelled Deputy Everett to vote for the cessation of mineral exploration. He is now going to compel Deputy Norton, Minister for Social Welfare, if he is here —I do not know whether he is here or not—the Minister for Industry and Commerce, Deputy Cogan and Deputy Alfred Byrne to follow the Party Whip. How that used to be repudiated when they were in Opposition.

An Leas-Cheann Comhairle

The Deputy should speak to the amendment.

Mr. MacEntee

How we were told that proposals of this kind would be left to the free vote of the House. Now we are going to see the Party Whips go on and we are going to see all those Deputies who, last year, went with bleeding hearts into the Division Lobby in order to support a proposal that the allowance in respect of children should be increased, going into the Division Lobby to vote against this amendment.

Mr. Collins

What about the Deputy's own change of heart?

Mr. MacEntee

I am afraid, Sir, that such is human nature that they will follow their hard taskmaster, with the Parliamentary Secretary to the Taoiseach wielding the whip, into the Division Lobby to vote against a proposal which last year they so ardently supported.

Mr. S. Collins

And you opposed.

Captain Cowan

The Deputy who has just sat down, apparently, ages like an ox. His weight increases but not his wisdom. I remember when the change of Government took place we were exhorted by Deputy Lemass to make sure that we handed back the Administration to his Party in the good order in which we got it. It is perfectly clear that Deputy MacEntee has lost all hope of returning because, if he had any hope of returning in the near future, he certainly could not, with any sense of responsibility, put down the series of amendments he has put down to this Finance Bill. It is perfectly clear, as far as Deputy MacEntee is concerned, that he knows that office has disappeared for ever from his grasp.

Mr. C. Lehane

And he says he feels better.

Captain Cowan

As I said already, the great majority of people in this country who saw the enormous bill that was presented in the Estimates feared that there would be very heavy additional taxation. The Minister for Finance avoided that by economies and otherwise. He economised in order to prevent this great increase in taxation that was feared. The position is that he produced a Budget which was supported and passed and accepted by this House, and this Finance Bill, 1948, gives effect to the Budget that has been accepted by the House and welcomed by the people. As far as I personally am concerned, whereas I should like personally to go in and vote for this particular amendment or for other amendments that are down in the name of Deputy MacEntee, I cannot do it. I hope I am looking at this in a responsible way. It cannot be done. If these amendments were accepted, that would be an end to the Budget; there must be that additional taxation.

I do hope and believe that when this inter-Party Government has been in office for one year, when the Minister for Finance has had an opportunity of considering the problems, when those Parties that are associated in the inter-Party Government have had an opportunity of considering the problems, next year, please God, will be able to come before the House with substantial improvements as far as reliefs for the lower income groups are concerned. There is one thing certain, if we had not formed this inter-Party Government there would be no relief at all or could not be any relief. There would have been heavier taxation. I have said it several times in this House, and I repeat, that I am becoming sick and tired of this litany of Cumann na nGaedheal and this litany of Fianna Fáil, both over a period of 25 years. It is nauseating. We are here in 1948 trying to do things for the people. I do not care two hoots what happened 25 years ago. That is not the important thing, and if Deputy MacEntee can advance no other argument than the achievements of Fianna Fáil over 16 years, that is not helpful at the moment.

I freely admit that Fianna Fáil were responsible for several good things during their 16 years in office, and I freely admit that the Government that was here before them did many things that they ought not to have done. That is not going to help us in deciding matters now. I mention that for the purpose of saying that I am tired of having this thing cropping up in every debate and on every issue that comes before us.

Mr. Lynch

Having listened to Deputy Cowan justifying his opposition to the amendment and at the same time accusing the sponsor of it with a lack of responsibility in framing it, one wonders what sense of responsibility was behind the amendment introduced by the present Minister for Education last year and voted for by so many prominent members of the present Government Party which proposed to double the children's allowances.

Captain Cowan

They never thought they would be the Government again.

Mr. Lynch

The same remark would apply then to what the Deputy has said about this side of the House even if we do not think, according to him, that we will ever by a Government again. But the Deputy may be surprised. This amendment should recommend itself to any fair-minded person. Everybody knows that the cost of living, as it affects the bringing up of children, has gone up enormously. The Minister for Finance may ask me, why did not Fianna Fáil do this last year. He must know, of course, that that is no argument against the amendment.

Mr. McGilligan

Why not? Will the Deputy answer it?

Mr. Lynch

The Minister knows that is no argument. If there is justice in a proposal it should be met.

Mr. McGilligan

Why was it not done?

Mr. Lynch

There was an increase in 1946.

Mr. McGilligan

In 1936.

Mr. Lynch

The Minister must agree that there has been an increase in the cost of living between 1936 and 1948, and that it takes more to rear a child now than it did 11 years ago. I do not think that he can put up any serious opposition to the amendment. The Minister, in replying on several amendments, referred repeatedly to the harm which he said had been done in the last 15 or 16 years. It is a peculiar thing that it took the people 12 years from 1936 to 1948, Fianna Fáil fact that the last Administration remained in office for 16 years is in itself a tribute to it, and to the fact that no change occured until after the rigours of a six years' world war, with the usual social upheaval which such a war causes, and in spite of all the literary, vocal and financial support and resources of such powerful organisations as the licensed vintners and the national teachers.

Mr. S. Collins

What about the 16 drapers?

Mr. Lynch

I wonder is the Minister serious when he talks about the mess and the harm that was done by the last Government. Surely, he must realise that the people would not have put up with a Government that could do harm and create a mess over a period of 16 years.

Mr. S. Collins

It seems amazing that most fallacies can be argued ably by lawyers. Deputy Lynch ran away from the Minister's suggestion that he should answer the question why, in the 12 years from 1936 to 1948, Fianna Fáil should have left office without increasing this particular allowance. The reason is apparent. Deputy MacEntee comes here to-day with his heart bleeding for the people, but he quite cheerfully, with his own inimitable smile, walked into the Lobby last year and voted against any increase for those people, in the teeth, as I said before, of a meteoric rise in prices, and in a situation in which his Government was forced to bring forward a Supplementary Budget to get more money from the people in order to bolster up its extravagance and its foolishness.

Are we never going to get away from the litanies of alleged achievement as a basis for a sudden change of heart? I am perfectly satisfied that these increases in allowances must come, but they will come not at the whining of Fianna Fáil but at the instance of this Government when it begins to clear up the mess that was left to it. I ask the Deputies opposite not to delude themselves. Even their own dyed-in-the-wool followers do not believe that this new Government has not brought real relief in taxation and a new air of freedom to the country. If they think that by their airy, rubbishy utterances through the country they are going to counteract the effects of all that the sooner they disabuse their minds of it the better. Let me say that when the time comes and when the needs of the most necessitous class have been remedied, amendments such as those envisaged by Deputy MacEntee will hold no water, because the efforts of this Government will be to put the people back into a state of reasonable prosperity, free from State interference—to put them back into the position which they were before ever Fianna Fáil was heard of.

Mr. P.J. Burke

I support the amendment and I hope the Minister will accept it. During the last year the fees for children attending secondary schools have gone up.

Mr. McGilligan

Do you mean at the start of the school year?

Mr. P.J. Burke

I say that the position has not changed since last year.

Mr. McGilligan

That is right.

Mr. P.J. Burke

My point is that if it has changed, and if there have been increases, those people should get consideration. We had several long speeches this evening from Deputies dealing with Fianna Fáil and with personalities. I, for one, welcome the conversion of Deputy Cowan. I am one of the Deputies who suffered vilely from him when personalities were indulged in at a meeting held in Swords.

Mr. MacEntee

He was the leader of the Maximoe chorus.

Mr. P.J. Burke

I cannot help welcoming his conversion.

Captain Cowan

I think the Deputy was rather personal himself that night.

An Leas-Cheann Comhairle

We are not interested in what happened in Swords, from either Deputy Cowan or Deputy Burke.

Captain Cowan

Nor am I concerned, but Deputy Burke made a very abject apology for his attack on Deputy MacBride that night and he did not want to make that apology public.

An Leas-Cheann Comhairle

Deputy Cowan cannot discuss what happened in Swords, any more than Deputy Burke can.

Mr. P.J. Burke

I made no personal attack at all.

Mr. McGilligan

Not one that you would recognise as such.

Mr. P.J. Burke

I ask the Minister to accept this amendment.

Mr. S. Collins

Why did you not vote for it last year?

Mr. P.J. Burke

Because times and conditions have changed. It is not merely that we are in opposition now, but that times have changed, and I strongly urge the Minister to accept it.

Mr. McGilligan

I must point out to the House that these allowances in respect of children were fixed in 1936 and that, in the years between with the cost of living mounting, the Party now in opposition stolidly resisted all attempts to increase them. Year after year, as suggestions were made that it should be done and odd amendments to that end put down, the Party beat them. Some remarks were made here that Deputy Lehane and other people may have to follow me into the Division Lobby. That is not the greatest and most significant change that has taken place in the House. The most significant change is that Deputy MacEntee has now become convinced of the justice of the claims that were advanced for years on behalf of children.

Mr. McGrath

You have been convinced of the injustice of them.

Mr. McGilligan

No; if I could increase the allowances in respect of children, I would do it, but surely there are two entirely different situations, as Deputy Burke has said. To ask that the allowances in respect of children be increased to allow of some alleviation in the family circumstances at a time when taxes were being piled high is one thing.

Mr. MacEntee

At a time when the price of drink is being reduced.

Mr. McGilligan

All taxes were being piled high then. The first Budget in 1947 showed an increase of £5,000,000 and the Supplementary Budget something more than that. All taxes were being increased. There was a great claim, and there was great justice in the claim made, that these allowances should be increased, so as to give some alleviation in the family circle. That argument has nothing like the same force now, when the cost of living has been reduced as it has been since February 18th. Taxation has been remitted on an extraordinarily big scale and certain extra services have been given, such as the increase in the tea ration and the marking out for priority treatment of the old age pensioners and the widows and orphans. These are things that cost money and the money is going to be found for them. While that money is being found, such things as allowances in respect of children, and other items which Deputy MacEntee is now so fond of, have to be postponed and have to take their proper place.

The three amendments Deputy MacEntee has put down would cost, in a full year, £1,800,000. I have not got £1,800,000 for that. The Deputy, in later amendments seeks to reduce the tax imposed upon petrol. That would cost another £900,000 odd. The Deputy wants now to prevent this Government having revenue to the extent of about £2,750,000 and he apparently wants us to suffer that loss of revenue, while, at the same time, we are doing what we are doing about old age pensions and the tea ration. There is a completely changed situation. There is a situation now in which taxes are being reduced and in which the burdens of family life have been, to some extent, alleviated. In these circumstances, I simply have to ask Deputies to postpone their sympathy for this amendment until better times dawn. We cannot afford the money this year. We have distributed quite an amount of money and it has had its effect in alleviating the circumstances of life. We have done quite sufficient for this year.

Amendment put.

The Committee divided: Tá, 58; Níl, 68.

Tá

• Allen, Denis.
• Bartley, Gerald.
• Beegan, Patrick.
• Blaney, Neal.
• Boland, Gerald.
• Bourke, Dan.
• Brady, Brian.
• Brady, Seán.
• Breathnach, Cormac.
• Brennan, Thomas.
• Breslin, Cormac.
• Briscoe, Robert.
• Buckley, Seán.
• Burke, Patrick.
• Butler, Bernard.
• Childers, Erskine H.
• Colley, Harry.
• Collins, James J.
• Corry, Martin J.
• Crowley, Honor Mary.
• Davern, Michael J.
• Derrig, Thomas.
• De Valera, Vivion.
• Flynn, Stephen.
• Friel, John.
• Ruttledge, Patrick J.
• Ryan, James.
• Ryan, Mary B.
• Sheridan, Michael.
• Gilbride, Eugene.
• Gorry, Patrick J.
• Harris, Thomas.
• Hilliard, Michael.
• Kennedy, Michael J.
• Kilroy, James.
• Kissane, Eamon.
• Kitt, Michael F.
• Lahiffe, Robert.
• Lemass, Seán F.
• Little, Patrick J.
• Lydon, Michael F.
• Lynch, John.
• McEllistrim, Thomas.
• MacEntee, Seán.
• McGrath, Patrick.
• Maguire, Patrick J.
• Moylan, Seán.
• O Briain, Donnchadh.
• O'Grady, Seán.
• O'Reilly, Matthew.
• Ormonde, John.
• O'Rourke, Daniel.
• O'Sullivan, Ted.
• Rice, Bridget M.
• Smith, Patrick.
• Traynor, Oscar.
• Walsh, Richard.
• Walsh, Thomas.

Níl

• Blowick, Joseph.
• Brennan, Joseph P.
• Browne, Noel C.
• Browne, Patrick.
• Byrne, Alfred.
• Byrne, Alfred Patrick.
• Coburn, James.
• Cogan, Patrick.
• Collins, Seán.
• Commons, Bernard.
• Connolly, Roderick J.
• Corish, Brendan.
• Cosgrave, Liam.
• Cowan, Peadar.
• Crotty, Patrick J.
• Davin, William.
• Desmond, Daniel.
• Dockrell, Maurice E.
• Donnellan, Michael.
• Doyle, Peadar S.
• Dunne, Seán.
• Esmonde, Sir John L.
• Fagan, Charles.
• Finucane, Patrick.
• Fitzpatrick, Michael.
• Flanagan, Oliver J.
• Flynn, John.
• Giles, Patrick.
• Halliden, Patrick J.
• Hogan, Patrick.
• Hughes, Joseph.
• Keane, Seán.
• Kinane, Patrick.
• Kyne, Thomas A.
• Larkin, James.
• Lehane, Con.
• Lehane, Patrick D.
• McAuliffe, Patrick.
• MacBride, Seán.
• MacEoin, Seán.
• McFadden, Michael Og.
• McGilligan, Patrick.
• McMenamin, Daniel.
• McQuillan, John.
• Madden, David J.
• Mongan, Joseph W.
• Morrissey, Daniel.
• Mulcahy, Richard.
• Murphy, Timothy J.
• O'Gorman, Patrick J.
• O'Higgins, Michael J.
• O'Higgins, Thomas F.
• O'Higgins, Thomas F. (Jun.).
• O'Leary, John.
• O'Reilly, Patrick.
• O'Sullivan, Martin.
• Palmer, Patrick W.
• Pattison, James P.
• Redmond, Bridget M.
• Reidy, James.
• Reynolds, Mary.
• Roddy, Joseph.
• Rooney, Eamonn.
• Sheldon, William A. W.
• Spring, Daniel.
• Sweetman, Gerard.
• Timoney, John J.
• Tully, John.

Tellers:—Tá: Deputies Kissane and Kennedy; Níl: Deputies Doyle and Corish.

Amendment declared lost.

Section 2 agreed to.

SECTION 3.

Mr. Cogan

I move amendment No. 4:—

Before Section 3 but in Part I to insert a new section as follows:—

In assessing income for the purposes of income-tax a sum equal to the capital element included therein shall be deducted from the sum received as income by way of contractual annuity in respect of which a capital payment has been made.

This amendment affects a limited number of people. It is not very important for the reason that the number affected would not, I think, be very great. There is, however, a principle involved and the principle is that it is unfair to impose income-tax on capital. Persons who, because of advancing years or failing health, seek to provide security for themselves by purchasing from an insurance company a life annuity are at the present time liable to income-tax upon that annuity. That system is unfair. This matter has been investigated in other countries. A commission in Canada inquired into the question and decided that the principle of imposing taxation upon annuities of this kind was unfair. I know that this matter was before this House last year but I am bringing it forward again because I was not convinced by the arguments put up by the present Minister's predecessor. I consider that those arguments have no basis.

Last year the Minister stated that it would be impossible for the Revenue authorities to distinguish between that portion of the annuity which is income and that portion of it which is capital. I feel sure that it should be reasonably possible for the Revenue Commissioners to make that distinction. I think the commission which inquired into this question in Canada decided that the ratio as between capital and income was that 80 per cent. of the annuity was capital and about 20 per cent. income. It should be easy to ascertain the basis upon which insurance companies decided to pay this annuity. They must have some system of calculation and there ought to be some system of accountancy by which the income-tax authority would be able to decide how much of this money is capital.

If a person has capital to the extent of £5,000 and is in his declining years, he may put it in the bank and draw £500 per year to live on and in that case after 10 years the money would be completely exhausted, but during the period in which he was drawing this annuity of £500 he would be exempt from income-tax. On the other hand, if he decided to purchase an annuity of £500 a year, it would be subject to income-tax. I think that is all wrong. A person should be encouraged to make adequate provision for the remaining years of his life. If the Minister would give this matter consideration, he would find that there is a good and reasonable case for it. I was not impressed by the opposition to this amendment last year, but now that we have an enlightened Minister for Finance, I am sure he will go into this question in detail and, if he is not able to accept it, he will be able to make more convincing arguments against it than were put forward by his predecessor.

Mr. McGilligan

I would ask the Deputy not to press this amendment at the moment. I think the arguments are against it. The Deputy is making the case that, when a person buys an annuity out of capital moneys that he has on his hands, some part of what thereafter comes to him is repayment of his capital and some other part is something that arises in some other way in something that he calls income. I suggest that that is not what happens. When a person buys an annuity, he exchanges some amount of capital for an income which is spread over a number of years. Take an insurance company which might provide such an annuity; the company never regards any part of what comes to it as capital. These annuities are done upon the basis that a sum of money is taken into consideration, in addition to the age of the person who is purchasing and his likelihood of life; and there are certain actuarial calculations on which the insurance company pays income over a particular number of years. They have a more or less fixed number of years in their mind. Of course, if a person lives longer than the ordinary span, the insurance company has made a bad bargain; but if the person dies earlier, the company has made a good bargain. If the person had an expectation of life of 20 or 25 years and died at the end of the second year, no one belonging to him would think of going to the insurance company and claiming that they had some of the man's capital and should make a refund. The man has taken his chance and has transferred what was capital at one time into income.

As long as we have our code based upon a very definite distinction between capital and income, we could not accept this amendment. There are certain border-line cases, in respect of which there are decided cases to guide those in charge. Acceptance of the amendment would mean that other cases would arise where an analogy could be made equal to the case the Deputy is making.

I suggest to him that it is not proper to base the argument upon what has happened in other countries. Canada is always brought in for comparison in this connection. It is true that in Canada, in circumstances analogous to this, there are certain calculations made and some part of what we call income is regarded as repayment of capital; but they have not the same distinction as we have here as between income and capital. In addition, there is a very different situation there, which originated the present Canadian system. There was a time when Canada was free from income-tax, but when income-tax was introduced it was Government policy to issue annuities and they decided then—being the taxing machine and the source from which the people were paid out—that they would allow a certain division. They made some calculation and distinguished between capital and income. That arose out of their peculiar circumstances. The United States have something that may be regarded as analogous, but they have a completely different view from this rigid distinction that we have. Our whole code is based on the distinction. I think anyone can put up an argument that once a man transfers capital by way of buying an annuity he has transferred what was capital into income. We are entitled to tax that under the present code.

If this is going to be considered seriously—and I suggest that should not be done and that it should be nothing more than ventilation this year—it would lead to an investigation to see what other cases would be likely to crop up and what other inroads it would make on the whole income-tax code. If it should become desirable to make a change and have some kind of capital distinctions of this nature, it would mean a reconstruction of the code. It would mean heavier taxes, as we would need to get the same amount of money, and so we would have to find out what the remission would cost. I suggest that this amendment is inconsistent with the foundation of the present income-tax code and that it would be a complete disruption of that code. It is a small thing in itself, but would undoubtedly lead to very many heavier inroads into the code as it stands.

Mr. Cogan

Would the Minister have this matter considered or investigated, with a view to seeing to what extent it would affect other classes of people?

Mr. McGilligan

I will have it investigated, but I am making no promises about remissions.

Amendment, by leave, withdrawn.

Mr. Lemass

I move amendment No. 5:—

Before Section 3 but in Part I to insert a new section as follows:—

(1) If in the case of any trade or business the net relevant distributions to proprietors (as defined in subsection (2)) for any chargeable accounting period are less than the profits thereof for that period, chargeable to the corporation profits tax, the amount chargeable by way of corporation profits tax in respect of that period shall be reduced by an amount equal to 7½ per cent. of the difference.

(2) The net relevant distribution to proprietors for any chargeable accounting period of a body corporate, society or other body are so much of the gross relevant distributions to the proprietors for that period of that body corporate, society or other body (as hereafter may be defined) as bears to the whole of the said gross relevant distributions the same proportion that the profits for that period bear to the profits therefor, computed without abatement and including franked investment income.

I gathered from a remark which the Minister made in his observations on Section I, that he proposes to resist this amendment on the grounds that it is promoted by undue consideration for the class of persons whom he described as wealthy industrialists.

I shall begin, therefore, by saying that this amendment is based upon a change which was introduced in British law last year under the Socialist Government. I am saying that not because it is an argument in favour of the amendment but as some indication that there is in justification here for the change an economic purpose and some indication that there is an aim to be achieved by changing the law as I have suggested other than merely to grant a concession to industrialists. I am aware that the British have not got a corporation profits tax such as we have, but they have a tax on profits which has some points of similarity and, in making the change in their law, they had precisely in view the purpose to which I think we should give our regard also.

They were anxious to discourage the distribution of profits as a measure against inflation and they were anxious, in the second place, to encourage the utilisation of profits for the purpose of investment in modern machinery. The aim of this amendment is to grant some concession under the corporation profits tax to corporations which are reinvesting in their undertakings a proportion of the profits earned in any year. I am aware that this amendment, as it is framed, would not give complete effect to that purpose. I think it would be impossible for anybody, without expert assistance, to frame an amendment to give full effect to the idea I have in mind.

We have here a corporation profits tax. Last year the Taoiseach argued strongly in favour of the abolition of that tax. He made a very good case for it although, I think, it is as true to-day as it was then that circumstances are not suitable for the elimination of that tax. We have in the past 20 years greatly increased the incidence of that tax and it applies now to all the profits of a company in excess of £2,500 a year. There are good grounds for giving the corporations subject to that tax an inducement not to distribute the whole of their profits but to retain for reinvestment in their business and particularly for reinvestment in up-to-date machinery a proportion of the profits earned. Recently the Taoiseach went to the Dublin Chamber of Commerce and he made there a speech which, surprisingly, contained a good deal of sense. One of the things he said there was intended to be an appeal to industrialists not to distribute profits but to retain profits earned in business particularly for the purpose of replacing out-worn or obsolescent plant with efficient modern machinery.

If we are to do that, and nobody I think will question the wisdom of giving the industrialists in this country the maximum encouragement to pursue that policy, we must go further than merely exhorting them. I think we should give them some positive inducement to follow that policy, and the inducement suggested here is a slight remission of taxation in undistributed profits. If any corporation subject to corporation profits tax does not distribute the whole of the profits earned in any year then, in respect of the undistributed portion, it should be entitled to make a deduction before the amount liable to tax is determined. I am sure it is not necessary to make the case for encouraging industrial firms to keep their equipment up to date and to replace obsolete machinery by up-to-date equipment as quickly as possible.

There is another amendment which I would like to have moved here if I could have undertaken the task of framing it. That amendment would relate to the allowances now made for depreciation. I am not sure that an amendment is necessary. It is possible that the deductions permitted in respect of depreciation are arranged administratively rather than determined by legislation. If that is so, I would urge strongly upon the Minister that, in addition to adopting the device here, he should consider whether it would not be desirable to allow industrial firms to make other more generous deductions from profits for depreciation. I think it is true to say that the allowances permitted under the present income-tax law or practice are far below what prudent firms think it necessary to make and, if that is correct, then it is obvious that the position is unsound. There should be a maximum inducement to every firm engaged in industry to replace its equipment when that equipment ceases to be efficient or as new and more efficient equipment becomes available.

I think the British went even further than that and granted some concession to firms scrapping existing plant for the purpose of installing more up-to-date plant. We have done nothing of that sort here. It is, I think, a part of the income-tax code that it is difficult for the average layman to understand because there is a large part of it determined by decisions of the Revenue Commissioners and by administrative practice rather than by formal law. I want to urge, however, the wisdom, as a general policy, of going even further than the Taoiseach went in exhorting firms not to distribute profits but to use them for the development and expansion of their business by granting a tax concession under the corporation profits tax, by allowing more generous deduction for depreciation—at least to allow firms to take their profits before the amount liable to tax is determined as prudent business practice would require; and, furthermore, that there should be a concession given in respect of profits invested in new machinery merely on the ground that new machinery has become available which is more efficient than that presently installed, even though existing machinery has not been fully depreciated or cannot be described as completely worn out.

Anything which induces firms engaged in industry here to keep their plant efficient and up to date is, I think, good business and good business not merely from the point of view of the general national interests but from the very special viewpoint of the Exchequer as well because ultimately the yield which income-tax will bring to the Exchequer depends upon the level of productivity here and that, in turn, depends on the efficiency upon which our industrial enterprises are conducted.

Mr. McGilligan

I am taking it that this amendment means what the Deputy has now said because the amendment, as an amendment, is very difficult to understand. I notice the Deputy kept away from it. It is quite clear, of course, that the amendment would not carry out the proposal of which Deputy Lemass has now spoken. Am I to deal with the proposal and not with the amendment? I take it that the amendment has been abandoned.

I shall start with a quotation. Deputy Lemass said that the Taoiseach went to the Chamber of Commerce and for once spoke sense. I want to give a quotation from Deputy MacEntee who, for once, spoke sense. An amendment was proposed in 1933 and a suggestion was made that there should be an exemption from income-tax profits derived from business which were reinvested in business. The Minister for Finance, who was then Deputy MacEntee, said:

"With regard to the other point as to whether it would be possible to exempt from income-tax the profits derived from a business which are reinvested in the business... for the benefit of the industry, if they are reinvested in the business, it is not for the benefit of the industry, but for the benefit of the proprietor of the business, who is in exactly the same position in regard to his own business and the investment he would make therein as he would be in regard to any investment he would make in some other person's business.

He would put his profits, that is, his income, back into this business, and I am sure that, first of all, he would not dream of putting them back unless he was certain that it was going to yield him a certain profit. It would yield that profit and, if you once conceded the principle, it would seem to me that it would ultimately resolve itself in this way that we would have to exempt altogether from income-tax any profits derived from a manufacturing business or, in fact, any other sort of business. Apart altogether from that, we should thus be in this position that, whereas we should tax the clerk earning an income in the business, or a manager, or possibly a foreman who is earning an income in the business, whereas everybody employed in the business might be liable to income-tax, we should have to exempt the man who owned the business and who was drawing a profit on the whole thing. Apart altogether from the logical extension of the principle of exemption in that way there is this, that, even if we accepted the principle, I am perfectly certain that it would lead to wholesale evasion and the effect of it on income-tax collection would be disastrous. Every man who owned an individual concern could turn it into a private company or corporation and it would be quite impossible to administer a concession of that sort...."

Has the argument changed very much from those days? The suggestion is that we should give a remission on money that is not distributed as profits but that is put back again into the business—that is, money made in the business. Suppose a man earns money at a profession and wants to put that money into that profession. He will not get any exemption because he puts his money into the business. Why should the businessman get exemption? He is increasing his own property but a salaried man would not be increasing his own property; he would be looking for a return the same as the businessman.

Once you start on that line, as Deputy MacEntee said in 1933, where will it stop? There would be a wholesale turning of private businesses into corporations. They would come under the sway of the corporation profits tax and they would get the 7½ per cent. rebate, 7½ off 10, and we would be left to collect 2½ per cent. by way of corporation profits tax. The British are doing this, but their tax is not 10 per cent.; it is 25 per cent, and in these circumstances they make certain rebates. It would not suit industry here. If we put up the corporation profits tax or a tax that corresponds to it, if we put up the 10 per cent. to 25 per cent. and give a remission, they would not be as well off as they are. They are getting off quite lightly as it is.

I suggest that when you look at the different classes of taxpayers who have been taxed you cannot make this distinction in favour of one group. They are in a specially favoured position in the main. They have been notoriously making sufficient to put them in a position to put money back into their business, even though they are not getting this remission, and they have been favoured much to the anger of quite a considerable section of the community. In opposition to them you have the individual who has been heavily charged as things go.

I suggest the analogy I have pointed to is an answer to this case. The businessman who owns a business, the person in an incorporated body subject to corporation profits tax, if he reinvests part of his profit will get this very big remission. The outside man who makes his money, if he invests it in his business, will not get a remission when it comes to income-tax. The young man who is putting money aside in order to get married—quite a laudable object—will not get any remission. Why should the businessman get this special exemption? There has been no case made for it.

Mr. Lemass

That is the usual Revenue Commissioners' argument. They will always argue on the ground that somebody else would be less favourably treated if the concession were granted. Consider this proposal as part of a general policy for the establishment of industrial efficiency. I think it is true to say that most of our industrial concerns, like industrial concers in Great Britain, were unable during the war to effect replacements or even repairs of plants much as they would desire to do so and they emerged from the war with a large part of their industrial equipment in bad shape.

Mr. McGilligan

Does the Deputy mean that that was the situation here?

Mr. Lemass

Yes. Not merely that, but I think I am correct in saying that for the purpose of taxation depreciation allowances were based on the purchase price of the existing plant, not its replacement, because most firms came out of the war situation in conditions in which they had to face considerable expenditure on new equipment to replace outworn equipment. They frequently had to instal modern plant to replace the obsolescent plant with which they began the emergency and they made adequate appropriations to finance this development.

We might say they could have made more appropriations and not distributed profits during the war and we might insist upon applying the letter of the income-tax code. We might argue that people in other walks of life could make a similar case for a concession. But it is good business for the nation to give financial inducements to industrialists to do what the Taoiseach asks them to do, namely, to take their profits now and put them into modern up-to-date plant where such is possible and necessary, and it is likely to yield more revenue to the Exchequer if that policy is followed than if we apply the existing law unchanged.

I am not putting this to a division. It is a matter upon which I have had strong personal views, for a long time. I found equal difficulty in persuading the Minister's predecessor.

Mr. McGilligan

You did persuade him.

Mr. Lemass

I did not, unfortunately. I was making progress and was hoping for some success this year.

Mr. McGilligan

What was the excess corporation profits tax charged here?

Mr. Lemass

It was made more onerous from the year in which Fianna Fáil came into office until last year by the reduction of the exemption limit. It was originally £10,000 and was reduced to £2,000.

Mr. McGilligan

That is corporation profits tax. I am talking about excess corporation profits tax.

Mr. Lemass

That was abolished altogether.

Mr. McGilligan

At what rate was it and what was the comparison with England?

Mr. Lemass

I make the Minister a present of all that. There was good reason for what was done. I find very considerable sympathy with the case put forward by the Taoiseach for the abolition of corporation profits tax altogether. I do not say that should be done now. It could not have been done last year and I am not arguing that it should be done this year, but I think, on the logic of the case, the weight of the argument was with him in times when a change of that kind could be effected.

I am asking now that corporation profits tax or the system of taxation on business profits generally should be so altered as to encourage people not to draw their profits and spend them but rather to utilise them for the modernisation of their equipment and the improvement of their efficiency. What methods might be adopted to secure that result is a matter upon which there is a difference of opinion. I am urging the wisdom of that policy, having regard to general industrial considerations and to the considerations which were advanced by the Taoiseach in his Chamber of Commerce address in favour of the adoption of that method by industry as a body. I think that we should do more than ask them. I think that we should give a positive advantage to those who do over those who do not.

Mr. Dockrell

I would like to say a few remarks on this subject. I think that we hear all too little in this House on industrial matters, and one of the things that strikes me is that it is a great pity that the late Minister for Industry and Commerce was not able to put before his colleagues when they were in the Government with equal fervour the case that he has made now. Speaking as a person who does know some little amount from personal experience of industrial matters, there is a great deal in his argument that industrial efficiency is ultimately the rock upon which the industry of this country will rest or wreck itself. No country that has not an efficient industrial arm can make the way in the modern world which it is necessary for it to make. I think that is a truism and I think that this House understands that perfectly well. Once we have arrived at the conclusion that industrial efficiency is necessary, we should, I think, try to encourage by legislative means that industrial efficiency. The Minister for Finance compared the case of a professional man with business, and with all due respects to the Minister for Finance's very brilliant reasoning powers, I do not think the analogy is quite fair because the profits which a professional man would put back into his own business would be ultimately, and not only ultimately but I think immediately, to the benefit of himself and of his family, but the profits put back into an industry may not at all be for the personal benefit of the proprietor because there may not be a proprietor in the accepted sense of the word, it may be a public company. In the long run, when you can encourage the ploughing back of profits into industry you benefit by employment the personnel of the firm, you benefit the workers and I think you benefit the country generally. That again flows from the truism which we all here, I take it, understand of the benefit of industrial efficiency to the country.

I do not know that this amendment is very successful in putting forward that idea legislatively. By that I mean that I do not think that the end which I would be in favour of can best be attained by that particular amendment. But certainly I think that we should legislate, and that every party in the House should be behind some method by which the efficiency of industry would be increased and that at the same time loopholes are not left for evasion. I think in most established businesses which are subject to audit by accountants and so on it is easily ascertainable if any evasions have, in fact, been done. I would urge, then, upon the Minister that there is a great deal in the idea that business must be encouraged in order to give more employment, and to give a better standard of living, because profits are only one side of business.

I would say to this House that it is not an industrial House and does not understand business and it does not understand industry. The country in which we live is mainly an agricultural country and by and large we get in this House a very fine understanding of agricultural and rural matters. Unfortunately, however, we do not get the same understanding of commercial and industrial matters, so I think a duty devolves on anybody who is connected with industry to try to put their views before the House on industrial questions. I do feel that we should, as a legislative body, quite irrespective of Parties, do what we can to encourage businesses to plough back the profits of industry into the business as it is to our ultimate advantage as a country.

Major de Valera

Two points strike me in connection with this and I would like to urge them on the Minister. Firstly, we have got to take the present attitude of the Minister with regard to profit-making. I take it that the Minister is of the opinion that excessive profits to individuals have been made and that he wishes to control them. Under these circumstances, it is apparently the policy of the Government rigidly to control these profits. That is all very well in its way, but one difficulty confronts any administration, the difficulty of restricting the profits of a business and at the same time to enable it to make sufficient profits to keep itself going in a healthy way and to expand. The idea put forward in this amendment to my mind affords a method of differentiation; in other words, a method for keeping control and taking the excess that is visualised in the Minister's general policy in that regard, while, at the same time, affording a means of encouraging development of business and fostering the efficiency of business. For that reason, I think that this device, or the idea contained in this amendment, would be well worthy of consideration by the Minister, especially when at the present time industry in this country has to face the usual difficulties of a post-war situation. Industry very often starts behind scratch after a war because of the type of depreciation mentioned by Deputy Lemass. Machinery has not been replaced. Development in methods and general progress in methods does not take place during a war, with the result that in the post-war period industry has to face a sort of jump and in order to negotiate that jump something more than the normal turnover is very often necessary.

In such a situation, some encouragement is needed, encouragement to industry to suit itself to the times, to get the equipment necessary and to develop the business technique necessary to meet the problems of the day. In this amendment, the general idea is simply to try to make moneys which industry itself has made available for its development without putting those moneys in the way of being personal profits. The general idea is sound in that regard.

There is another point touching upon that. If I understand the trend of things correctly, the present Administration has been anxious to curb credit. There is, I understand, a rather considerable tendency towards restriction of credit at the moment. In a situation like that, what is the position of industrial firms who need to expend large amounts on capital? They have only two sources open to them to get the moneys which they require for replacement. One is to find the moneys themselves from their own profits for these necessary replacements and developments. The other is to borrow. Now the Administration is anxious to restrict borrowing. The banks are very much less inclined than formerly to make the advances required. If industry is not in a position to find the moneys from its own transactions, then the problem must go by default, the necessary replacements will not be made, and the necessary expansion and developments will not take place, with the consequent effects upon employment indicated by Deputy Dockrell.

To my mind if any firm needs to replace its machinery or to develop its technique, it is preferable that it should find the money for that purpose from its own transactions rather than have recourse to borrowing, thereby aggravating the situation which the Minister is desirous to curb. Here is a method by which that problem can be met by making the reduction visualised in the amendment. Sums of money which would be simply taken up by the State if the law is unamended will be made available to industry for this development, will obviate the need for borrowing, and will be accompanied by the necessary safeguard against such moneys being diverted to personal profits. Let us forget about the past. After all, it is a problem of the moment. From these points of view, I think that we should now consider carefully, if not the amendment as it stands, the general idea behind the amendment with reference to the particular circumstances of the present day.

Mr. Briscoe

The approach of the Minister to this amendment is somewhat different from and possibly more comprehensive than the attitude of Deputy Lemass, who moved it. First of all, I should like to point out that the Minister in referring to this amendment more or less included all limited companies which become liable for corporation profits tax as distinct from manufacturing concerns or industries. I have a great deal of sympathy with the point of view expressed by Deputy Dockrell. I should like to remind the Minister that when the excess profits tax was originally introduced there was an implied agreement that if, in normal times, losses should occur in firms that had paid excess profits tax they would have a repayment claim against the income-tax authorities to the extent of the excess profits tax paid. That, of course, had now gone by the board and, no matter what amount of excess profits tax has been paid, the firms concerned cannot now, in the event of losses in the post-emergency period, have a claim upon it.

I do not know whether the Minister has had time to examine the extent to which manufacturing concerns are controlled with regard to the margin of profit which they are allowed to make, this control being exercised by the prices section of the Department of Industry and Commerce. I do not know if the Minister knows the extent of the hard cases, cases of firms which had no pre-war standards and consequently had to pay excess profits tax on their earnings. There were a certain number of these cases. These firms, whether they wished it or not, were unable to make any provision in the shape of reserves for renewal of plant and extension of premises. In a great many cases they were entirely cleaned out of the profits made, notwithstanding the fact that the margin of profit had been fixed by another Department.

On top of that a new situation developed. The price control section limits the margin of profit no longer to the actual turn-over, because prices have gone up both as a result of wage increases and the cost of a great many raw materials. In order to keep the cost of materials down, the intention is to have the margin of profit related almost to a pre-war turn-over of the same quantity of goods. I am referring to that in order to ask the Minister to examine it from that point of view, particularly with regard to manufacturing concerns.

The Minister referred to the professional classes. Everybody in the House knows that lawyers and doctors have no limit fixed on them by law. The more successful a doctor or a lawyer happens to be, the higher the fees he can charge and the greater is the turn-over which he can build up. There is no control on him from the point of view of protecting the public. The greater his success, the better it is for him from the point of view of earnings. As against that, take a manufacturer who is equally successful from the point of view of being efficient. The moment he starts to benefit as a result of his own abilities you come down on him and say that you are going to take away from him what might be called the means that would be available to him to get a better turn-over and, consequently, a greater net profit.

The House, I hope, will clearly understand that the manufacturer in this country has to submit to a control which permits him a certain margin of gross profit. Then, when he has to pay his corporation profits tax one has to bear in mind that there is a great deal in what Deputy Lemass has stated in connection with the plant. The Revenue Commissioners fix for various industries, from experience over a number of years, what they consider is the normal average life of machinery and they allow concerns to write down on that basis for the purpose of renewals. I am inclined to think, however, that the Revenue Commissioners are somewhat behind the times. We are now living in an age when there is rapid progress in regard to industrial plant, machinery and methods. In many lines of industry, if one wants to continue to exist and be able to compete, you have sometimes to scrap almost after a few years a whole set of machinery and replace it by a completely new set as a result of some new development.

One only has to take the newspaper industry and to compare the type of machinery used to-day with what was used 20 odd years ago. In the same way I say that if one studies the attitude of mind of the public, one finds that the public admire the professional man who reaches the top of his profession and recognise that because of his outstanding qualities he is entitled to charge fees accordingly but, on the other hand, the successful businessman is regarded as some kind of wild animal who has to be penalised the moment he shows he has some ability and, as a result of his ideas and efforts, has been able so to develop his business that it yields him a very large profit. I do not say that the Minister can do it to-day but I would like him to consider the suggestion in the amendment from the point of view of industrialists along the lines suggested by those who have some sympathy with the amendment.

Mr. McGilligan

It was admitted by the Deputy who moved the amendment that it was taken from the British Finance Act. So it was, but it is not tied into our Finance Act. It is taken over with certain terms not properly defined and which have no recognised meaning in the code we have here but it is also taken over and introduced here as if it were something done, as Deputy Lemass said, by a socialist Government for the good of industrialists. That was not the object at all. The object was—I think the phrase used by the Chancellor of the Exchequer was—there was too much money being chucked about and he wanted to stop it being chucked about.

Mr. Lemass

I said that and I think that is one of the reasons why it would apply here.

Mr. McGilligan

It was anti-inflation.

Mr. Lemass

That is right.

Mr. McGilligan

It had nothing to do with improving business. At least, that was not the primary object. Do not forget what the situation in Britain was. When the tax was first increased, in 1947, it was raised to 12½ per cent., with an abatement of 7½ per cent, that is to say, 12½ per cent. on undistributed and 5 per cent. on distributed profits but, in the second part of the year, they doubled both of these. What happened was not any great special remission to the undistributed profits but there was an increase in the tax paid on the distributed part. Remember, that is the setting of this in Britain and in a Britain where a considerable amount of business properties had been subject to bomb damage, enemy action of different types, and remember again, it is in a Britain in which a considerable amount of machinery had been turned over to war purposes and the proprietors found themselves faced with the task of reconverting it to their own purposes.

Mr. Lemass

There were special grants given for the repair of bomb damage.

Mr. McGilligan

That is the situation, in any event. We have had no bombing and no reconversion was required here. There was not any great conversion of machinery for the purpose of making special things required during the war and proprietors being allowed to change back. So that the things that impelled a particular view of English industry do not operate here at all. I think, further, that in Britain during the war the tax they had corresponding to our excess corporation profits tax took all the excess profits. We did not. We established here quite good standards, a standard of good years before 1939 and where there was a new business that could not establish a standard by relationship to certain years they were given the pretty good standard of £2,500 or another standard, whichever of these two was the greater. In any event, £2,500 was stipulated and in this country we allowed people to make profits beyond that and we did not take the whole of it from them. We gave them 25 per cent. for themselves. Why? To enable them to meet this situation.

Mr. Briscoe

Is not it correct that in the case of a new business the standard of £2,500 included director's fees whereas in established businesses director's fees were excluded?

Mr. McGilligan

In any event, £2,500 was good enough. I did not fix the standard—the Deputy's colleagues fixed it.

Mr. Davin

And the director's got their expenses.

Mr. McGilligan

Do not delve into that murky business.

Mr. Briscoe

They did not get their expenses.

Mr. McGilligan

In any event, do not forget that, whatever the standard was, when there were excess profits made over that standard, they were left 25 per cent of it, year by year, for themselves and in 1946 the whole excess corporation profits tax was wiped out, given back to them. Why? I always understood that that was intended to cushion them against this sort of thing. They have got amazing advantages in comparison with their English rivals. It is put here that it is good policy to utilise the profits to improve the business. Of course it is and nobody should understand that better than the business man but he will utilise them because he sees a chance of making more profits immediately.

To come back to my professional man, I do not think the argument has been understood. I take two brothers, one of whom went into a profession and, say, did well in it and the better he does the more he is subject to surtax but he did well in it. His brother went into business and did at least as well in it. The brother in business has the type of business that is subject to these corporation profit taxes. They both have a certain amount of money made in one year. They both decide they will invest their money in the business. Under this, one man would get a remission of 7½ per cent. and the other would get no remission. Why? They are both putting the money into industry, the only difference is that the professional man has no property in the industry; the other man is increasing his own property, making his own property better and it is going to give him more profits in succeeding years.

Why should we be so soft with these people? They were not merely allowed to preserve their properties during the war, when most people, professional men, people with fixed salaries, the poorer classes of the community, all the lower elements, suffered by the increased cost of living. They were not allowed to keep their family possessions. They were not allowed to keep their homes, their children, their education, their own health but the business man who has property was enabled to keep them in first-class form. He certainly was allowed to make such profits as to put profits aside.

Mr. Davin

And to improve them.

Mr. McGilligan

As most of them did. Now, when the war is over, we have an amendment brought in here copied from a British Act, the object of what was put into that British Act being anti-inflation, and it is presented as if the industrialists of the country were long-suffering men, whose businesses had been destroyed during the war, all of whose prices were controlled so that they were not able to make profits and whose machinery is worn out and who have not bank credit or cash with which to get new machinery or to indulge in spending money in developing what Deputy Major de Valera made so much of, new business technique, or to improve their business. We must not forget that they are the specially favoured members of the community. I do not think it is proper to favour them still more.

Mr. Lemass

I do not want to prolong the discussion but I think it is important that the Minister at least should get the argument in favour of this course right. He does not appear to have done so. He is the one man now that can effectively influence policy in this matter. I said that the British did this thing for two reasons, one as an anti-inflationary measure and the other for the purpose of securing the re-equipment of British industry with more up-to-date plant.

Mr. McGilligan

Will you waive these two objections?

Mr. Lemass

No. They both apply here.

Mr. McGilligan

In Britain, was it not mainly an anti-inflationary matter?

Mr. Lemass

We have here, presumably, a somewhat similar problem and whether you get the result by increasing the tax upon the distribution of profits or by remitting the tax on undistributed profits, I think there is a strong argument in favour of some policy which will discourage the undue distribution of profits.

Mr. McGilligan

Double the tax. Will you let me do that? That is what the British have done.

Mr. Lemass

It is a course of action which could be commended in certain circumstances. I think there are advantages, however, in adopting the other course of discouraging the undue distribution of profits by giving an inducement to people not to distribute their profits but to use them instead for the re-equipment of industry. It is not true that in Britain they have any idea in adopting this device of helping people to repair blast damage. It was to cover cases of converting from wartime to peace-time production. All these cases were covered by a special arrangement made by the British Government. They have this idea that during the war the normal replacement of industrial machinery was not possible. The existing plant was worked harder and worked longer than it would be in normal circumstances. It was frequently repaired and kept going by makeshift methods and there was, apart from these special considerations arising out of the war, a reason, which appeared to be supported by various experts and the reports they got and published upon conditions in American industry, for encouraging British industrialists to scrap their existing equipment and to instal more up-to-date equipment.

Whatever arguments induced the British Government to adopt that policy apply much more forcibly here because during the war we could not even carry out to our industrial plant the type of repairs possible in Great Britain. The plants here had to be worked under conditions in which they would have normally closed down. Some of them were kept going with bits of string, and even now, because of the higher cost of replacements and repairs, the tendency in many firms is to postpone replacements and repairs longer than is desirable.

I do not know if many of the Deputies opposite have experience in business and know the considerations which will induce the board of directors of some concern to utilise the profit in some year to buy a new machine rather than distribute it in dividends. The inducement that will secure a decision to replace some existing machine by a more efficient one that has become available will be mainly financial. The new machine will not merely be able to produce at a lower cost than the one it replaces but at such a lower cost that it will recover the whole capital which has been invested in it. Otherwise the old machine will continue to be worked as long as it will go so that the decision I speak of will often be influenced by the prospect of a tax concession such as I propose here.

The Minister has often talked about the difference between the excess profits tax in Great Britain and the excess profits tax here. It is true that we did not go out to take the whole of the excess profits earned by commercial firms here during the war. Our circumstances were the reverse of those in Great Britain. In Great Britain, immediately the war started, there was full employment. There was a flow of orders for war purposes into every industrial concern in Great Britain which those concerns could not meet. Every concern that could be converted to the production of war materials was so converted. Every one of them was working at full capacity and working overtime. There was, if anything, inability to produce all that they required or even to man the factories that were engaged on war production.

We had an entirely different situation. At the outbreak of war our task was to try to keep up industrial output and to preserve employment in industry. We thought it better therefore, to adjust our taxation so as to give an inducement to people in industry to maximise their output, to devise ways and means of getting over the difficulty of getting materials, of using unaccustomed materials and of finding substitutes for materials that could not be procured, and, generally to improvise ways of keeping going despite the difficulties created by the war. There is no good in saying that we had not the problems the British had. We had problems which were almost completely the reverse of theirs. The excess profits tax was ended because it was stifling output. So long as it remained in existence nobody except a mad man would open a new factory or start a new business. It was based upon pre-war standards and weighed with particular severity on new firms, firms which either had not been earning profit before the war or came into existence during or after the war. It was a bad tax because it was unfair in its incidence between one kind of firm and another. I mentioned here a case which my successor can check up on from the records in the Department. It was the case of two firms engaged in the same industry, both earning gross profits of £40,000 a year, both of about the same size and the same capital investment. One of these firms had to pay no excess profits tax, and the other had to pay the full excess profits tax upon its earnings. There was obviously no justification for the unequal taxation in the case of both these firms. It was the inevitable result of a temporary tax carried over for a much longer period than we had anticipated when the war started.

If the Minister thinks there is a case for special taxation of company profits, he can undoubtedly devise checks, which will be much fairer than a war tax, but before he adopts it I would urge him to read the speech made here last year by the present Taoiseach in favour of the entire abolition of the excess profits tax. As I have said, he made a good case for that. It was a case that could not be accepted last year nor can it be accepted this year, but it was a far better case than the Minister will make for any scheme for re-enforcing the present system of taxation on company profits. That tax was ended because the war had ended and because the circumstances which necessitated its application had ceased to exist, and because the national drive here was to get new output, new industries and new enterprises going. It was ended here for the same reason that it was ended in every other country. We cannot have been wrong and they right. Precisely the same considerations induced a socialist Government in Britain, a capitalist Government .tein America and composite Governments in France and Belgium to abolish the tax at the same time that we did it here. They were right and we were right.

That is only a matter of political argument, and what I am putting to the Dáil is that I think there are good reasons why we should do more than the Taoiseach said when he exhorted industrial firms not to distribute their profits in dividends but to reinvest them in the improvement of their equipment. I think we have got to give up exhortation and give them such an inducement as I propose here. If the Minister is not prepared to accept the amendment I do not intend to press it to a division. I urge him to consider the matter as one which is bound up with the whole policy of expanding the output of Irish industry and of increasing its efficiency.

Major de Valera

Would the Minister say whether I am right in thinking that the tendency now, and during the past year, has been for the gross profits in industry in this country to be on the downward trend?

Mr. McGilligan

I have not the figures for 1948. If the Deputy is thinking of 1947, in that year they were up on 1946—in the main. There is a minus here and there. There has been a rise year by year.

Major de Valera

The amount of money available to industry for replacement—how does that stand?

Mr. McGilligan

The Deputy's guess is as good as mine, but I think they have a lot of money. All I can say on the point is that a previous Minister for Finance in the Seanad said that Irish industry had been enabled to put millions aside for this purpose.

Major de Valera

The point I wanted to follow up was how far some measure of this nature would be necessary to offset the tendency towards restricting credit, if it is going to have an adverse effect on the development of industry. No doubt, many of our industries are encumbered with outmoded equipment and replacements generally are urgently needed.

Mr. McGilligan

Where is the money they collected for this purpose?

Major de Valera

If they cannot get the money from their profits, they certainly will not get it if it is taken away in tax.

Mr. McGilligan

They could have had it from their profits after tax had been paid. An amount of 25 per cent. was allowed to them after tax.

Major de Valera

The Minister should be in a position to tell from his returns whether any particular firm is in that position, but there is no doubt that a number of industries are in the position that they cannot replace their plant without having recourse to borrowing, if a tax of this nature is put on. The excess profits tax was not taken off for a sufficient length of time to enable all commitments of that nature to be met.

Mr. McGilligan

I do not understand the Deputy. For six years they were allowed 25 per cent. of all profits made beyond the standard.

Major de Valera

But not all of them made them.

Mr. McGilligan

I thought we were talking of firms which did make profits. Otherwise, the amendment has no force.

Major de Valera

There are firms making profits now which were not making profits then.

Mr. McGilligan

I think there are a lot of them, but most of them did well during the war. There are probably people now making profits who did not make profits during the war.

Major de Valera

Is it not true that there were firms which were in a struggling position during the war years, which only got on their feet in those years and which had not any reserves to meet such a contingency as faces them now?

Mr. McGilligan

Very few private citizens got on their feet during the war years.

Major de Valera

One can agree with the Minister and sympathise to a certain extent with some of his points, but there is this essential difference between the private individual and the firm, that the manufacturing firm is carrying employees and playing a social role in excess of that played by the ordinary individual. The Minister has addressed his remarks purely to personal profits, but there is another side of the question which must be taken into account.

Mr. McGilligan

The Deputy understands that he pays his employees before he begins to calculate profits. His profits are made after that.

Major de Valera

But the future of the employees depends on the future of the business and the future of the business depends on its efficiency, the proper preservation of its plant and its necessary working material, and also, of course, on the profits. There is one aspect of this which I should like to press on the Minister. There are, I am sure, in this country a number of firms which have not yet got into the position of being able to put by the reserves necessary for the replacements which efficiency demands. They can only meet the situation confronting them by borrowing, if their profits are taxed at the present level, and that is the situation I should like the Minister to meet. I am not asking him to do so in the case of businesses which were making ample profits to meet their replacements—that can always be met by some differentiation in the tax code; a mere matter of mechanics—but I am asking him to do so with regard to firms which have not been in a position to get the necessary reserves and which will have to borrow or go without. I want to press the Minister to reconsider that matter.

Mr. MacEntee

I was not here for the greater part of this discussion, but from what I have heard the Minister say during the few minutes I have been in the House, it seems to me that he is either unwittingly or deliberately—I hope, unwittingly—creating confusion between past earnings and past profits and present and future earnings. This amendment relates not to profits made in the past, whether they were moderate or excessive——

Mr. McGilligan

Unfortunately it has been argued on that basis.

Mr. MacEntee

——but to the profits to be made in the future.

Mr. McGilligan

That is not the argument.

Mr. MacEntee

We are anxious that these profits to the utmost extent possible should be retained in the business for the purpose of expanding and consolidating the business and making more certain and secure the future of the employees, and the future of the nation generally. For that reason, we think that in this country we should do as they are doing in every other country. As Deputy de Valera has said, we are interested in industry because of its social values, and when we talk about inducements being given to firms we are not concerned with the proprietors, but with the ultimate fruit of these inducements. If we can induce and persuade employers not to milk their businesses, not to bleed their businesses, not to draw imprudently on their profits but rather to conserve, to retain and to re-employ them in the business, we think we are doing a good social thing, something which will redound to the ultimate benefit of everybody in the State. That is why we are asking the Minister to consider this as a social measure.

It is very easy to muddy the waters and prejudice approaches to this matter by referring to the profits of individuals. We are not concerned with these profits as the profits of individuals. We are concerned with these profits as potential capital which might be reinvested in Irish industry. We have always talked about trying to induce our people to invest in Irish industry. The Minister has referred on several occasions during this debate to the 1932 Finance Act. One of the things we did —and we did it in face of the opposition of the Minister—was to give to those who invested in new industries in this country certain income-tax concessions which proved, from the point of view of industrial development, to be very useful and effective.

We are asking the Minister to approach this problem in the same spirit. We are not concerned with big manufacturers or vested interests. They invariably supported our opponents when they were in opposition. We are concerned, however, to persuade the ordinary Irishman to put his money into Irish industry. Now we are endeavouring, where money has already been invested in industrial concerns, to persuade the directors of these concerns, who have also to face their shareholders, to retain in industry the profits which they might otherwise distribute to their shareholders, to the satisfaction, no doubt, of the shareholders. The position as it stands at present is that, if they do not distribute the profits, they are blamed by the shareholders and held to be unfair and unjust to them. We are trying to bring about a position in which the directors will be able to say to the shareholders: "We kept your dividends at a low figure because we wanted to invest this money in Irish business and secure the concession embodied in the Finance Act 1948." These are the things we are trying to do. I think they are perfectly reasonable and it is very unfair, and I am sure that no person is more conscious of that unfairness than the Minister, to try to represent it here as being an attempt to enable people who have already made profits in the past to continue to retain them.

Mr. McGilligan

This was argued on the basis of the present condition of Irish industry, with its machinery worn out. Deputy Lemass has given us a long lecture about our problems when war broke out, about the different situation here from that which existed in Britain and about our having to maximise production here, and he gives us a reason why he abolished the excess profits tax.

It is a pity his was not the mind that spoke in the House or which was reflected in the House when the tax was being put on and being taken off. When it was put on the phrase used was that the 25 per cent. remission was given "to meet the inevitable shocks of post-war adjustment". That was what it was for. For six years the people subject to that tax got their remission of 25 per cent. to enable them, over the six years, to pile up a fund to meet the inevitable shock of post-war adjustment. If they have outworn machinery now I want to know where that fund we gave them is. They were given that 25 per cent. for years for that special purpose. Where is the money? I am told by Deputy Lemass that it was taken off first because it was stifling. I wonder if the Deputy ever attends to what his colleagues may tell him at conferences and so forth? Deputy Aiken said that the excess corporation profits tax was taken off to enable the traders to reduce the prices. I suggest that the elevating of these arguments made here heroically in speeches was for the purpose of trying to buttress up this copy of the British Act, first when the tax was being put on and then when the tax was being taken off.

Deputies here make an appeal as if Irish industry was in a decaying condition. If it is, I do not know why it should be so. It is notorious that big profits were made during the war. The President of the country came in here as Minister for Finance very early in the war period—I think about 1940. He told us that a definite engagement had been made in the House that nobody would be allowed to make money out of the exigencies of the war and that he knew from the records the Revenue Commissioners presented to him that people were doing what he had said there was a public engagement not to permit and he proposed to take some of that money from them. He did not do so that year. He was swayed by arguments about new businesses being promoted.

The same Minister for Finance speaking in the Seanad was questioned on one occasion by Senator Douglas about Irish industry. Senator Douglas asked him: "Do you think Irish industry made these moneys?" The reply was: "I not only think it, I know it has happened" and he said that millions were involved. I need not refer to what Seán T. O'Kelly as Minister for Finance said. We all know it. I have not see any account for the year 1948—the year is still fairly young— but 1947 in the main showed an increase in profits before tax was levied over 1946. I do not know of any year in the years since 1939 in which there was any real decline. The profits mounted year by year.

Mr. Davin

That is why the 16 fellows signed Deputy MacEntee's nomination paper.

Mr. P.J. Burke

That is dirty.

Mr. McGilligan

That might certainly have something to do with it.

Mr. MacEntee

I was not backed by a British union.

Mr. Lemass

Or by the oil companies. You got a subsidy from the oil companies to oppose the oil refinery. You published a paper with it. Ask the Minister for Industry and Commerce, Mr. Morrissey, about it. He will be able to give the details.

Mr. S. Collins

What about the bakers?

An Leas-Cheann Comhairle

What about the Minister?

Mr. McGilligan

Let me keep to the main argument. Nobody is going to gainsay me in what I have said. The tax, when put on, had a special remission in it for a special purpose. These people have not played fair with the community if they have spent that money. I think they have the money and I think that if any situation is to be met by way of outworn machinery or replacement of plant they ought to have plenty of money in the background with which to make good. I think it was Deputy de Valera who talked about businesses that were struggling and got on their feet during the war. That is an apposite remark. How many private citizens who started badly in 1939 got on their feet during the war? I have heard the claim made from time to time and I think it is an amazingly shameless claim that businesses that were not able to do well pre-war took advantage of the exigencies of the war situation to get themselves, not merely on their feet, but well on their feet. Now, apparently, we are in the position that we must keep them on their feet by ploughing back some of what is called their profits into their businesses. Deputy de Valera had something to say when I interjected about the private citizen. Deputy MacEntee followed with the remark that we are not thinking of businesses here as just what the proprietor has—that we are thinking about the proprietor as the man who is giving employment and that we ought to favour that. There is no businessman in business for the sake of giving employment to anybody.

I am quite certain that many a businessman takes pride in the employment he gives once he has his business started and that quite a number of them make it an excuse when looking for remissions of various types. However, he generally goes into business not from the point of view of organising labour but because he thinks he can make money out of it. It is a laudable wish and it is very well achieved in this country. Deputy MacEntee had a lot to say. He did not hear the extract from a speech which he made in 1933 which I read to this House earlier to-day. I shall read it again for his benefit.

Mr. MacEntee

Circumstances are very different now.

Mr. McGilligan

Maybe. In 1933 it was suggested to him that there should be a special handling of profits for reinvestment in businesses for capital purposes. It was put up by a Senator. He had, apparently, used the phrase that it would be "for the benefit of the industry". Deputy MacEntee, the then Minister for Finance, did not like the phrase. He said:

"With regard to the other point as to whether it would be possible to exempt from income-tax the profits derived from a business which are reinvested in the business, as the Senator euphemistically puts it, "for the benefit of the industry", if they are reinvested in the business it is not for the benefit of the industry but for the benefit of the proprietor of the business who is in exactly the same position in regard to his own business and the investments he would make therein as he would be in regad to any investment he would make in some other person's business. He would put his profits, that is, his income, back into this business, and I am sure that, first of all, he would not dream of putting them back unless he was certain that it was going to yield him a certain profit."

He went on to say:

"It would yield that profit and, if you once conceded the principle, it would seem to me that it would ultimately resolve itself in this way that we would have to exempt altogether from income-tax any profits derived from a manufacturing business or, in fact, any other sort of business. Apart altogether from that we should thus be in this position that, whereas we should tax the clerk earning an income in the business, or a manager, or possibly a foreman who is earning an income in the business, whereas everybody employed in the business might be liable for income-tax, we should have to exempt the man who owned the business and who was drawing a profit on the whole thing."

—the man who is keeping a great property for himself and one which he can hand on to his children.

Mr. MacEntee

I am sorry I was not in the House when you read this extract earlier to-day because I could have answered it. I was dealing then with a remission of income-tax. We are dealing with quite a different tax now which takes priority over income-tax.

Mr. McGilligan

Deputy MacEntee went on to say:

"Apart altogether from the logical extension of the principle of exemption in that way there is this, that even if we accepted the principle I am perfectly certain that it would lead to wholesale evasion and the effect of it on income-tax collection would be disastrous."

I think the Deputy—pray, not to-night —should develop the difference between profits tax and income-tax on some other occasion.

Mr. Lemass

Deputy Costello did that very clearly last year.

Mr. McGilligan

Anything that he said was said very clearly.

Mr. Lemass

The Minister would be well advised to study that and to consider it very carefully.

Mr. McGilligan

I have been looking at it to-day and I have also been looking at the answer.

Mr. MacEntee

Does the Minister suggest that the clerk pays corporation profits tax? It is only by making that suggestion that he can make the quotation apposite to this debate.

Mr. McGilligan

I leave it as it is. I want anybody to read it and to see how far it indicates a change of mind in the Minister and the Deputy who has spoken. What is the case for this? Certainly, so far as Irish industry is concerned and how far it was able to plough back past profits for special purposes during the war, they were well served by the community, and I do not think we should give in to them at this point. If they have broken faith, I think they should have packets of money for this very purpose. The phrase is there and can be looked over and if they have broken faith with us I do not think we should help them out of difficulties of their own making.

That is the disadvantage of taking a thing from an Act that was intended for an entirely different purpose, and putting it in here for another purpose. I say—and it has been admitted by Deputy Lemass—that the main purpose of the concession in England was anti-inflation, it had nothing to do with the building up of the business. If I am asked to do something that is anti-inflation, I would say I would do it in the British way and double the tax. It is only 10 per cent. here, while it is 25 per cent. in Great Britain.

Mr. Lemass

And abolish the corporation profits tax, as they have done over there?

Mr. McGilligan

They have reintroduced that tax and called it by different names, but it is the same thing. I will give 10 per cent. away if I get 25 per cent.—at least I should, if I merely looked for revenue; but I do not want to do harm to business and that is why I am not doing it.

This amendment is brought in for the purpose of anti-inflation. The more prosperous the concern is, the better it is to give some remission, because the more prosperous the concern the more it can afford to pay for these profits. It may cause some inflation by being allowed to have profits, but if it is given for the purpose of building up industry, the more prosperous the industry is going to get the more remission it is going to get. Is there any sense in that? If there are two businesses and one has small profits and the other enormous profits and if this suggestion is passed—then the more enormous the profits the greater the rebates and the result of the rebates. I do not think that is a proper amendment. There is no case made for this now in actual fact, whatever case might be made three or four years hence, in regard to any position Irish industry might find itself in.

Deputy Briscoe referred to allowances for the replacement of plant. There are quite definite provisions regarding allowances for replacement of plant and machinery, carried over from the 1918 Act which has been operating here, though there is now some difference in the method of operating the allowances. We have a definite system and make the allowances with regard to machinery that is played out. There is plenty of power to deal with that situation as and when it arises.

Amendment put and declared lost.

An Leas-Cheann Comhairle

I take it that the Deputy understands that amendments Nos. 6 and 7 oppose the entire principle of the section. Therefore, the decision can be taken on the section itself.

Amendments Nos. 6 and 7 not moved.

Question proposed: "That Section 3 stand part of the Bill."

Mr. Lemass

The purpose of setting down amendments Nos. 6 and 7 was to endeavour to devise some means by which the Dáil could single out for discussion and, if possible, for decision, the proposal to increase the petrol tax, without moving to abolish the tax altogether. I want to urge seriously on the Dáil that the decision to increase the taxation on petrol is unwise. It is well known to most Deputies that the great bulk of the petrol used here is used in commercial vehicles for the transportation of goods. Even in normal times when unrationed petrol sales are possible, the proportion of the total supplies used for pleasure or non-essential purposes is quite small. At the present time, when petrol is rationed—and rather severely rationed, so far as private motoring is concerned—the great portion of all the supplies available to us is used for necessary commercial purposes. A decision, therefore, to increase the tax is a decision to impose an additional charge upon commercial transportation.

Even to the extent that petrol is used for private motoring, there is one fact which helps you to establish that private motoring in this country is primarily not for pleasure, and that fact is that more than 80 per cent. of the private motor cars registered in this country are registered in rural areas. In that I think we are unique in Europe, for it is an indication that most of the private motor-cars in use here are acquired because people find them necessary for the pursuit of their business. With the restriction upon petrol usage present, there is comparatively little pleasure motoring and nearly all our supplies are used for some necessary purpose. There are many taxes which the Minister might have considered if he found it was necessary to raise further revenue, but of all those that may have been suggested to him the most undesirable, from the point of view of its effect upon the commerce of the country, was the tax upon petrol.

Nobody, it is true, has discovered what the taxable capacity of petrol is. The Revenue Commissioners in our day always recommended petrol when the Government had to consider a new tax, because statistics show that each increase in the tax on petrol was followed by an increase in petrol consumption. What was happening was that petrol consumption was expanding rapidly, and not even the increased cost following higher taxation prevented that increase, though it may have slowed it down to some extent.

It is true that we increased the tax on petrol during the war. We did so at a time when the supplies were a very small proportion of our normal needs, when private motoring was severely restricted and motoring for pleasure entirely eliminated, when the supplies that could be given for commercial purposes were far less than were needed. We thought that it was desirable to reinforce the official rationing scheme by increasing the price of petrol, in order to discourage its use except for the purposes for which it was essential. By increasing the tax we tried to divert motor traffic for the transportation of goods to horse drawn traffic, or drive people to other methods of carrying goods. But when the war ended and the supplies improved and it was possible to permit private motoring again and give more or less adequate supplies to commercial vehicles, we reduced the tax by 6d. per gallon. That reduction it is now proposed to offset, to the extent of 5d. by the proposals of the Minister for Finance.

I am anxious that the Dáil should consider this as a special matter, not as one of a series of proposals put forward on the Budget statement, but as a device adopted by the Minister which, I submit, is likely to have undesirable consequences and which represents a bad policy. Clearly, if the Minister has to raise a substantial amount of additional revenue, he could devise ways and means of doing so without hurting the trade and commerce of the country and without imposing a tax upon them which ultimately is bound to be reflected in the price of commodities sold for consumption. It is because this tax upon the country's commerce must inevitably be passed on to the consumers of goods that it is an undesirable device and one which the Dáil should oppose. I therefore, ask that the House will divide against this section of the Bill as an expression of its view that the price of petrol should not be increased by the imposition of a bigger tax.

Minister for Education (General Mulcahy)

The Deputy has suggested that it should be easy to devise some other kind of tax which would bring in this additional revenue for the Government. It is quite true that the last Government did intend to get money by the taxes on beer, tobacco and entertainments. We need not go back again over the budgetary situation which had to be faced. We know that a certain amount of taxation had to be imposed in order to meet the increases in social services. But it is the duty of the Government to reduce the cost of living to the people. We know that the Deputy and his colleagues took up the attitude that the increased tax on beer, tobacco and entertainments did not affect the cost of living. We did not agree with that theory and, therefore, we removed the taxes on these commodities and put an increased tax on petrol instead, which was actually less than the duty, as the Deputy has explained, on petrol from 1941 to 1946.

The Deputy now says that the cost of petrol is an important factor in the cost of commodities because the cost of distribution is increased. At the present time I think that is a rather farfetched argument. The number of cars that came into this country last year over the number imported in 1946 was something over 8,000, or three times the number of private cars that came in in the year before. I think anyone who has any experience of the reception given to the increase in the petrol tax, as against the removal of the increases on beer and tobacco, throughout the country must appreciate how much more acceptable is the increase on petrol.

Mr. Lemass

The Minister does not have to queue up at a petrol pump nowadays. If he did he would perhaps know more about the opinion of the country.

Mr. S. Collins

It is a novel experience for the ex-Minister.

Mr. Lemass

I did it before the Deputy was born.

General Mulcahy

The person who tries to argue that the increase in petrol is a serious imposition on the commercial section of the community ought to marshal his argument before he advances it.

Mr. Lemass

The commercial community will pass it on. It is the consumer who will bear the increase.

General Mulcahy

The Deputy wants to have the tax taken off petrol and imposed on bear and tobacco.

Mr. Lemass

We left you a surplus of £2,000,000. The last Fianna Fáil Budget closed with a surplus of £2,000,000.

General Mulcahy

I think the Deputy is trying to forget what he left us.

Mr. Lemass

A surplus of £2,000,000.

General Mulcahy

Does the Deputy want to go back over the whole Budget statement at this stage?

Mr. Lemass

I am directing your attention to a fact.

General Mulcahy

That we were left £2,000,000?

Mr. Lemass

The Minister for Finance admitted a surplus of £500,000 and he submitted that by remitting these taxes on beer, tobacco and entertainments he had a further £1,500,000. On the 31st March of this year, therefore, the Budget closed with a surplus of £2,000,000.

General Mulcahy

Does the Deputy ask us to go back over the whole Budget statement? The Minister for Finance, in order to ease the Budget ultimately to the people, reduced the bill by £6,646,000.

Mr. Lemass

But that is the point— that figure is a notional figure.

General Mulcahy

It is a notional figure which everybody who goes in to buy a packet of cigarettes or a pint of beer will appreciate.

Mr. Lemass

That is true.

General Mulcahy

At any rate the additional tax on petrol was put on to meet a very, very difficult Budget situation presenting itself to the Minister when he took office. That additional tax on petrol for the current year brings the tax to less than it was in the years 1941 to 1946. It does so at a time when, in spite of the difficulties the Deputy suggests, the number of private cars imported into the country is increasing very, very rapidly.

Mr. Lemass

But the Government controls the amount of petrol they use.

Mr. MacEntee

The speech of the Minister for Education is enlightening. First of all, he admitted that there was an alternative tax to this tax upon petrol—this tax upon a modern agent of production and distribution. We knew there were alternatives. The Minister's Government remitted some of them, remitted some of them, as I have already said in the course of this evening, incontinently and imprudently. We have listened to a speech now in which the Minister for Finance has occupied himself pretty largely with an attack upon the business elements of this country. He has refused our request to have something done to assist them to extend and expand their businesses. The fact has emerged in the course of the debate upon this Finance Bill that there is only one business in this country with which this Government is concerned and that is the business of running the public houses. That is the licensed trade. We dare not touch them.

Mr. S. Collins

What about the 18 dead men?

Mr. MacEntee

We dare not touch them. Their commodities are sacrosanct. Let them be immune to taxation. But the transport of the people, the transport of the merchants and the transport of the farmers must all be taxed. Why? Simply because this Government, which has already shown that it prefers cheap beer to cheap bread, which has reduced the price of the pint and proposes to increase the price of the loaf, which regards beer and tobacco as necessaries of life, which has elevated them to the same position in the household as food and clothing——

Mr. C. Lehane

So they are.

Mr. MacEntee

The price-of-the-pint, Deputy——

General Mulcahy

Is it in order to discuss what alternative taxes could be imposed to make up this amount?

An Leas-Cheann Comhairle

No, definitely not.

Mr. MacEntee

I do not wish to question the ruling of the Chair, but let me remind the House that the Minister for Education has admitted that his Government did reduce certain taxes.

An Leas-Cheann Comhairle

That does not make it in order.

Mr. MacEntee

His justification for imposing this additional tax on petrol was that they had already reduced the tax on the pint.

An Leas-Cheann Comhairle

The Deputy knows perfectly well the limitations of this discussion in reference to this section.

Captain Cowan

On a point of order, the Deputy who is now addressing the House referred to a colleague of mine as "the price-of-the-pint Deputy". I want to know if that is an appropriate Parliamentary expression to use in this House?

An Leas-Cheann Comhairle

I did not hear the expression and I do not know what expression the Deputy used.

Captain Cowan

I ask the Deputy to deny it.

An Leas-Cheann Comhairle

The Chair can only take cognisance of remarks it hears.

Mr. MacEntee

The reason why this tax, which is an oppressive tax, has been chosen by the Minister for Finance, is that it is a concealed tax, a tax whose first incidence does not fall upon the person who ultimately has to endure it. He has told us he has not heard any complaint from those who deal in petrol, but I am perfectly certain that those who have to use petrol for the purpose of their business find that this tax is a very oppressive one. The fact that the Minister for Finance has chosen it is merely a manifestation of that lack of moral courage which has characterised the Government since it took office. If it had been prepared to face up to its obligations it would not have been necessary to impose this tax at all. We did not find it necessary. Everybody knows as regards the taxes you took off that you could have let them stay on.

Mr. S. Collins

You know a lot now to your cost.

Mr. MacEntee

Perhaps I do, but then I have suffered in a good cause. We have at least tried to be honest with the people. We told them that if they wanted certain things they would have to forego certain things not nearly so essential as others. If the propaganda of Deputies opposite happens to bemuse the people or cloud their judgment for a period, we are satisfied that it will be a brief period, one that will pass rapidly.

I would prefer, if I might be allowed without interruption, to discuss the merits of this tax. I have said it is a regressive tax and I have said it is an oppressive tax. It is a tax which falls most heavily on the people least able to bear it. It is a tax which the man with the Rolls-Royce will not notice very much. He has already to pay, perhaps, £120 or £150 to put his car on the road. He can well afford to buy petrol, but it is a different thing in the case of the struggling farmer or a country doctor.

Mr. S. Collins

Or an ex-Minister.

Mr. MacEntee

Or an ex-Minister. It is a fact, as Deputy Collins has said, that he readily recognises the tax which falls most heavily on those whose resources are limited. I hope the position will always continue in this country, since Deputy Collins has raised this matter, that when people have been 15 or 16 years in office they will go out of it, as I have gone out of it, a much poorer man than when I went into it. This is a tax which falls most heavily upon the people who are least able to bear it. The struggling businessman, the small haulier trying to keep a lorry or two upon the road, finds this tax oppressive. Perhaps the large transport undertaking will not find it so oppressive. The large transport undertaking will certainly be able to pass it on to customers and it is the customers who will ultimately pay. The people who live at Crumlin and Kimmage in working-class houses, built under the Fianna Fáil Government—at which Deputy Collins sneers and jibes—will find this tax very oppressive because they will have to pay. When, in due time, bus fares have to be raised, it is those people who will have to pay for this tax.

Captain Cowan

They will not be raised.

Mr. C. Lehane

They will not be, and the Deputy has been told that.

Mr. S. Collins

Purely wishful thinking.

Mr. MacEntee

I bet you they will be raised, because the Minister for Finance, who has already increased the rate of interest chargeable to local authorities, is not going to have to meet the 3 per cent. debentures which have been guaranteed by the State. If the interest on those debentures cannot be met, you will find the fares will go up in exactly the same way as the price of bread is going up in order that the Minister for Finance may reduce the subsidy. I am becoming discursive, but the Chair will have to grant me some indulgence.

An Leas-Cheann Comhairle

The Chair has given the Deputy a good deal of indulgence, and he knows it.

Mr. MacEntee

This tax will fall heavily on the people.

Mr. Rooney

What people will it affect?

Mr. MacEntee

Every person concerned in the transport of goods and people, whether as an undertaker or as a customer.

Mr. S. Collins

To what extent?

Mr. MacEntee

To a great extent.

An Leas-Cheann Comhairle

This type of cross-examination must not continue.

Captain Cowan

We are helping the Deputy to fill in the extra few minutes.

Mr. MacEntee

This tax is also a tax on commercial enterprise. Every man who makes an article in this country has to have it transported one way or another to his customer. If his carrier has to pay more for his petrol, or if he happens to be his own carrier and has to pay more, then the customer will have to pay more, for the article and, as the price of manufactured commodities go up, naturally the ability of the public to purchase them will decline and there will be a slowing down in the demand for manufactured articles. That is inevitable; there is no person who can gainsay that. Nobody can tell me that as goods become dearer the demand will increase, unless in time of absolute scarcity—famine scarcity. That is the position created here.

The Minister for Finance has admitted, through the Minister for Education that there are many other taxes that could be imposed instead of this one. He admitted that candidly and openly and I must congratulate him on his candour. Instead of taking any of these other taxes, any one of which would be less detrimental to the public interest than what we are discussing, he has chosen one which is oppressive, which is regressive in that it falls most heavily on those least able to bear it, and it imposes a handicap on industry.

Captain Cowan

We will send the Deputy a few good arguments for next Tuesday.

Mr. MacEntee

It would be very much better if Deputy Cowan, when he goes home to-night, would meditate upon the iniquities of this tax and, when I resume the debate on the next sitting day, perhaps he will be persuaded——

General Mulcahy

That this tax is oppressive and regressive?

Mr. MacEntee

——not by any words of mine, but by his own good sense and sound judgment, to recommend to the Minister for Finance that he ought to reverse engines in regard to this tax and take out of the bag some other one of the taxes which the Minister for Education has told us he could have imposed. I move to report progress.

Progress reported, the Committee to sit again.

The Dáil adjourned at 10.30 p.m. until 3 p.m. on Tuesday, 15th June.