Dáil Éireann díospóireacht -
Tuesday, 24 Jun 1958

Vol. 169 No. 4

Finance Bill, 1958—Committee Stage (Resumed).

Debate resumed on the following amendment:—

In sub-section (2), page 14, line 12, before "of" to insert "or in any premises adjacent thereto"—(Deputy Sweetman.)

Mr. Sweetman

Before we adjourned consideration of this amendment, we were discussing whether this part of the Bill referred to directors, no matter what they were paid. I think we concluded that it was clear that Part IV of the Bill does refer to a director, whether he receives any remuneration or not. The exception included in sub-section (3) of Section 24 refers only to employees. If a person who is a director is caught under any part of this Bill, then he is caught notwithstanding the fact that the remuneration he draws out of the concern is far less than the limit of £1,500 specified in Section 24, sub-section (3). The effect of that clearly appears to me to be that under Section 22 in towns in rural Ireland many small businesses which happen to be private companies with small capital and small fixed assets, where the directors either live over the shop or, perhaps, have a room behind the shop for meal purposes, will, for the first time, be charged a rental for tax purposes in respect of the accommodation.

To me, that seems completely unnecessary, and to be as far removed, as chalk is from cheese, from the type of deliberate fake on which the Minister founded this Bill in the earlier discussions. If a company operates in Dublin and a director of that company prefers, for his own convenience, to live on an estate in Meath or Kildare some 20 miles away and, for the purpose of avoiding tax on it, ensures that it is bought by the company, I can understand that in such a case the Minister would provide that such a person would be assessed on a rental basis. But where we have—as there are throughout the country—a great number of small business people living adjacent to their work for the purpose of carrying on that work—not necessarily, or, to use a phrase we have already met, "wholly, necessarily and exclusively living there"—I do not think it is right and proper that they should be charged as provided in this section.

I asked the Minister some specific questions earlier, and as the Minister has decided to reject the method of getting the Income Tax Commission to report to us, I think the House is entitled to an answer to those questions. What is the purpose, the true meaning, of Section 22 in regard to benefits in kind? I am not interested at this stage in what is intended or in arguing about whether the Revenue Commissioners will "go for" this man or that man. I take the view already stated by Deputy Dillon that when the law is there, it is the Revenue Commissioners' duty to comply with the terms of the Act and operate accordingly.

I want to know clearly from the Minister are we correct in thinking that the phrase "in any of its business premises" in line 11, page 14, sub-section (2) of Section 22 means, as we think, that any director, even of the smallest business concern that is incorporated, who happens to live overhead will have the value of his living accommodation added in for tax purposes, or that even if he has a room at the back of the shop which is used for private purposes, as apart from shop storage, the value of that will be taken to be a benefit in kind and assessed for tax purposes?

If I am correct in understanding from the Minister earlier to-day that such benefits are to be included for the first time in taxation by reason of Section 22, then I think we have reached the position in which we can truthfully say: "This is legislation gone mad." Nothing in relation to the type of case the Minister mentioned earlier would justify provisions of that sort, and I think it is time the House considered whether, under the guise of a technical Bill to get over imperfections, something really radical is being "put across" us all.

Mr. Haughey

In spite of what has been said, I am trying to be helpful, and it seems to me that it is quite possible to argue that if one——

Mr. Sweetman

Am I to take issue with the Deputy when he says he is trying to be helpful? Does he imply that I am not being helpful?

Mr. Haughey

I can only defend myself.

Mr. Sweetman

Inasmuch as there is no implication, I am satisfied.

Mr. Haughey

There is no implication. It is quite possible to argue on sub-section (1) (a) of Section 22 that it can be read as referring to a body corporate incurring expense in connection with provision for any of its directors employed by it in an employment to which this part of the Bill applies. If it is an employment to which this part of the Bill applies, it is defined in sub-section (2) of Section 24 as an employment which brings in emoluments exceeding £1,500 per annum. It seems to me that anybody to whom this section is attempted to be applied in future will be able to make that argument and will be able to say that a director employed by a company and whose income does not exceed £1,500 a year will not come within Part IV of the Bill.

Mr. Sweetman

Does the Deputy make the case that "employed by it" means directors as well as other persons?

Mr. Haughey

Precisely.

Mr. Sweetman

The Deputy may be right but I should prefer the Deputy to make the argument rather than myself.

Mr. Haughey

I may be wrong but I am sure somebody will argue it some time.

Dr. Ryan

I am doubtful if Deputy Haughey's interpretation is correct. It is not what I meant to be in that clause, if it is correct. We shall have to look into it.

Mr. Haughey

We shall have great fun going to the Supreme Court.

Dr. Ryan

Deputy Sweetman wants to know the purpose of Section 22 in regard to benefits in kind. At present, benefits in kind are not subject to income-tax, a benefit in kind being defined as a benefit that is not readily convertible into cash. That is the main thing at the moment.

If a director gets a motor car, that is convertible into cash and therefore it would be assessable under the present law. If a house is presented to him, the same would apply. However, if he got the use of a house, it would not apply because he could not sell it and therefore it would not readily be convertible into cash.

Mr. Sweetman

Would the Minister mind repeating that? I have not followed him.

Dr. Ryan

If the benefit in kind at the present time is readily converted into cash, it is subject to income-tax. If he gets a motor car handed over to him completely by the company——

Mr. Sweetman

Transferred into his name?

Dr. Ryan

Yes. That is readily convertible into cash and therefore at the present time it would be subject to tax. The same would apply if he got a house. However, if he got the use of a house——

Mr. Dillon

Or a car.

Dr. Ryan

Quite right. He could not sell that and therefore tax would not at present be applied. The object is to bring all these benefits in kind into the same category and subject to tax. The discussion has been raised particularly on the country business—as Deputy Sweetman put it just now, on the man who is living either over or behind his business, a small business in the country. In the first place, if you take a proprietor—not a company, as the Deputy knows—he is assessed on the profits of his business. As far as the premises are concerned, the rule at the moment is, and will remain the rule, I think, as far as this Bill is concerned, that he gets a deduction in respect of Schedule A tax on the business part of his premises. In other words, premises are divided between the living part and the business part.

Mr. Sweetman

Schedule A tax is an expense in the Schedule E accounts.

Dr. Ryan

But he pays on the living part of his business.

Mr. Sweetman

Schedule A.

Dr. Ryan

Yes. I am talking about the proprietary businessman, part of whose premises is living accommodation and part business. That is how it works out. If that man converts his business into a company and he is a director of the company with his wife, perhaps, and maybe a son or daughter and if he lives in part of the premises, the position then would be that he would get a deduction of the whole of Schedule A, even though he is living in part of it.

Mr. Sweetman

That would not be deducted. The company would pay on it.

Dr. Ryan

It is allowed against profits.

Mr. Sweetman

It would be taken in as a deduction only because it has already been taxed.

Dr. Ryan

It is deducted from his profits.

Mr. Sweetman

Purely because he is not to be taxed twice on the same ground. He is taxed under Schedule A.

Dr. Ryan

It is deducted from his profits.

Mr. Sweetman

Because he has paid the tax under Schedule A. There is no doubt about that.

Dr. Ryan

He may have paid it but the amount he has paid is deducted from his profits. Therefore, it is the same as a relief fund, as far as I can see.

Mr. Sweetman

I cannot see that at all.

Dr. Ryan

The amount he pays on the whole premises is deducted from his profits on the whole premises. To that extent, having converted himself into a company, he gets the advantage of the deduction for the whole premises. Therefore, he has an advantage there over being the proprietor, as he was previously.

Mr. Sweetman

The proprietor is brought in under Section 28.

Dr. Ryan

What is brought in here is that he pays, therefore, on the living part of the premises—but he pays under Schedule A only in respect of the valuation, not the letting value.

Mr. Sweetman

Under this section.

Dr. Ryan

Yes, he pays on the valuation. What is more, he gets the advantage of the four-fourths, not the five-fourths. He is not treated very harshly. He is merely brought into line with a proprietor who is running a business on the same premises, that is, living in part of the premises and using the other part of the premises for the business. That is as far as we have to go at the moment on that section. I submit that the small man who lives on his premises is asked to pay Schedule A tax only on the part he lives in. He is asked to pay only on the poor law valuation of that part and on the basis of four-fourths and not five-fourths.

Mr. Sweetman

No. If the Minister will look at line 1, page 14, he will see that where these things arise under sub-section (1), at the bottom of page 13, Rules 1 and 9 of the rules applicable to Schedule E are to apply. That has nothing to do with Schedule A.

Let me give the Minister an example. Take a small country shop the valuation of which is £10. The valuation on the shop is £5 and the valuation on the house is £5 also. As the position stands, the Minister gets tax on a Schedule A assessment. I always forget whether it is five-fourths or not, but whether it is or not does not matter. The Minister gets tax of £10 under Schedule A on the valuation.

As the Bill now stands the Minister will get tax of £10 under Schedule A and, in addition, will get tax on the estimated letting value of the private part of the house, less £5. The estimated letting value of the house, the private part, will be much more than £5. Let us say it will be £50 and it means accordingly, as I see it, the tax here will be assessed under Rules 1 and 9 of the rules applicable to Schedule E, because all these directors' emoluments come in under Schedule E.

If the situation was that there was purely a charge for Schedule A, then, of course, I could understand the case the Minister is making, but, from beginning to end in Section 22, there is not one word of mention of Schedule A. The only thing in Section 22 that is mentioned in relation to any schedule are Rules 1 and 9 of Schedule E. I do not want to weary the Minister by reading out Rules 1 and 9 of Schedule E, but nothing in Rules 1 and 9 refers to Schedule A. That being so, it seems to me quite clear it must be in relation to the assumed rental of the private part of the house that the assessment is being raised.

Quite apart from all that, we have been arguing this on the basis of the private company in the small town in rural Ireland. I am not a bit happy that we are even restricted to that, because Section 28 in sub-section (1)— or rather, to be more accurate, in all its sub-sections, and particularly in sub-section (3)—makes the provisions of this Part of the Act applicable to individuals trading in exactly the same way as if they were a company. Therefore, I think we may be coming back to the situation that the small shopkeeper is caught in rural Ireland, even if he is not incorporated, but that is an argument we will have to have on Section 28 when we come down to it.

As framed at present, however, there is not one word in Section 22, from beginning to end, about Schedule A. Perhaps the Minister can show me where my reading is faulty, but I cannot find one word about it. All I can find is the reference that the tax, the benefits here, are to be computed under Rules 1 and 9 of Schedule E. That means also it will be taken in on Schedule A, but on the assumed occupier's rentals, and for the life of me I cannot see where we are travelling in this section.

It seems to me we are putting on the small shopkeeper down the country, certainly those who are incorporated, and possibly, when we come down to Section 28, those who are not incorporated, the man who has not incorporated himself into a company, an additional and penal tax. Anybody who has experience of rural Ireland at present knows the shopkeeper in the city, in the town, and in the village is having a pretty rough time, and to me this seems the wrong time to impose a burden on him such as is included in this section.

The difficulties we have had already on it when Deputy Haughey and I differed on the interpretation, and the difficulty when the Minister gets up and says it is Schedule A, when Schedule A is not mentioned here, all come back to the same point, that this is a technical Bill and the House should have had before it the report of people competent to report objectively on proposals like this, such as the Income Tax Commission at present sitting. Certainly, the more I go into this Bill, the more fogged I get and—I do not mean this in any offensive way to the Minister—the more the Minister tries to explain what the sections in the Bill mean, the more it appears from his explanations that it means something different from the language contained in the Bill.

Mr. Dillon

I put this to the Minister: we are trying to pursue a discussion on this Bill as objectively as possible. Deputy Sweetman is professionally interested and has some experience of income-tax law. The Minister is advised by the Revenue Commissioners and Deputy Haughey is professionally familiar with the income-tax code. I am an ordinary legislator. The position is now reached in which Deputy Sweetman takes the view the Bill as submitted means one thing. Deputy Haughey takes the view it means something else and the Minister takes the view that it has yet a third meaning. When the Minister expresses his view as to what he intended to convey and to effect by this Bill, Deputy Haughey's comment is he would go to the Supreme Court on that issue, believing honestly that the Bill does not mean what the Minister intended it to mean. I do not believe any of the participants in the discussion are in bad faith. I believe the truth is that we are all trying to speculate as to how this legislation will operate in our conditions and, no matter how hard the Minister tries, his mind must be influenced by how this legislation has operated in Great Britain in the circumstances obtaining there.

I want to renew my submission to the House that it will not operate in our conditions as it has operated in Great Britain, or as it may be expected hereafter to operate there. Our conditions are entirely different and I want to say, quite deliberately—and I think this submission should carry weight with the Minister, as I also have as long experience of legislation in this House as most Deputies and I believe I have given this Bill as close consideration as any other Deputy— I do not know what it will mean. I do not believe I have at my disposal the means of determining the impact which this legislation will have on a very large part of our people, but I do believe there is available to this House, if the Minister will but make it available, the means to give reasoned judgment on these proposals, and that means is to ask either a special committee of this House, or the Income-Tax Commission at present sitting, to give consideration to this part of the Bill, with power to hear evidence and send for documents. I mean no disrespect to Deputy Sweetman or to the Minister when I say it is hopeless to raise the kind of problems which must occur to the mind of any Deputy in the Opposition and ask the Minister across the House what will happen in this contingency and that.

On the other hand, if we had a special committee of the House, or if I were a member of the Income-Tax Commission, I would expect the Revenue Commissioners, if called upon to give evidence, to have in their establishment—as I know they would have—perhaps two or three men, or maybe four, who would be between them equipped to give an authoritative answer to any hypothetical case of a reasonable character that would be placed before them in order to elicit information. I do not believe any Minister for Finance can be expected to provide information of that character in the course of the Committee Stage of a Bill such as this, because no matter how exhaustively he had briefed himself, if he is fit for the job of Minister for Finance he ought not to know the income-tax code with that degree of familiarity, because he ought to have more important things to be troubling himself about.

Surely the Minister will agree with me that to launch the whole commercial population of this country into the vortex of Part IV of this Bill, without any of us in this House knowing precisely what we ourselves are doing, is to carry parliamentary irresponsibility to a fantastic length?

I am obliged again to call to the memory of the House the situation in which we now stand. It is the duty of the Revenue Commissioners, who have a quasi-autonomous status under our Constitution, from time to time to make recommendations to the Minister for Finance, whoever he may be, for legislative action which, in their judgment, will better protect the revenue. It is their duty to state the revenue point of view and it is for us in Dáil Éireann, when these proposals are submitted to the Dáil, to present the case of the ordinary people of the country. If what the Revenue Commissioners consider to be requisite for the adequate protection of the revenue, appears to us to impose an unreasonable burden on the average taxpayer —either in the size of the tax it seeks to levy or in the method to be employed in the levying of the tax—it is for us to make the case against it. I shall have occasion to do that, in connection with an amendment which I shall move later on, in regard to the levying of taxation; but when I come to make that case, I should have at my disposal the facts, and I should be able to communicate the facts to the House and let the House pass judgment on them. The difficulty in regard to Part IV is that I do not know the facts; the Minister does not know the facts; Deputy Haughey does not know the facts; Deputy Sweetman does not know the facts; nobody knows the facts. What exasperates me is that we are not in a position where it is impossible to ascertain the facts. We have machinery to do that; and all I am asking is that before we legislate we should use that machinery.

Then, when we have the facts, we may not all agree. The Minister may adhere to his view and, with all the facts before him, he may still stand on this. We on this side of the House may agree or disagree with him. A decision will then be taken by the votes of the Members of Dáil Éireann. It seems to be reckless to persist in this Part of the Bill when manifestly none of us understands what it will mean.

If the Minister will not accept the suggestion that it go to the Commission on Income-tax—where I think it ought to go—will he consider referring this Part of the Bill to a Special Committee of Dáil Éireann, with power to hear evidence and to send for papers? Whatever course he decides upon, will he at least deliver us from the necessity of finally passing on this Part of this Bill, when no Deputy, including the Minister, understands it? Is that understood? Let me recall to the Minister his yearning solicitude for a reasonable approach to his legislative proposal and let me exhort him, if he wishes to encourage such an approach, to give some signal on his part that, where reasonable representations are made, they will secure some compromise from him?

I cannot for the life of me see how there can be any reasoned argument against the simple proposition that, if none of us understand Part IV of this Bill, we should not pass final judgment upon it until we take the simple and readily accessible means available to us to secure an understanding of it— and then, with that information, give our judgment.

An Leas-Cheann Comhairle

Amendment No. 24?

Mr. Sweetman

Is the Minister not going to explain how Schedule A comes into this section?

Dr. Ryan

If the Deputy would look at sub-section (3) of Section 23, he will see that, where a body corporate is assessed or assessable under Schedule A in respect of any premises, and so on, the amount of the assessment under Schedule A will be the amount taken into account and the annual value referred to is treated as remuneration of the director concerned, that is, the Schedule E assessment will include the amount of the Schedule A tax.

Mr. Sweetman

Will it be exactly the same as the Schedule A tax? I do not think so, on this.

Dr. Ryan

It will. If the Deputy looks at paragraph (b), the effect of that is to make it four-fourths instead of five-fourths. The section there was the section which raised the four-fourths to five-fourths.

Mr. Haughey

Is it not also true that if the director we are worried about, namely, a proprietor, is taxed under Schedule E and if this Bill eventually passes, a corresponding amount will be allowed against the profits of the company?

Dr. Ryan

That is right. It will.

Mr. Haughey

And, as he owns the company, he does not lose?

Dr. Ryan

That is right.

Mr. Sweetman

Why is it that Rules 1 and 9 of Schedule E are referred to in sub-section (1), if it is to be Schedule A?

Mr. Haughey

It seems to me that the value is determined by means of a Schedule A valuation, but it is treated as income under Schedule E, Rule 1, and deductions against it will be allowed under Rule 9. They use Schedule A only to find the value in respect of Schedule E.

Mr. Sweetman

Is it true that there cannot be an assessment in respect of estimated revenue?

Dr. Ryan

No.

Mr. Sweetman

Earlier the Minister said there would be an estimated revenue.

Mr. Haughey

That does not apply to premises.

Mr. Sweetman

I thought it did not, until the Minister said earlier that it did.

Dr. Ryan

I think that, in exceptional cases, the Deputy is right.

Mr. Sweetman

I think there is power here that it can be a rental. If I were clearly and categorically assured that there was nothing in this except the apportionment of Schedule A, I would be quite happy.

An Leas-Cheann Comhairle

Shall I put the amendment?

Mr. Sweetman

No. I want to see whether I am going to get any assurance on that or not. I think it means more than Schedule A in certain circumstances.

Dr. Ryan

Perhaps the Deputy would read it again. I shall go back to sub-section (3) (a) of Section 23. It says:—

"When a body corporate is assessed or assessable under Schedule A in respect of any premises the whole or any part of which is made available by it as living or other accommodation for any of its directors or employees, and either the body corporate pays no rent in respect of the premises or the annual amount of the rent paid by it is less than the amount of the assessment under Schedule A on the premises."

"If the amount is less than the amount of the assessment under Schedule A."

Mr. Sweetman

Then it is Schedule A or the rent, whichever is the greater.

Dr. Ryan

If there is a high rent charged the value of the rent will be taken. Deputy Sweetman has in mind a case where there is no rent paid.

Mr. Sweetman

I am thinking of a case where there is a greater rent.

Dr. Ryan

It is less than Schedule A and this applies where there is a high rent. Then the valuation is taken. That is why I referred on another occasion to the rentable value being taken.

Mr. Sweetman

We will come back to it on the Report Stage. It is as clear as mud.

Amendment, by leave, withdrawn.

Mr. Sweetman

I move amendment No. 25:—

In sub-section (2), page 14, line 13, to delete "solely".

This is an amendment to delete the word "solely". What I have in mind— and this reduces the case, as I read the section, to its farcical absurdity—is that a company pays a commercial traveller, not a director—to get away from the director class—more than £1,500 a year. They pay him £1,501 a year and in the course of the traveller's business he goes down to Nenagh to sell the company's wares and travels in the company's car. He has to have the company's car to go down to Nenagh. When he has finished his business in Nenagh and has had his tea, on a fine summer evening, he decides to go and play a game of golf and he drives the company's car out to the golf course.

As this section is phrased an assessment has to be made on him for the proportion of the car's expenses driving out to the golf course in Nenagh, because the word "solely" is there. He has the car for the purpose of the company's business. He must have it for the company's business but he is not going out to play golf that evening on the company's business and it seems absurd to suggest that he must operate——

Mr. Haughey

That is the wrong section.

Mr. Sweetman

Sub-section (2)—"supplies and services provided". The use of a car is a service.

Mr. Haughey

But "in any of its business premises".

Mr. Sweetman

No, "supplies or services provided for the director or employee and used solely in performing the duties of his office or employment". That is not restricted to business premises, it is "in any of its business premises,". It refers particularly to its accommodation, or perhaps, on this occasion the Minister will agree with Deputy Haughey's interpretation and not with mine. Supposing that my interpretation of the word "solely" is wrong and this does apply to business premises only, then I can conceive an exactly similar performance in relation to business premises. We go back to our country shop and the back parlour. A person has a chair there to sit on, waiting patiently for a customer to come in to the front of the shop. Because it is not in the business premises if a chair is bought to sit on and rest on—or even in the business premises but is not for the business concern—it will cover the same thing.

I confess that I put this amendment down believing that the business premises referred to accommodation and I am thinking in terms of services in relation to travelling. Quite clearly what should be the law is that if a person has to have a car to travel around the country on business, and happens to be in a country town when business hours are finished, he should not be in the situation of having to clock up a proportion of his time as being pleasure and to go down for tax assessment.

Mr. Dillon

Am I correct in my recollection that the Minister said in his introduction to the previous amendment that he differentiated between the transfer of a house, or a motorcar, to an employee and the transfer of the user of the house or the motorcar to the employee? I understood the Minister to say that if a house was transferred to an employee that that was a benefit readily convertible into money and would be taxed——

Mr. Sweetman

No, under the existing law it can be taxed.

Mr. Dillon

I am only repeating what I thought the Minister said. He said that the user of a house was not readily convertible into cash and was not liable to be taxed and that the same applies to a car. If it becomes the property of the employee it becomes a service that is a benefit that can be converted into cash and is taxable, but if the company retains the ownership of the car, but gives the use of it to the employee, inasmuch as that is not readily convertible it is not taxed.

Dr. Ryan

That is the position now.

Mr. Dillon

And the purpose now is to change that and to make both benefits taxable where there is a transfer.

Dr. Ryan

With regard to Deputy Sweetman's reference to Section 2, he must recognise that this is to exempt the director or employee under certain circumstances and only in a business premises. If it were not in the Bill it might imply that a managing director supplied with an electric fire for his office might have that regarded as an amenity on which he would have to pay tax. The same would apply to the employment of a typist and so on. This is put in to cover points of that kind, where he has accommodation, supplies and services on the premises itself and they are used, of course, solely in the performance of the duties of his office. That would be exempt from tax. When you read it that way the word "solely" is necessary.

Mr. Sweetman

What about the electric fire the Minister mentioned?

Dr. Ryan

Let us take a cocktail bureau or whatever you call it.

Mr. Haughey

In other words, the employment of the typist is restricted to business purposes?

Dr. Ryan

He should use the cocktail cabinet solely for his business friends. That is the point.

Mr. Dillon

Let us drop the cocktail cabinet and the typist for a moment. I want to call the Minister's attention to an experience that he and I have shared, and we have not shared many. One of them is this. The question arose on the issue of the use of ministerial cars. The practice in England is that a British Minister can use a Government car if he is driving on Government business, and you have the absurd situation in which you will see a British Minister travelling half way down Whitehall to his office and then solemnly clambering out of the official car and getting into his private car, going around the corner to the Chelsea Flower Show, coming back and then clambering back into his official car.

Both the Minister's Government and our Government examined this question. We came to the conclusion ultimately that unless you wanted Ministers to undergo a crise de nerfs day after day the only rational way of dealing with the situation was to say that if a Minister is granted the use of a State car, he can use it as if it were his own car while a Minister and when he ceases to be a Minister he cannot use it at all. But we cannot put on any man the obligation of settling a case of conscience every time he steps into a ministerial car. You are creating such a situation in regard to a man's everyday affairs by declaring that something shall be solely used for the purpose of his business and if it is used for any other purpose he is liable to be taxed.

Is it seriously asked that if a man is dictating business letters in the morning and remembers half-way through the proceedings that he wants to pay the gas bill and asks his secretary to type an envelope and send a postal order to the Gas Company or to the E.S.B., he breaks the law if he does not return the typist's time as something that is taxable? Is it seriously argued that if after business hours he is waiting to go to the theatre and puts his feet up, reads a novel and turns the electric radiator on to keep him warm between the time the office shuts and the time he goes to take his wife out, he is under a moral obligation to inform the Revenue Commissioners?

I know the Minister is inclined, as any rational man would be, to regard these things as a reductio ad absurdum. Of course, they are. But you have no right by law to create dilemmas every hour in the day about which conscientious people may have scruples. I was reading to-day in the paper that a man laying bricks in Moscow has just become entitled as remainder man under the law in the City of Dublin. He has announced that not only has he changed his surname but that he has a conscientious scruple about enjoying an income under the will or becoming the owner of any property. People have a right to be scrupulous if they want. They may be so conscientious that they may not reconcile themselves to minor infringements of the law. I agree that you cannot expect the law to be drafted to meet the exceptional citizen, but you can demand that the law will be drafted in a form in which it is possible to conform to the law. We have no right to enact legislation here which is of a character that nobody can possibly conform to it no matter how anxiously they try.

Again, I am putting it to the Minister that the evidence of these problems, as they arise here to-day, highlights the fact that this part of the Finance Bill is not the kind of legislation that ought to be undertaken by this House without adequate prior inquiry. No Parliament in the world has done it. Am I not right in that? Legislation of this kind has been introduced elsewhere but in each case it has been consequent on the report of a Royal Commission or a corresponding body which has had power to send for people and documents and to take evidence. We are trying to legislate without the benefit of that prior precaution. I am as certain we are doing wrong as I am that I am standing here.

I am perfectly certain that out of this piece of legislation there will grow events in the forecasting of which Deputy Haughey's words are prophetic. Case after case will come to the Supreme Court for decision ex post facto, and if that happens it will be our fault because we shall then have shoved over on to the unfortunate individual taxpayer the task of elucidating the meaning of the law by seeking interpretation from the courts at appalling expense and in the knowledge that the Minister, supported by the Revenue Commissioners' technical advice, is at this moment in direct conflict with his own colleague, Deputy Haughey—both of them, apparently, have given careful consideration to one aspect of this Part of the Bill—and that a person in Deputy Haughey's position would have a conscientious duty to advise a client to instruct counsel and go to the Supreme Court on that issue. As far as I understand the situation, the Revenue Commissioners, having recommended this form of legislation to the Minister, would have a conscientious duty on their part to advise the Minister—I am wrong, they would have a duty not to advise the Minister but to go to the Supreme Court without reference to the Minister to try the matter out. That appears to me to be wholly wrong.

We ought to be in a position here to say that the law is as clear as it is possible for us to make it and, if there is any ambiguity in it, that between now and the Report Stage the Minister would insert whatever words were requisite to give clear expression to the purpose I had in mind. We are not doing that and we are not able to do it because we do not know the conditions in which these sections will apply, and there is no means of finding out as we are at present situated. We ought not to allow that situation to continue. We ought either to set up a special committee of this House, which we can do under Standing Orders, and refer this part of the Bill to it, or we ought to refer it to the Income-Tax Commission and then legislate in the light of their report.

Question: "That the words proposed to be deleted stand" put and declared carried.

Amendment negatived.

Mr. Sweetman

I move amendment No. 26:—

In sub-section (3), page 14, line 18, to delete "business".

This amendment deals with sub-section (3) of this section. Sub-section (3) excludes from the operation of this section certain things provided they take place in business premises. The purpose of my amendment is to exclude those things if they take place in premises owned by the company concerned. The sub-section appears— I use the word "appears" deliberately because it is a difficult sub-section—to exclude taxation on accommodation where there is a general practice in the trade to have certain people concerned in the type of business living on or adjacent to the place in which the trade is carried on. As the section is phrased, it strikes me you cannot have any exclusion at all. If you have living accommodation in portion of the business premises, when that accommodation is used for living then it is not business. As it stands, it seems to me the sub-section is contradictory.

We have discussed earlier on this section the position that arises in relation to living overhead in a shop. Let us consider the case of a trade which requires constant tending. In malting the temperature has to be maintained at the same level the whole time. Maltsters throughout the country always have someone living where the malting takes place because a continuous eye must be kept on the temperature. That is a practice that has gone on for a great number of years and, as far as I can understand, this section of the Bill, it is a practice which the Minister purports to exclude under sub-section (3) from the penal assessment made in Section 22. As I see it, the living accommodation in that case is not in the business premises. It is either over them or adjacent to them, but it is not in them. The business premises is the actual malt house. So long as you leave the word "business" in line 18 this exclusion means nothing at all.

As I understand it, what the Minister implies in the section—he will correct me if I am wrong—is that where it is the custom of the trade to have a man living in, the value of that living in, because it is a custom of the trade, would not be taken into account. The trade must be carried on in business premises strictly so construed and I do not think the living accommodation would be so construed by a court as being part of the business premises in question.

Dr. Ryan

The Deputy is afraid that living accommodation near the business might not come under this. If we were to agree to the amendment suggested by him, I am afraid that it would make it far too wide. There is some difficulty. The aim undoubtedly is, as the Deputy says, to exempt where a man lives on the business premises because it is the custom of the trade.

Mr. Sweetman

Take the bank manager.

Dr. Ryan

The case of the bank manager would certainly be exempt under this.

Mr. Sweetman

But the bank manager does not live in the business premises. He lives over them.

Dr. Ryan

It is part of the building.

Mr. Sweetman

No.

Dr. Ryan

It is part of the business premises. The difficulty here is how we define business premises. I have no doubt at all but that the bank manager is living in business premises.

Mr. Sweetman

Not under Section 27 (1).

Mr. Haughey

The proviso to Section 27 (1).

Dr. Ryan

In the bank there is only the one valuation for the premises. That certainly makes it part of the premises.

Mr. Sweetman

Section 27, sub-section (1), seems to me to provide that the bank manager has to pay because "business premises" in that "does not include so much of any premises as aforesaid as used wholly or mainly as living accommodation for any of the directors of the body corporate or for any persons employed by the body corporate". Therefore, as the bank manager is paying no rent, the two sub-sections seem to me to be contradictory.

Dr. Ryan

The provision states that:

"business premises", in relation to a body corporate, includes all premises occupied by that body for the purpose of any trade carried on by it:

Provided that, except where the reference is expressly to premises which include living accommodation, "business premises" does not include so much of any such premises as aforesaid as is used wholly or mainly as living accommodation for any of the directors of the body corporate or for any persons employed by the body corporate in any employment to which this part of this Act applies."

The important words there are in line 8—"except where the reference is expressly to premises which include living accommodation...".

Mr. Haughey

But that is the reference in Section 3.

Mr. Dillon

Does the Minister tell me the bank manager gets off?

Dr. Ryan

He definitely gets off.

Mr. Dillon

The Minister will at least sympathise with an uninstructed legislator who reads:—

"Provided that, except where the reference is expressly to premises which include living accommodation, ‘business premises' does not include so much of any such premises as aforesaid as is used wholly or mainly as living accommodation for any of the directors of the body corporate or for any persons employed by the body corporate in any employment to which this Part of this Act applies."

As I read that, it means that where the bank manager does bank business, that is, interviews his clients or passes cash across the counter, that part of the premises is business premises, but when he shuts the door and goes up the staircase which ordinarily adjoins the business premises, to the dining-room floor and to the bedrooms above it, it becomes the part of the building which is referred to in this Bill in lines 9, 10, 11 and 12 in Section 27 on page 17 in the following terms:—"So much of any such premises as aforesaid as is used wholly or mainly as living accommodation for any persons employed by the body corporate in any employment to which this Part of this Act applies." Yet the Minister, having looked at that, says that, in his judgment, that does not apply to a bank manager who lives above a bank. If the Minister's interpretation is correct, then the words used in this section have a meaning which they have in no other context across which I have come.

Dr. Ryan

We were dealing with Section 22 (3).

Mr. Sweetman

But the Minister will agree it is impossible to understand Section 22 without referring to Section 27.

Dr. Ryan

We are dealing with premises which include living accommodation and they are excepted. Section 27 (1) provides: "...except where the reference is expressly to premises which include living accommodation..."

Mr. Haughey

It seems to me Deputy Sweetman is right. The proviso to Section 27 (1) says: "except where the reference is expressly to premises which include living accommodation". The reference in Section 22 (3) is just such a reference because it is a reference to premises which include living accommodation. Therefore, the living accommodation of the premises referred to in 22 (3) clearly comes within the proviso to 27 (1) and if it does—"‘business premises' does not include so much of any such premises as aforesaid..."—Section 22 (3) is a clear contradiction. It talks about living accommodation and business premises and as that is defined it is excluding that living accommodation. I think that does bear further examination.

Mr. Sweetman

Assuming the Minister's interpretation is correct it means that the bank manager will not be assessed but that the poor small shopkeeper across the road, who is in an infinitely worse financial position than he is and, in fact, has to wear rubber soled shoes in case the bank manager would hear him going past the door, call him in and put him on the mat, will be assessed. Surely that is the reverse of intelligent legislation. We had a long discussion about the small shopkeeper who has turned himself into a company and runs a small confectionery shop and lives over the shop. The result of our discussion in that respect was that the Minister told us that he would be assessed on a proportionate Schedule A basis for his living accommodation and that he would have to pay income-tax on it. The bank manager who lives in better premises over the bank will not, according to the Minister, be assessed.

Dr. Ryan

He is not assessed or going to be assessed.

Mr. Sweetman

He is not assessed at present or going to be assessed. Neither is assessed at present.

Dr. Ryan

Yes they are. The proprietor shopkeeper is.

Mr. Dillon

But the shopkeeper turning himself into a company of which he is a director——

Dr. Ryan

Yes, and the bank as the company pays too.

Mr. Sweetman

Of course the bank pays.

Dr. Ryan

As a company.

Mr. Sweetman

Yes, the bank pays but the private individual will be assessed and the manager will not be assessed. I cannot see the logic in that argument at all.

Dr. Ryan

The director of a small business will be assessed on the living part of his accommodation, but the bank manager it is true, will not be assessed on that part of the premises. He is not assessed at the moment, but the bank will be assessed on the value of the premises and will pay what is appropriate.

Mr. Sweetman

But does the whole of this legislation not purport to make sure that people who are getting benefits in kind are assessed personally? Is that not the whole purpose of this section we have been discussing——

Dr. Ryan

Yes.

Mr. Sweetman

——to make sure that such people are assessed personally? What will happen in future is that the small shopkeeper will be personally assessed but the bank manager will not. That does not seem right.

Dr. Ryan

The small shopkeeper will have his Schedule A tax deducted from his profits. The bank manager has no profits.

Mr. Sweetman

He is paid.

Mr. Dillon

Take the case of a small company operating a grocery shop in Stradbally employing a person who is made a director of the firm, as the Minister knows, is commonly practised. He lives on the premises over the shop, and across the street the bank manager lives on the premises over the bank. The bank manager is not charged on any part of his income except his salary. There is no fictional addition to his income for the purposes of income-tax in respect of the rental of the house in which he is living over the bank, but the manager of the grocery shop across the street who is a member of the board of directors of the small business, because he lives over the shop, has a fictional rental put upon the part of the premises in which he lives by the Revenue Commissioners which is added to his wages or salary and income-tax is levied upon him in respect of it.

Do we mean to do that? Is that the purpose of Dáil Éireann? Do we think it is expedient, fair or desirable to do it? We ought to clarify our minds on that. I do not think we are clear in our minds on that and, before we take a decision, I think we ought to be clear on it. Am I not right in that, in regard to the position of these two people living opposite each other?

Dr. Ryan

Yes, the Deputy is right; but at the moment I do not like to go further. It is all right talking objectively. One can talk objectively and give examples which do not give a fair picture of the position. At the moment—and this has been so for a long time—when a bank manager is living on the bank premises, he is exempt from income-tax, as far as his housing accommodation is concerned. When, however, there is a small businessman living opposite that bank manager, for years and years back, he has been paying Schedule A tax on the living part of his premises. There is no change as far as that goes.

Mr. Sweetman

He has not been paying it, if it is a company.

Dr. Ryan

I am talking about the proprietor.

Mr. Dillon

It is agreed.

Dr. Ryan

I am just giving these few examples. As I say, we can be objective, but we can take a particular case which does not occur very often, of the proprietor who converts himself into a company; and we can make it appear that we are more kind to the bank manager than we are to the small businessman. We are not, actually, because the small businessman gets his Schedule A tax deducted from his profits.

Mr. Sweetman

His Schedule A assessment, not the tax.

Dr. Ryan

I was attacked on this section, first of all, for not giving sufficient exemption to men who were compelled to live on their premises, where it is customary in the trade to live there. I was attacked because I was not going far enough. That continued until Deputies got hold of the bank manager and then they turned completely around and began to show me that I was going to exempt bank managers and tax the poor shopkeeper. That is not an objective way of looking at it; that is giving it a twist.

Mr. Sweetman

Nonsense. Because you exempt the bank manager, it is not giving it a twist to say you should exempt others as well. There is no twist there. That cock will not fight.

Dr. Ryan

It was all right to argue that way, until Deputies got hold of a good case, the bank manager, and then I was accused of being too generous because I was allowing the bank manager out.

Mr. Sweetman

No one is accusing the Minister of being generous.

Mr. Dillon

This cock will not fight. The first person to mention the bank manager in this context was the Minister for Finance—that, in that case, clearly a bank manager would not be liable. It was he who introduced that. I do not know that bank managers are in any more affluent circumstances than their average customer. The Minister is not so far removed from the county of his origin as not to know that, even in his lifetime, he has seen, in towns like Wexford and Enniscorthy, a change take place. In his youth, 90 per cent. of the businessmen in both those places were proprietors: I do not think it would be an exaggeration to say that to-day more than 80 per cent. of them would be incorporated. I believe that incorporation resulted—partially, in any case—on the advice tendered to them by their accountants, to meet modern conditions.

It has been, and I think is still, the practice, and it is a good practice, a practice we should be concerned to encourage, where employees in a business in rural Ireland have been with that establishment or whatever it is, for the greater part of their lifetime, that one should say of such people, when they have been 25 or 30 years working in one place, that the time has come when they ought to be made directors. It gives them a status, it gives them a security that they otherwise would not have. As far as I can understand this legislation, if that preferment is given to them and if their ordinary terms of employment have traditionally consisted of a salary plus a right of residence on the premises, they are now to suffer a serious tax liability which they did not carry heretofore. I do not believe that was anticipated; I do not believe it was intended; I do not believe that is what Dáil Éireann wants to do; and I have the horrible feeling that we are being manoeuvred into a position in which, unless we are all prepared to stand up and cheer for that proposition, we are to be accused of engaging in political chicanery and manoeuvring.

Everyone who knows conditions in rural Ireland knows that a bank manager does not own a bank, that a bank manager is not a banker, that he is an employee of a bank and is in no sense to be accepted as, in normal circumstances, more affluent than his businessmen customers. No case is being made that the Minister favours the rich to the detriment of the poor. The case being made is that this part of this Finance Bill is like a bull in a china shop: it is designed to abate abuses, but, in the process of controlling certain practices which nobody wants to see permanently enshrined or made sacrosanct, we are to knock about and harass and persecute a whole category of persons in rural Ireland who should not be subject to that kind of annoyance from their own Legislature.

If the Minister says to me: "Make proposals, then, to avoid that", my answer to him is that I am not able to do so, because I have not got at my disposal the information requisite for that purpose; but I will gladly collaborate with the Minister in doing it, if he will collaborate with me in getting the necessary information through either of the devices which I have proposed to him.

Mr. Sweetman

What would be the effect of the sub-section, if the word "business" were struck out? Would the Minister get everything he wants just the same?

Dr. Ryan

I am not sure, really. I am not sure whether it would make much difference to the Deputy's point of view or mine. I should like to look into it again before answering the question.

Mr. Sweetman

We will have enough time between this and to-morrow. I am glad to hear that the Minister is going to examine it, in the time available to him. I find it difficult to understand exactly the significance of the word "business" there. It seems to me that we have not discussed adequately at all the case of the premises. I instanced that of a maltster who has to be next to his malting, so as to be able to keep an eye continuously on the temperature. Is it intended that the sub-section will cover the case of his living accommodation? That accommodation is part of what the Minister and I might call "The Maltings" as we drive by. Is it the business premises or is it not? As the sections stands, I am inclined to think it is not, and that literally "business premises" there means nothing more than if I rig up a camp bed on my office floor and when half-past nine in the morning comes I fold up my bed, hide it away and then that place becomes my office. I do not think that is what the Minister intends, but there is a possibility that the section could be so interpreted.

Progress reported; Committee to sit again.