I move that the Bill be now read a Second Time. Most of the matters with which the Bill deals have already been discussed on the Financial Statement during a debate which ran for several days in this House. As these are now included in a series of sections which incorporate the matters I mentioned, I do not think there is anything completely new in the text of the Bill. The first section, which corresponds to Financial Resolution No. 1, is the usual section providing for the charge of income-tax and surtax for the current tax year and for the continuance of previous enactments in relation to those taxes.
Section 2 is a relieving section introduced to bring up to date the existing exemption from income-tax in respect of wounds and disability pensions and gratuities granted under the Army Pensions Acts.
Section 3 is also a relieving section. Its purpose is to extend the existing exemption from income-tax of certain allowances to widows of persons killed in the 1916 Rising, so as to include increases in those allowances granted under the Army Pensions (Increase) Act, 1949.
Section 4 is again a relieving section. It is designed to exempt from income-tax allowances payable to relatives of signatories to the Proclamation of Easter Week, 1916, and also the annuity payable under the Griffith Settlement Act, 1923. There seems to have been some confusion in regard to this matter. At an early stage allowances other than that made under the Griffith Settlement Act were exempted from the payment of income-tax. Later, income-tax was taken in the usual way, the reason given, I understand, being that, as the payment under the Griffith Settlement Act was not exempted, it was better to have them all on the same footing. It is now agreed that they should be all on the same footing.
Section 5 provides that the preferential rates of customs duty applicable under the provisions of Section 15 of the Finance Act, 1949, to unmanufactured tobacco grown in, and consigned from, a part of the British Commonwealth of Nations shall cease to apply as from the 31st July, 1950, except in relation to unmanufactured tobacco in a bonded warehouse on that date and unmanufactured tobacco shown to the satisfaction of the Revenue Commissioners to have been purchased before that date for the purpose of being imported into the State.
Section 6 includes special extra conditions of relief in connection with certain entertainments. Under sub-section (4) of Section 10 of the Finance Act, 1943, relief was provided from the payment of entertainments duty in the case of entertainments promoted for educational, philanthropic or charitable purposes, with the provision that the expenses were not to exceed 30 per cent. of the takings. Many representations have been made on the matter and on investigation they have proved to be well-founded. It is not very often possible to keep the expenses as low as 30 per cent. of the takings, so that the provision for relief was not, in fact, having the effect intended. Section 6 provides that the expenses limit of 30 per cent. will be increased to 50 per cent. with effect as from the 1st August.
Section 7 is to relieve from entertainments duty payments for admission to exhibitions of amateur wrestling promoted by the Irish Amateur Wrestling Association or by a club affiliated to, or under the direct control of, that association. Most of the games of an amateur type conducted under amateur auspices have been exempted from time to time from entertainments duty, but for some reason wrestling was left out. My attention was directed to that and there is no reason why it should not be included.
Sub-section (1) of Section 8 provides that, on and after the 6th July, a person authorised to conduct auctions by virtue of an auctioneer's licence or an auction permit, granted under the provisions of the Auctioneers and House Agents Act, 1947, may act as an appraiser without being licensed under the Appraisers Licences Act, 1806. It was really intended that that should be the case, but licences under the Auctioneers and House Agents Act are often taken out for a company and it is then not possible for the exemption really to go down to people who are called appraisers or people who get auction permits. There is a consequential sub-section which repeals as from the 6th July, 1950, Section 7 of the Appraisers Licences Act, 1806, which provides that all persons duly licensed to act as auctioneers may act as appraisers without being licensed as such under the Act. It is consequential on the passing of the auctioneers and house agents' legislation and the provision I am now making.
Section 9 gives power to the Minister for Finance to make regulations to adapt and modify the laws relating to customs and excise in relation to the special circumstances of air traffic and to give full effect to the provisions of the Chicago Convention on International Civil Aviation in so far as they relate to customs matters.
I am passing over Section 10 for the moment. I shall discuss it in connection with the conventions which are referred to in Schedules I and II.
Section 11 extends for a further period of three years the exemption from corporation profits tax afforded to certain public utility concerns, etc., which expired on the 31st December, 1949. Under the section railway companies will continue to enjoy exemption from the tax.
Again, I am passing over the sections which are contained in Part V and which deal with the conventions that are scheduled.
Section 16 secures with retrospective effect that last year's legislation increasing the stamp duty in respect of fines or premiums on leases shall not apply in the case of leases by a local authority under the Housing of the Working Classes Acts or the Labourers Acts or in the case of a lease by a society registered under the Industrial and Provident Societies Acts and made in accordance with a scheme for the provision of houses for its members.
Section 17 corresponds to Financial Resolution No. 4 passed on Budget day. It is designed to overcome a particular method which lawyers' ingenuity has discovered of breaking through the 5 per cent. tax. There was a legal evasion of the duty. I explained the necessity for this provision in my Budget statement. If I am requested to do so, I can go through it again. This has not been made retrospective but as from the date of the Budget speech.
Section 18 enacts that stamp duty shall not be chargeable on any receipt for payment of a pension under the Old Age Pensions Acts.
Section 19 embodies machinery to allow assurance companies to compound for stamp duty on industrial assurance policies. I referred in my Budget speech to these proposed arrangements for composition, which have been asked for by companies. It would seem, therefore, only fair to grant it.
I do not think the provisions of Section 20 were referred to during the discussion on the Budget. They are of a purely administrative character and do not raise issues of policy. It is intended to effect an amendment of Section 49 of the Finance Act of 1941. The Foreign Exchange Account was established by Section 49 of the Finance Act, 1941, following the making of Orders by the Government under the Emergency Powers Act, which obliged Irish residents to sell to the Minister for Finance certain specified currencies, mainly United States and Canadian dollars, which they then held or might acquire in future. Advances were made from the Exchequer to the Account to put it in funds to buy these currencies which, when purchased, were to be held for credit of the Account or to be re-sold to banks to meet essential foreign exchange needs. The proceeds of such sales of currency from the Account were to be paid into the Account and used either to purchase more currency or to repay the advances to the Exchequer. One or two slight flaws have been found in Section 49 of the Finance Act of 1941. This section is designed to remedy one or two of these points—it is not exactly right to say that the points were left uncovered, but the section was drawn in an extremely rigid way, and there was some doubt as to whether the provisions were elastic enough in certain respects.
Section 49 of the Act of 1941 made no provision for the investment of balances of foreign exchange held for credit of the Account. These balances are now almost exclusively United States dollars. In view of the importance of earning dollars, it has become necessary to invest any portion of such balances as are not likely to be immediately required for use in financing new transactions.
The main purpose of Section 20, sub-section (2), is to give the Minister power to invest foreign exchange held for the credit of the Account, but he is restricted to two types of investment, either interest-bearing deposit with a bank or Government securities of the country in which such exchange is held.
The rest is pretty definitely consequential, and I do not think any special point arises on it.
I am passing over Section 22 for the moment but I shall come back to it again.
Section 23 is the section which provides for the transfer of £300,000 from the Road Fund to the Exchequer for the purpose of meeting general charges falling on the Central Fund. When the Finance (No. 2) Act, 1947, was being enacted it was indicated that the proceeds of the increases in taxation on private motor vehicles provided for in it would not be available for roads expenditure but would be devoted towards meeting the cost of food subsidies. The additional revenue at the time was estimated at £300,000 for a full year. Since then there has been a considerable increase in the number of private vehicles taxed, so that the receipts from the increases in taxation would now be considerably more than £300,000 a year. This means that the Road Fund gains to the extent of some £100,000 to £150,000 not taken by the Exchequer.
Section 24 is the customary provision placing under the "care and management" of the Revenue Commissioners all taxes imposed by this year's Finance Act.
Section 25 is the usual provision in the Finance Act covering the "short title", "construction" and commencement of the Act.
There are two conventions scheduled to this legislation. They are extremely technical and detailed. The sections that refer to them are, first of all, Section 10, which refers to death duties, and the whole of Part V from Section 12 to Section 15 inclusive. Up to the time of the making of the convention a person in this country in receipt of United States income would, in the ordinary course, receive that income subject to deduction at the source of 30 per cent. United States tax. That is what the United States describe as a "withholding tax". It is charged on non-resident aliens who receive income from the United States.
As far as Irish residents are concerned, the convention will, in regard to certain classes of United States income, provide complete exemption from United States tax and, in regard to other classes of income from the United States, will secure that the rate of the United States tax is reduced. Where the income bears United States tax and is subject also to Irish tax, relief from the double tax will be granted in this country by means of a "credit" against Irish tax in respect of United States tax. Under the convention, interest is dealt with in Article 7. Patents and copyright royalties are dealt with in Article 8. Life annuities and pensions (other than Government pensions) are dealt with in Article 12. Any of these, arising in one of the countries to a resident in the other, will be exempted from the tax of the farmer country.
Residents in this country in receipt of United States income have hitherto received from the United States only £70 out of every £100 of the income. The balance, £30, has been deducted in respect of United States withholding tax. That is the tax on non-resident aliens who receive income from the United States. When the convention comes into force, the United States tax will no longer be deducted from the income of the classes referred to and the full amount of the income will be available for transmission here.
Authors in this country will find Article 8 of considerable interest. This article deals with exemptions in respect of copyright royalties. Irish authors have for a long time been complaining of the double taxation charged on royalties arising from sale of their works in the United States. The royalties have been subject to United States withholding tax, in the first instance, and to Irish tax in addition. For example, on a royalty of £100 a deduction of £30 has been made in respect of United States tax and, when Irish income-tax was subsequently charged, the author might be left with a net royalty of about £50. Under the convention, Irish authors will receive their United States royalties in full, without any deduction of United States tax. The income will, of course, be still subject to tax here.
An individual who is a resident of Ireland will, on the coming into force of the convention, be exempt from United States tax for personal, including professional, services performed within the United States if he is present in the United States for not more than six months during the tax year and the services are performed on behalf of a person resident here. That would cover an actor sent to the United States by an Irish theatre.
One feature of this convention is the reciprocal exempting provisions for shipping and aircraft profits. In Article 18 there are reciprocal exemptions from tax in the case of visiting professors, students and business apprentices. The students and apprentices are covered in Article 19. In Article 10 Government salaries and pensions are to be taxable in the paying country and exempt in the other.
As regards Irish residents the convention will, as to the classes of United States income already mentioned, provide complete exemption from United States tax and will, as to other classes of income from the United States, provide that the rate of United States tax will be decreased. Where the Irish resident receives income which bears United States tax and which is subject also to tax in Ireland, the convention will give relief from the burden of the two taxes by providing that a credit may be granted against the Irish tax in respect of the United States tax. There is a credit system of relief, and this was one of the solutions recommended by a group of experts who studied the general problem of double taxation under the aegis of the League of Nations. It is the method most in use in modern tax conventions.
United States income coming to Ireland comes largely in the shape of dividends. Hitherto the Irish recipient of a United States dividend got it under deduction of 30 per cent. withholding tax. In addition to that, he has had to pay, without double taxation relief, Irish tax on the dividend which already has been diminished by tax in the United States. The convention will bring substantial relief to such persons. In the first place, the withholding tax is to be reduced by one-half, that is, to 15 per cent. That is to be found in Article 6. When the Irish shareholder's liability to tax in this country is being computed he will in future be allowed double taxation relief by way of a credit in respect of the 15 per cent. tax in the United States. United States withholding tax on mineral royalties arising in the United States to Irish residents is likewise to be eased from 30 per cent. to 15 per cent. and double taxation relief may be similarly allowed. The convention is reciprocal and it brings relief to a person in the United States with income from Ireland as well as to a person here drawing income from the United States.
There is also a convention for the avoidance of double taxation on the estates of deceased persons. The liability to double taxation, as between the two countries, on the estates of deceased persons arises, firstly, where the person was domiciled in Ireland and had possessions in the United States at his death or, secondly, where the person was domiciled in or was a citizen of the United States and had possessions in Ireland at his death. Under the convention, where there is double taxation of this kind, the home country, the country in which the deceased was domiciled, will allow against its own tax a credit in respect of tax paid in the other country on possessions deemed in accordance with the convention to be situated there. The home country may also, irrespective of domicile, be the United States in the case of a United States citizen.
The broad result of the relief will be that, instead of the deceased's estate having to pay estate tax both in Ireland and in the United States, only the higher of the two taxes will be payable. Many Irish people who go to the United States return to Ireland in later years and die domiciled here. These people, having been accustomed to keeping their money in the United States banks, often leave it there even after their return to Ireland. Under the law as it existed prior to the convention, money so kept would be treated as an asset situated in the United States at the deceased's death. The convention contains a special code for determining the situation of certain classes of property and, among other things, it enacts that debts due to the deceased, which includes money in bank, are to be deemed to be situated where the deceased was domiciled at his death. Therefore, money in the bank is deemed to be in Ireland for death duty purposes if the deceased dies domiciled there. In such a case the United States will charge no estate tax on the money. The person entitled to the money on the death will, under the convention, receive it undiminished by United States estate tax.
The same position arises in the case of a policy of insurance taken out on his life with a United States company by a person who dies domiciled in this country. The convention secures that money received under a life insurance policy is to be deemed to be situated where the deceased was domiciled. If he dies domiciled in Ireland, the money will be deemed to be situated here and the United States will charge no estate tax on it. The person becoming entitled to the money on the death will receive it free from United States estate tax. If the deceased is a United States citizen and retains his citizenship of that country, the United States would charge estate tax on the asset, whether it is money in a United States bank or money received under a life insurance policy with a United States company. The United States, in that event, would allow Irish death duty on the asset as a credit against United States estate tax on it.
The conventions are very long, very detailed and highly technical. If Deputies have any difficulty with any part, after reading what I have read, I would be glad to make the matter more clear. Deputies may desire to put questions to me. Should they do so, I shall be in a position to reply to the precise points put to me. I have left over Section 22.