The Minister in his Budget statement indicated that he was prepared to consider a more general review of the code of direct taxation than was undertaken recently by the Committee of Inquiry into Taxation on Industry. It is desirable to make it clear that we here would strongly support that proposal. There is need now for a comprehensive review of our system of direct taxation. The report of the Committee of Inquiry into Taxation on Industry, and particularly chapter XI dealing with the general body of taxpayers, emphasises, by the information which it provides as well as by the observations of the committee, the need for that review. The committee in their report stated at paragraph 209:—
"It appears that income taxation in Ireland is neither broad nor general in its incidence, and that there is an unequal distribution of the total burden over the different sectors of the community. It is no longer a relatively simple tax, levied at modest rates. An increasingly formidable volume of legislation, and case law, adds to its complexity from year to year."
The information contained in the body of the report gives rather remarkable evidence, not previously available in the same form, of the increased incidence of direct taxation particularly as it affects wage and salary earners, those whose tax is calculated under Schedule E. Since the dates chosen by the committee pre-war, there has been an increase from 45,000 to 138,000 in the number of wage and salary earners paying income-tax, an increase from 62 per cent. to 79 per cent. of the total body of direct taxpayers. Furthermore, as a table published in that section of the report makes clear, the reliefs now given in respect of earned income to married men and to people with dependents, are relatively considerably less than they were before the war. The actual rates of relief have been increased, but the increase in each case was not in proportion to the decline in the value of money in the meantime.
The committee indicated that they had received evidence that the present rates of taxation on wage and salary earners had a serious disincentive effect. Salaries and wages carried about 18 per cent. of the direct taxation burden before the war, but are carrying 27 per cent. of that burden now. Having regard to the changes that have taken place, to the effect of the deterioration in money on the incidence of direct taxation, to the many anomalies to which the committee made brief reference, the time would appear to be ripe for undertaking the general review of the whole code to which the Minister referred.
The annual conference of the Fianna Fáil Party last year passed a resolution favouring, in principle, the introduction of a pay-as-you-earn system of taxation on personal incomes. I do not know if the Minister has as yet given any consideration to the type of inquiry that is to be set up or to the terms of reference to be given to those undertaking the inquiry; but it would appear to be desirable that there should be specific reference to the practicability and desirability of introducing here a pay-as-you-earn system of taxing earned incomes.
It is to be recognised that there are many difficulties likely to be experienced in devising a simple and workable system and it is clear that, before any official decisions are taken, it will be necessary to have consultations with those who are likely to be involved in the operation of such a system, whether as employers or as workers. Indeed, I think that the terms of reference of the inquiry should be drawn widely enough to permit of the examination of the possibility of abolishing income-tax altogether. I do not want to be taken as suggesting that the Fianna Fáil Party has taken any decision in principle in favour of the abolition of income-tax or has come to the conclusion that it would be practicable to abolish income-tax. But there is, I think, a growing volume of opinion in favour of the view that taxation of income should be replaced, if possible, by some system of taxing expenditure. In theory, it is altogether desirable that persons should be taxed on the basis of what they spend rather than on the basis of what they earn.
In this country, where there is very urgent need to encourage increased savings, it would seem to be wrong policy to tax income which is saved at the same rate as income which is spent. It may be that no workable system of basing the direct tax system upon expenditure rather than income can be devised, but anybody or any committee that may be entrusted with the task of examining the whole code of direct taxation should not be precluded by the terms of reference from examining that possibility.
I should like to urge on the Minister also that there should be no delay in getting this inquiry under way. We have had the experience of the Committee on Industrial Taxation and we know that it took a long time for that committee to produce its report: and, in matters of this kind, time is important. Having regard to the experience of the working of that committee, I think the Minister should consider entrusting this wider inquiry to people who can give a considerable amount of time and are prepared to sacrifice a considerable amount of time to the work. Many of the delays which are experienced in the working of Government committees and commissions are due to the inclusion in their membership of persons, who, while undoubtedly qualified by their experience to express views on the subject upon which they are asked to report, are not, because of other obligations, able to give any considerable time to the inquiry.
The work of investigating the whole of our code of direct taxation is likely to be a very specialised type of task. Not many people will be available who are qualified to come in with the initial information which would enable them to get down to the work without delay. As I say, I do not know whom the Minister has in mind. If he contemplates a committee in which members of the Dáil may be asked to participate he can assume that the fullest co-operation of this Party will be available to him. But we would like to feel that the work will begin soon and that the organisation of the work will be such as to offer a fair prospect of having it completed within a reasonable time. That will involve not merely the careful selection of members of the committee of inquiry because of their availability and willingness to give time to it but will also involve ensuring that they will have at their service an adequate staff to do the necessary research work. If the Minister is now in a position to indicate when he hopes to get the inquiry under way, what type of inquiry he contemplates, to whom he proposes to entrust it and the terms of reference, that information will be very useful; and, if he is in a position to do that now, I would urge him to consider the desirability of getting the whole process started at least during this session of the Dáil.