A corresponding increase will, of course, apply to imported beers. From these changes in the beer duty I hope to gain an extra £2,400,000 in the present year.
During the year, strong representations have been made to the Government that the smaller brewers as a class were finding it increasingly difficult to make ends meet in face of rising costs of materials and manufacture. Actually, two have succumbed and some others are in grave difficulty. The Government are concerned at the possible consequent loss of employment in areas outside Dublin, undesirable in itself and particularly so in view of the State policy of encouraging the decentralisation of industry. Some measure of relief is necessary and I think this can best be given by raising the present rebate of duty of 10/- per standard barrel on the first 5,000 barrels brewed to 30/- per standard barrel. This relief will cost the Exchequer an additional sum of approximately £40,000 in the present year, leaving the net additional revenue from beer at £2,360,000.
SPIRITS.
The duty on spirits was raised substantially in 1947. Despite this and also despite successive increases in price unconnected with taxation, current consumption is far above that of 1947. Indeed, we have to go back to the early twenties to find a level of consumption comparable with that of recent times. Since additional revenue must be raised, I feel that I must look to this source for some of it. Accordingly, the excise duty on home-produced spirits is to be increased by £1 19s. per proof gallon, with corresponding increases in imported spirits. This will raise the price of whiskey by 6d. per glass, again, as in the case of beer, allowing some margin for the trade. By this means, I expect to get an additional £1,020,000 this year.
PETROL AND OILS.
Despite last year's increase from 1/2 to 1/4 per gallon in the duty on petrol the upward trend in consumption continued, duty being paid last year on some 68,500,000 gallons as compared with 45,500,000 gallons in 1948-49 and 63,800,000 gallons in 1950-51. There has also been a spectacular increase in the registrations of motor vehicles, which numbered 99,662 in 1939, 173,234 in 1949 and 223,444 in 1951.* In the light of these figures, we may assume that petrol will readily bear an additional 4d. per gallon. As usual, the duty on hydrocarbon oil other than petrol (i.e., on diesel oil), will also be increased by 4d. These increases should give an additional £1.1 million this year.
As announced by the Minister for Industry and Commerce on the 13th February, it is proposed to adjust to the advantage of the Exchequer, but without affecting the price of petrol, the situation which has arisen from the discontinuance of the admixture of industrial alcohol with motor spirit. That portion of the cost of a gallon of motor spirit which was attributable to the blend of industrial alcohol will be replaced by an additional duty of 1½d. without causing any rise in the price of petrol. The additional duty will come into operation on the 17th April, and will bring in an extra £400,000 this year making a total additional yield of £1.5 million from the petrol and oil duties.
MOTOR VEHICLE DUTIES.
I am afraid that transport, public and private, must before long be asked to pay more towards the upkeep and improvement of the roads. It will have been observed that I am making no call on the Road Fund this year for Exchequer purposes. I am obliged to forgo the customary £300,000 because of the need for increased outlay on roads, a need so great as to render inevitable an increase in rates of motor taxation in the near future. The necessary details have not yet been settled but they will be the subject of legislation to be introduced later this year.
VALUATION OF GOODS FOR CUSTOMS PURPOSES.
Before I turn to inland revenue, there are a couple of minor matters in relation to customs duty which I would like to mention. There is some doubt whether the existing definition of value in the Finance Act, 1935, is adequate in all cases for the purpose of the charge of customs ad valorem duty on imported goods. Accordingly, I propose to re-define value in terms which will not leave any doubt that the existing practice in valuing goods for duty purposes has the sanction of law. The definition now proposed has the added advantage that it is in accordance with that contained in the Convention on the Valuation of Goods for Customs Purposes which has been adopted by practically all European countries and to which in due course it is proposed that this country should adhere.
DEPOSIT OF CUSTOMS DUTY.
Provision will be made in the Finance Bill for regularising the system of allowing delivery of goods on payment of a deposit to cover the customs duty involved and for adapting this system to cases of dispute between the importer and the customs which may be the subject of legal proceedings.
INCOME-TAX.
The specific increases in the several duties of customs and excise which I have mentioned will bring in £10.38 million. But a further £800,000 or so must be found if the estimated current outlay is to be fully covered and for this I must look to the inland revenue. It is proposed, therefore, to raise the standard rate of income-tax by one shilling, making it 7/6 in the £, but the change is to be accompanied by important reliefs in consequence of which very many taxpayers will have to pay less than when the tax was 6/6 in the £.
The income-tax law as it stands provides for a deduction from the earned income of an individual of a sum equal to one-fifth of the amount of that income but not exceeding, in the case of any individual, the sum of £300. There should be greater incentive to earn more and it is, therefore, proposed to increase the deduction to a sum equal to one-fourth of so much of the earned income as does not exceed £800 and one-fifth of so much of the earned income as exceeds that figure, subject to a maximum deduction of £400. As a consequential matter, the rate of relief afforded to persons aged 65 years or upwards, whose income may be derived in whole or in part from investments and is not over £500, will be raised from one-fifth to one-fourth.
I propose also that new reduced rates of income-tax be introduced which will lessen materially the tax payable on the lower levels of taxable incomes. Under existing law the first £100 of taxable income is chargeable to tax at one-half of the standard rate and the balance is chargeable at the full rate. My proposal is that the first £100 of taxable income shall be charged at 3/- in the £ (representing two-fifths of the standard rate), the next £100 at 6/- in the £ (representing four-fifths) and the balance at 7/6 in the £.
Taken in conjunction with the suggested increase in earned income relief, this proposal will be of notable benefit to persons in the lower and middle income ranges. Hitherto an unmarried taxpayer has been liable to tax at the full standard rate if his earnings exceed £300 per annum or £5 15s. 5d. per week. Now, he must have more than £453 per annum or £8 14s. 3d. per week before he is liable at the full rate. An unmarried worker with £453 per annum will, under the proposals, pay £45 for 1952-53. His liability as settled by my predecessor is £56 0s. 7d. for 1951-52.
For the married man, and particularly the married man with children, the improvement under the new scheme will in certain cases be even greater. Up to now a married man without children has been liable to tax at the standard rate if his earnings exceed £475 per annum or £9 2s. 8d. per week. Under the new graduation he will not be charged at the full rate unless he has more than an annual £640 or £12 6s. 2d. a week. A married man with £640 per annum will, as proposed, pay £45 for 1952-53. He pays £59 3s. 0d. for 1951-52.
A married man with three children is chargeable at the full rate for 1951-52 if his earnings amount to £754 per annum. With the new reliefs he will need to have more than £929 a year before he comes into the standard rate zone. With £929 per annum he will pay only £45 for 1952-53 as against £61 16s. 3d. for 1951-52. The income-tax bill of a married man with three children will be less for 1952-53 than for 1951-52 unless his earnings exceed £1,348 a year.
A taxpayer who maintains at his own expense a relative incapacitated by old age or infirmity or who maintains his or his wife's widowed mother may claim for income-tax purposes a deduction of £50 in respect of each person whom he so maintains. It is, however, a condition under which the deduction may be granted that the total income of the dependent relative from all sources must not be in excess of £50 a year. It has been represented to me that, following the Social Welfare Act, 1951, a person whose sole income is an old age pension of £1 a week or £52 a year will no longer rank as a dependent relative in connection with the tax deduction. The increase in rates of pensions provided for by the Social Welfare Act did not come into operation until an "appointed day" which was the 5th October, 1951. While the income-tax difficulty does not therefore affect the year 1951-52, the question will arise for the coming year 1952-53. The taxpayer's relative need not of course be drawing an old age pension at all. He may, however, possess some small means of his own. It is clear that the dependent relative's income limit for purposes of the income-tax allowance should be increased and the amount proposed in the Finance Bill will be £80.
After allowing for the cost to the Exchequer of the substantial reliefs I have mentioned, the increase in the standard rate of income-tax will, it is estimated, yield only £910,000 in the current financial year. Much of this will come out of company profits rather than from employees' remuneration.
The problem of double income-tax as between Ireland and Great Britain was dealt with some years ago by an agreement under which either country exempts from its tax income flowing from within its territory to a resident of the other country. The "double resident", that is, the person who is resident in both countries for any given year, is assessed to tax both here and in Great Britain and both countries afford their share of double taxation relief. A section was included in the Finance Act, 1933, providing, subject to certain conditions, for a special relief to double residents who, by reason of differing methods of computing tax in the two countries, would otherwise have incurred some financial loss despite allowance of the ordinary double taxation relief. During the war, compliance with the conditions laid down by the Finance Act, 1933, was not always possible. It was considered that non-compliance through circumstances arising out of the war should not entail a refusal of the special relief, so Section 2 of the Finance Act, 1941, was passed to enable the relief to be granted if the Revenue Commissioners were satisfied that, but for the war, the statutory conditions would have been fulfilled. Having regard to the length of time which has elapsed since the cessation of hostilities, it is thought that the section in the Finance Act, 1941, should now be removed from the Statute Book and I intend to move the appropriate resolution. I may add that there is no actual case which is likely to be adversely affected.
EFFECT OF TAX INCREASES.
The sum of the net yields from the increased taxation on tobacco, beer, spirits, petrol, profits and personal incomes is £11,290,000, which is only slightly more than I need. This is not a year in which any major concessions can be made, apart from those already mentioned, but there are a few reliefs which, despite our meagre resources, I think it well to accord.
ENTERTAINMENTS DUTY.
I am proposing a concession as regards entertainments duty. Dancing has been the victim of varying fortune in this regard. The duty on entertainments was first imposed in 1916 but payments for the right to take part in dances did not come within its scope until 1932. In 1946 the tax, as applied to these payments, was abolished, but was restored by my predecessor in 1949. Dancing is the only amusement which is discriminated against by levying a tax on active participants as distinct from spectators. I have never been quite convinced that the discrimination was justified by any social purpose and I propose to abolish it altogether as from the 1st August next. This will cost £100,000 in the present year.
STAMP DUTIES.
It will be recalled that in the Finance (No. 2) Act, 1947, by which the rates of stamp duty on transfers of lands and houses were increased, provision was made to relieve from the increase transfers between persons related in a certain way. The relief was restricted to cases where persons were transferring property by way of gift to their children or other younger relatives or to their brothers or sisters. It has been represented to me that hardship may be caused by restricting the relief to these particular kinds of family transactions. For example, there is no relief where children want to transfer property to their widowed mother, or where brothers and sisters want to sell their interest in the family farm to that member of the family who is remaining on to work the land. To meet these cases I propose to include in the Finance Bill a provision extending the relief to include sales as well as gifts or voluntary dispositions, and transfers from the younger to the older relatives as well as transfers in the opposite direction. This will mean that the maximum rate of duty in all these cases will be 1 per cent.
Under 1947 legislation stamp duty at the rate of 25 per cent. was imposed on transfers of lands or tenements unless the instrument contained a statement certifying that the person who became entitled to the entire beneficial interest in the property was an Irish citizen or came within one of the other classes specified in the statute. The specified classes did not include a body corporate without a share capital, incorporated in the State after the 15th October, 1947. It follows that transfers to bodies corporate of this type are chargeable with duty at the rate of 25 per cent, even though the body may be composed exclusively of Irish citizens.
Another general type of body corporate not mentioned among the classes which the legislation specifies is the body corporate incorporated in the State after the 15th October, 1947, whose issued shares are wholly or mainly in the beneficial ownership of another body corporate incorporated here after the same date, where the issued shares of this other body corporate are wholly or mainly held by Irish citizens. In other words, under the law as it stands the question of the 25 per cent. rate of stamp duty would arise in the case of a transfer of lands or tenements to a subsidiary of an Irish company registered after the 15th October, 1947.
The two difficulties I have indicated are manifesting themselves in concrete cases and it is my intention accordingly to have remedial provisions written into this year's Finance Bill. Another matter which will be covered is the granting of exemption or virtual exemption from duty in instances where property is transferred and the transfer is being made from a parent company to its subsidiary.
DEATH DUTIES.
Where a sum of money is deposited with a banker in the joint names of two or more persons and one of the persons dies, the legal estate in the deposit vests automatically in the survivor; and the bank, before paying out to the survivor, will not require production of probate or of letters of administration. Before 1935, when preventive action was taken, it thus frequently happened that moneys on deposit were withdrawn by a surviving depositor in a joint account without the claim for death duties on the deposit having been discharged. Section 33 of the 1935 Finance Act prevented a banker from paying out money in a joint account to a survivor until any claim for death duties had been satisfied. The provisions of the section were limited to deposits exceeding £100 in amount. At that time estates not in excess of £100 in value were exempt from all death duties and, although the deceased might have died possessed of other property, it was considered safe to exclude deposits of £100 or under from the scope of the section. Since last year estates not exceeding £2,000 in value are no longer liable to death duties, so it appears to me that the limit of £100 for joint deposits in the Finance Act, 1935, might be lifted to £500, with some administrative saving and without undue risk to the revenue. The Finance Bill will contain an appropriate provision.
NET EFFECT OF ECONOMIES AND TAX CHANGES.
The reliefs I have mentioned will reduce the yield from increased taxation this year to approximately £11.2 million which, when added to the net saving of £3.9 million on food subsidies, gives £15.1 million or exactly the amount required to balance the current Budget.
PROSPECTIVE BORROWINGS, 1952-53.
The proposals which I have outlined will provide for one part only of the State's expenditure, that is for those public services which if they are to be continued cannot be financed otherwise than out of revenue. I am still left, however, with a huge volume of prospective expenditure, which if it has to be incurred, can be met only from borrowing. The total is £35,000,000 made up as follows:-
|
£ million
|
(a) Voted items classified in 1951-52 as “capital services”
|
9.28
|
(b) Provision for “Below the line” issues, as set out in the White Paper of Receipts and Expenditure, 1952-53
|
24.78
|
(c) Provision to cover guarantee of issue of shares by Industrial Credit Co., Ltd.
|
.50
|
(d) Provision for capital for Irish Steel Holdings, Ltd
|
.25
|
(e) Provision for capital for Agricultural Credit Corporation, Ltd.
|
.25
|
Total
|
£35.06
|
OBJECTS OF EXPENDITURE.
The total becomes £35.9 million when allowance is made for loan repayments by local authorities which will be reissued to them from the Local Loans Fund. In order to facilitate comparison with the particulars of public outlay on capital works given in last year's Budget statement, the following table shows the objects of this proposed expenditure of £35.9 million:—
|
1952/53 (estimate)
|
|
£million
|
Housing
|
12.05
|
Public Health:
|
|
Sanitary Services
|
0.67
|
Hospitals (excluding expenditure from Hospitals Trust Fund)
|
0.38
|
Agricultural Development
|
3.99
|
Electricity Development
|
9.00
|
Turf Development
|
1.75
|
Telephones
|
1.75
|
Schools and Other State Buildings
|
1.16
|
Afforestation
|
0.60
|
Fisheries
|
0.16
|
Transport
|
3.41
|
Industrial Credit Co., Ltd.
|
0.50
|
Irish Steel Holdings, Ltd.Agricultural Credit Corporation, Ltd.
|
0.250.25
|
Total
|
£35.92
|
Actual expenditure under the corresponding heads in 1951-52 was £33,000,000, as against the Budget estimate of £29.4 million.
It is, I think, unnecessary for me to elaborate on any of the major items included in the table. The Dáil is already aware of what is being done. It has legislated recently to make further finance available to the Electricity Supply Board and it will soon be asked to provide for our share— £2,250,000—of the purchase price of the Great Northern Railway Company, which is included in the table under the heading of "transport."
Only the last three items in the table seem to call for special mention. It will be necessary for the Industrial Credit Company shortly to make a public issue of shares in order to raise additional capital to fulfil its functions. This share issue will be underwritten by the Minister for Finance in accordance with the Industrial Credit Act, 1933, and the provision of £500,000 is made to cover this liability.
Hitherto Irish Steel Holdings has been financing both capital and current requirements on the basis of a bank overdraft guaranteed by the State. It is not desirable that this condition of affairs should continue and accordingly it is intended to provide the company with capital resources, so that only fluctuations in its current requirements will be financed by bank overdraft.
The £250,000 for capital for the Agricultural Credit Corporation is a provision to meet the additional finance which the corporation may require both to expand its normal lending activities and to give credits for the purchase of cattle and sheep, agricultural implements and machinery under the schemes announced earlier this year by the Minister for Agriculture.
SOURCES OF FINANCE.
I pass on, now, to consider the difficult question of how the £35,000,000 can be financed. Now, whatever the social or economic urge for particular forms of expenditure may be, we must always have regard to our capacity to undertake them and we must accept the fact also that there is a limit to what we can afford to spend on them in any single year. How that limit is to be determined is, of course, the crucial question, to which in the end only the lending public can supply a definite answer. In this particular year, 1952-53, we are under serious constraint. As I have already emphasised, a substantial reduction in the deficit in our external payments is of vital importance for national wellbeing. But this reduction cannot be secured unless the overall Budget, current and capital, be brought close to a balance; and this means that to the highest degree possible State expenditure will be met from current incomes of the public and secured from them in the form of ordinary revenue and loans and that the issue of new money will be avoided.
PROSPECTIVE SAVINGS.
Let us try to assess the prospects in regard to savings. The first item to be taken into account is the probable net receipt by way of "small savings", i.e., Savings Bank deposits and purchases of Savings Certificates. We may, I think, expect about £6,000,000 under this head, or roughly the same as our receipts in 1951-52. There was, however, no National Loan last year and it is the general experience that in a year in which a National Loan is issued—as it will be this year—small savings are attracted into the loan and the growth in Savings Bank deposits and holdings of Savings Certificates is correspondingly reduced. It may seem optimistic, therefore, to count on £6,000,000 but I am hopeful that we shall get at least that amount.
While there has been an appreciable increase in recent months in Savings Bank deposits, Savings Certificates, on the other hand, have been rather moribund for years past. So much so that it would clearly be of no use to campaign for increased savings in schools and factories unless we could offer more attractive terms. The present issue was first offered in 1946. I have decided to withdraw it and to replace it by a new issue which will yield £3 8s. 9d. per cent. per annum, free of income-tax, if held to maturity, as against the £2 10s. per cent., free of tax, which the present issue carries. The new issue price will be £1 and the £1 certificate will be worth £1 10s. at the end of 12 years. Everyone, even those who hold the maximum permitted amount of existing certificates, will be free to buy up to 1,000 certificates of the new issue. Arrangements are already in train for the introduction of the new certificates and it is expected that they will be on sale at all post offices as from Monday, 5th May.
The second heading under which receipts for capital purposes will become available is a minor one. The amount of the annual contribution income of social insurance funds which is available for investment has been running close to £1,000,000 for some years past. This source and small savings may yield about £7,000,000.
PUBLIC ISSUE.
A gap of £28,000,000 still remains and constitutes our great problem. In discussing it, I must mention the significant figures for the public response to the last three National Loans. The first of these, the 1948 issue of £12,000,000 was fully subscribed by the public, but owed its success in part to the fact that it was the first public issue offered by the State since 1941. Of the three issues, which were for a total sum of £39,000,000, the Irish public took up £27,000,000, making an average of £9,000,000 per issue. The average subscription by externs was £1,000,000. On this showing, it would seem that £10,000,000 is roughly the measure of the normal public response in an ordinary year to a National Loan.
But this year we must ask for much more, for if we were to raise only £10,000,000 in this way we should still be £18,000,000 short of realising our capital programme. Here we come to the hard core of our problem, which is that if we do not get a considerable proportion of that remaining £18,000,000 from the investing public a large part of the capital programme will be in jeopardy. The final determinant in the matter is the fact that we must not attempt to finance the public outlay by means which would damage our economy, perhaps irreparably. To do so would be culpable in the highest degree and would bring widespread hardship and social distress in its train.
From what I have said it will be clear that the extent to which the Government can give effect to its capital programme will be decided largely by the response to the proposed loan. In building up our country we cannot go further or faster than public support will carry us. The Government can designate the objective, it can prepare the plans but it is the citizens of the State and their institutions who must supply the means.
With all due regard for the position of our existing bondholders, we shall do our part to make the new issue attractive to all classes of potential investors. We can say truthfully to them that in this Budget, onerous as it may be, we have done what is essential, but no more than is essential to put the public finances in order and to revive confidence in the credit and stability of the State. On the solid basis thus laid we can build a future worthy of the sacrifices of the past, worthy too of the men and women of this generation, the first to be born in freedom but for that reason the more determined to preserve it. When Fianna Fáil left office in 1948, this State stood high in credit with the world. It owed no foreign debt. The encumbrances which the preceding Government assumed we shall, however, honour, as Deputy Costello rightly said, to the last dollar. But we shall not add to them. We shall rely on our own people to provide by their industry and thrift the capital necessary to build up the nation. We relied on them before during stringent and terrible days. They did not fail us then and they will not fail us now.