Can the Minister tell me the number of taxpayers who will be involved under subsection (1)? The latest information I have is that in respect of the year 1958-59. There were then 217,000 taxpayers including companies and individuals. I am sure the Minister must have some later figures.
Committee on Finance. - Finance Bill, 1961—Committee Stage.
Question proposed: "That Section 1 stand part of the Bill."
I do not think I have. The returns are not in yet from employers.
Is there nothing later than 1958-59? Those figures were given to me in reply to a question on 7th April, 1960. I should have thought that there would be a later figure available now.
I shall try to get that if it is possible to get it.
Could the Minister give us any indication as to whether there has been an increase or a decrease? I should think the effect of the inflation of wages must have brought more people up.
The introduction of P.A.Y.E. brought the number down a bit.
It brought it down because of the change in allowances, and so forth. On the other hand, there have been wage increases since 1958-59 and those increases should have brought more people in. I should have thought there would have been an increase which would have balanced any reduction in numbers under P.A.Y.E. If the Minister says the figures are more or less of the same order, that will be sufficient for my purposes.
I think they are.
There has always been a great deal of difficulty in relation to income tax from the point of view of the basis of assessment of individuals, on the one hand, and companies on the other. From what I have been able to ascertain in relation to the six Common Market countries, the basis of taxation differs radically as between companies, on the one hand, and individuals on the other. I was particularly anxious to know in relation to this section how the figure of some 200,000 is divided as between individual taxpayers, on the one hand, and companies on the other.
The difficulties we will have in any circumstances in adjusting ourselves in relation to those problems depend to a very large extent, not merely on the manner in which revenue is collected between individual taxpayers on the one hand, and company taxpayers on the other, but also on the numbers involved in each category. Perhaps, therefore, during the course of this discussion, the Minister might be able to ascertain and advise the House what the latest figures are for that break-down.
I suppose it is absolutely inevitable that there will always be a very great time lag in providing up-to-date information about assessment. For example, between the various five schedules, it is inevitable that there will be a very great time lag in relation to collection of tax.
In the last half of last year, there was the initial introduction of P.A.Y.E. and I should like the Minister to tell us in relation to this section how he segregates his tax revenue figures for income tax as between tax collected by the P.A.Y.E. system and tax collected under the other schedules.
Might I in relation to that interpolate an aside? This year for the first time—I am not aware of the Standing Order under which it was done—the Tables normally circulated with the Budget are incorporated in the Dáil Report. It was an excellent innovation. I am not aware of the Standing Order by virtue of which it is possible to interpolate into a Dáil Report documents that are not in fact read to the House but I am not interested in it to that extent. It is an excellent innovation but might I suggest that it is only a halfway house that in connection with the Budget, one wants to consider, first, the Financial Statement and the Financial Resolutions that are proposed in the House—and they are always in the Dáil Report in any event; secondly, the Table explanatory of the Budget that is always circulated on Budget Day and as far as I can trace, that has not been incorporated in the Dáil Report; thirdly, the Tables that were circulated with the Budget which have for the first time, and I commend the innovation, been incorporated in the Dáil Report; fourthly, the estimates of the receipts and expenditure, which have not been incorporated in the Dáil Report.
I think the Minister will agree with me that it is a good thing to incorporate them so that everybody will have them there in handy form. The additional cost of printing them when they are already set is negligible. It is desirable that the whole four statements should be printed in the one volume rather than that only two should be picked out, the one we always had, and the Table. I might suggest, therefore, for consideration in future, that it would be better to include, not merely the explanatory Tables which have been included this year—and I am glad to be able to commend the Minister on something—but also the Table explanatory of the current Budget 1961 and the Estimates of Receipts and Expenditure. Otherwise, one is looking at only half the picture.
In the Estimates of Receipts and Expenditure, the Minister is including for 1961-62 the sum of £28,350,000 as being the yield anticipated from income tax. In the explanatory Table, the figure is reduced by £1,400,000. Therefore, it means that the Minister is hoping to get this year from income tax £26,950,000—call it £27,000,000. I should be glad to know how much of that £27,000,000 is attributable to tax collected under P.A.Y.E.
I want to make it quite clear that in asking the Minister for that figure, I appreciate that it is an estimate which may be liable to very considerable adjustment during the course of the year. It is an estimate that may vary from a variety of causes during the year. I want to make it clear that if circumstances change during the year —and they could, from a couple of causes, quite simply—I do not think the Minister will be subject on that score to any criticism if the estimate has to be varied also. Such an estimate would give us a much clearer picture of the proportion likely to come from individual taxpayers on the one hand, and company taxpayers, on the other.
The main provision of this section is subsection (3) which extends for yet a further year the tax law in force on 5th April last. As I have remarked on a previous occasion, in this section we are extending an archaic and antiquated tax code quite unsuited to our needs for yet a further year, a tax code which was originally invented 150 years ago by William Pitt. As long as we continue to perpetuate it here year after year, we should prevail on the Minister to tell us something about the life and times of that great English gentleman, William Pitt. It would be suitable that we should acknowledge our indebtedness to him.
The code was invented by William Pitt 150 years ago and introduced into this country in 1853, so that we are now extending it for the 108th year. Of all the archaic and antiquated provisions of that tax code, we can all agree that there is no provision more archaic than Schedule A property tax. There is sitting in this country a Commission established by Deputy Sweetman before he went out of office to reform our tax code and to recommend the changes that should be made. That Commission, in its second Report, recommended the virtual abolition of Schedule A property tax. It recommended in particular its abolition in so far as it affects owner-occupiers of their own homes, up to a valuation of £30. Schedule A is quite an extraordinary tax. It is quite a legacy from the past. In Pitt's time, when the code was invented, Schedule A was by far the most important income tax schedule. At that time, in the early years of the present century, the industrial revolution had not taken place and it was before business or industrial profits had developed on the present scale as a proper subject for taxation. It is now relatively an unimportant tax. It is charged on property, on all lands, tenements and estates for every 20/- in the £ of their annual valuation.
The theory is that there is a national income from this property and that the resident-occupier of his own home derives a national income from that occupation. It was part of Ricardo's theory which has been completely discredited. The Income Tax Commission here also discredited this taxation and unanimously recommended to the Government its abolition in the case of owner-occupiers.
In fact, there are two major recommendations of the Commission in respect of Schedule A. The first is that non-business lettings should be taken as business profits and that landlords should cease to have the advantage of being taxed on notional income which does not check with their real income from their property. It is rather extraordinary that while this tax impinges severely on the ordinary householder its secondary effect is to relieve landlords in many cases from taxation to which they would otherwise be subject. Landlords are not taxed on the rents they receive from non-business lettings but they are taxed on notional income which is related to the valuation of the property under the Valuation Acts.
The secondary recommendation was to exempt owner-occupiers of their own homes from Schedule A taxation up to a maximum of £30 valuation and to provide a set off of that £30, in respect of houses valued at more than £30. Notional income is not a proper subject for taxation principally for the reason that it does not create any fund out of which the tax can be paid. It is unreal and purely fictional. To my mind, it is extremely inequitable to tax the householder on the ownership of his home and to ignore, as subjects for taxation at the same time, the element of notional income which may derive the ownership of other durable assets.
If it is right and proper to tax a householder on the ownership of his own home then, surely, it would be equitable to tax individuals on ownership of other durable assets from which it can be said they have some advantage or benefit akin to the benefit of owning a house. If we consider it in that light, we can see how absurd the theory is.
Dublin Bay is a great yachting centre. There are perhaps over 1,000 yachts in it and I understand that quite a number of those are very valuable chattels. They are durable and long-lasting. Would the Minister consider it right to tax a sportsman on the ownership of his yacht? Of course not; it would be preposterous. There would be a great outcry if that were suggested. Similarly, there would be an outcry if it were suggested that the motorist who can afford a really expensive car such as a Mercedes or a Rolls Royce, should be taxed on the ownership of that car as distinct from the road tax levied for using it on the roads. The theory would be the same.
The Commission had no doubt about how archaic this theory of notional income derived from durable assets really is. The majority of those who own their own homes are in the middle income group. They are a dependable class who, for social reasons, it is desirable to encourage. We have a smaller proportion of home-owners than other countries and it is obviously sound national policy to encourage people to purchase their own homes.
This Schedule A tax is yielding £1½ million in theory. It is a most complicated tax. Its effective yield in respect of notional income on house-holders—and they are the only people who are really paying the tax—is, as disclosed in the recent White Paper, £325,000. The people on whom it impinges most severely are a section of the community who seek little help from the State, a section who meet their own outlay, people of an independent type who usually boast that they can stand on their own feet and face their responsibilities without calling on the State for assistance.
When Schedule A tax was first devised the rate was very low and the number of people who owned their own homes was very small particularly in this country. At that time it was primarily a tax on the ownership of land. It is no longer effective as a tax on land here and I think it is true that, as far as landowners are concerned the primary purpose of Schedule A is to convert Schedule B assessments into farm loss claims.
It is an illogical tax based on false premises. In considering it, we must have regard to the very high level of rates all home-owners are paying and particularly to the element of taxation which is included in local rates. High rates on property are, without doubt, a form of taxation. I think I have produced strong theoretical arguments against this tax. I deplore the fact that the Government have completely rejected the recommendations of the Commission on this score. The strongest argument against this tax is that the Minister will scarcely feel the loss if he abolishes it. My grounds for saying that are that it is a most expensive tax to administer and collect.
A week ago, I tabled a question to the Minister inquiring the cost of administering Schedule A and his reply was that he did not know. He went on to point out that the overall cost of administering and collecting income tax and surtax was 3.8 per cent. of the yield. If the Minister is labouring under the delusion that it costs only 3.8 per cent. of the yield of Schedule A to administer that tax it is time to disillusion him. I suggest that the cost of administering Schedule A could be as much as 50 per cent. of its effective yield and for that purpose, I am treating the yield as £325,000, as I am quite entitled to do, because £325,000 is the yield of tax levied on owner-occupiers of their own houses. The other forms of income from property taxed under Schedule A are proper subjects for taxation. They are not, in effect, notional income or theoretical income.
When Schedule A is abolished, as it must be in time, the other forms of income will come to be assessed under Schedule D. If the Minister accepted the first recommendation and taxed non-business lettings under Schedule D, he would collect quite a lot of revenue which is not now being collected. But, as to the cost of collecting the tax, the Minister was unable to tell me what it was, which I suggest is quite preposterous. If the Minister does not know he should have estimates made of the cost of administration and collection.
Through a second question to the Minister I ascertained that there was a staff of 40 engaged in respect of Schedule A assessments for the Dublin area. I should like to inquire from the Minister how many of that staff are engaged in the operation of establishing liaison with the Schedule D section. How many of that staff are doing no more than advising the Schedule D section when Schedule A assessments have been made, of the amount, any changes that may have been made from year to year, and the amount paid, when, in fact, it is paid. When the Schedule D section are advised of that they duly set about cancelling the assessments.
I think that is a clear example of the working of the bureaucratic machine. It is a manifestation of bureaucracy, of the type that was pilloried by Professor Parkinson, when you consider that there are a number of clerks making assessments which are effectively cancelled by a second section of the tax administration. It is deplorable that the Government have produced this White Paper completely rejecting the report of the Income Tax Commission. If the Minister had said to us that he thought the Income Tax Commission may have been half right in what they said but that for financial reasons he could not possibly accept the report at this stage, I would respect that attitude, but to suggest, in the reactionary way in which it has been done, that the Commission were effectively talking nonsense is most deplorable and reactionary.
The Minister must strive to overcome the over-conservatism and fuddy-duddy approach to tax reform which is evident. Even the British Chancellor of the Exchequer has left the door open to the possibility that this tax might be abolished in so far as it applies to owner-occupiers of their own homes. It is paradoxical that our own Minister for Finance should outdo the British Tories in conservatism, but of course many people have come to look upon Fianna Fáil as a Tory Party, and certainly this decision is in line with that belief. In Britain the Royal Commission has not recommended the abolition of Schedule A on owner-occupiers but notwithstanding that the Chancellor, under pressure from some backbenchers, has shown signs that he will give way ultimately on it.
Our Minister, on the other hand, has a Government Commission recommending its abolition and he has completely rejected that report. Only today, according to the evening papers, in the British House of Commons the Chancellor has been subjected to considerable pressure from his own backbenchers, Tory rebels, to abolish Schedule A on owner-occupiers. I wish we could see some rebels appearing among the Minister's back-benchers——
What a hope! There is only one in the House to rebel.
——to get him moving towards this decision. The Minister has shown in Section 4——
An increase of 100 per cent.
——what can be done in the way of tax reform when he personally puts his foot down. Indeed, in this context one must remark on the device of establishing commissions and special committees to consider national problems as a means of stalling an awkward decision. Only a week ago the Minister for Education in relation to the report of the "Parity Committee" expressed very strong views on the obligation imposed on him to accept that Committee's report, notwithstanding the fact that it was not a unanimous report. His approach was that when a specialist committee is set up to consider a problem such as the question of parity—or the question of Schedule A—the Minister is almost compelled to accept its recommendations. I wish the Minister for Education could persuade the Minister for Finance to accept that approach.
There is a great need for a radical approach to tax reform and that radical approach has not been evident. The majority of the recommendations of the Income Tax Commission have been rejected. We must face up to the fact that William Pitt's income tax code was never designed for the Irish economy and is completely unsuited to this country and our national needs. As far as I am concerned, I would express gratitude to the Commission for the splendid work they are doing. I hope they will not be disheartened in their future endeavours by the reception which the majority of their recommendations have received to date.
The major need, of course, in our tax code, over the short term anyway, is relief for wage earners and salary earners. Wage earners and salary earners are an easy mark for the income tax collectors and inspectors and because of that, they are regarded as fair game. The amount of income tax which has been paid by wage earners and salary earners, and the increased amount they are paying over the years, is quite out of proportion to the share of the increased national income which has accrued to them. They are inequitably treated in regard to expenses, but we shall have more to say about that at a later stage of this debate.
The yield of tax paid by wage earners and salary earners in 1955/56, was 26 per cent. of the total income tax collected. In 1958/59, it was 33 per cent. of the total income tax collected—a very significant increase— and in 1960/61, the amount of tax collected has shown a startling increase. In general, it can be said that the amount of tax paid by wage earners and salary earners is out of proportion to, and in excess of, the proportion of the national income accruing to them.
Deputy Sweetman mentioned the question of statistical information a few moments ago. I want to ask the Minister to consider the desirability of establishing some type of small statistical section in the tax administration. There have been too many Parliamentary Questions put down in this House on which it has been impossible to provide simple and fundamental information. As I said a few moments ago, if the Minister had that information before him in making a decision on Schedule A, it would enable him to say what the cost of the administration of that tax was.
I suggest that the cost of the administration of Schedule A is about 50 per cent. of its effective yield, taking its effective yield as £325,000. There are 40 clerks in the Dublin general district and while Schedule A is assessed and collected by the general inspectors and collectors in other parts of the country, there is no doubt that a lot of time must be taken up in that process. If a small statistics section were set up, it would be an advantage. There is need for more information about our tax code, and it is impossible to appraise it, unless we have the necessary information. We would hope that the recently formed Economic Research Institute will get around to looking at many aspects of our tax code, and no doubt they will need information.
A few years ago, I commented on the lack of information in the annual report of the Revenue Commissioners. I am happy to say that as a result there was a certain improvement in that report and the yield in respect of various companies is now shown. That is only a beginning. I would ask the Minister to consider the question of having more information made available to those interested. It would serve a very useful purpose for himself and this House.
There are about 7,000 companies paying tax and they contribute about 35 per cent. of the total. The total in respect of this year is something like £27 million.
Would the Minister mind saying the 7,000 companies contribute how much in tax?
Thirty-five per cent. Under Schedule A, we collect £1.5 million and that is not inconsiderable. Deputy Byrne has suggested that it costs 50 per cent. to collect. If £1.5 million is collected under Schedule A and it costs 50 per cent. to collect, there is practically no cost in collecting the rest of income tax, so it is ridiculous to say that.
I suggested 50 per cent. of the effective yield, £325,000— the yield from owner-occupier—in other words, the cost of collecting would be about £150,000.
It will cost just as much to collect under Schedule A, whether it is owner or occupier. If the Deputy is right in saying that it costs 50 per cent. to collect, the cost would be £750,000 which would mean the collection of the other income tax is very low indeed.
I suggested no such thing.
P.A.Y.E. is expected to bring in £8 million this year. That, of course, does not include salary and wage earners who do not come under P.A.Y.E., such as civil servants, and so on.
Direct Schedule E.
I speak of those who come under P.A.Y.E. only. With regard to the Deputy's suggestion that more information should be given in the Official Report, I suppose that could be done. If the Deputy puts down a Parliamentary Question, the answer could be in the form of a tabular statement and circulated with the Official Report. Personally I believe the little booklet is easier to handle for tables and figures than the Official Report.
Tables were put in this year.
It is a matter of convenience, I suppose. It is true that to a certain extent recommendations were made by the Commission that Schedule A tax should be abolished, and the Government rejected them. I must say that when the arguments were put up for and against, I was rather convinced that the arguments against its abolition were strong.
I should like to refer Deputies to paragraph 25 of the publication Direct Taxation:
It could scarcely be said that a person who has savings of, say, £2,000, invested in Government stock and lives in a rented house is less deserving of consideration than a person who has invested an equivalent sum in a residence for himself.
It is obvious that the person who has £2,000 in Government stock is drawing, say, £100 interest and paying income tax in full on that. If a person buys a house, he probably gets a housing grant and other things and his income tax will be assessed on a sum of, say, £150 a year. Taking one against the other, no great hardship is involved. I would go further and ask Deputies to look at paragraph 30 which says:
In present circumstances, therefore, the Government are not convinced that owner occupiers should be relieved of income tax where there is a liability under existing law.
We had the difficulty of considering all these reports as they came along, without having any co-ordinated information, as it were. I think that when the remaining reports come in, we will be bound to go back over them again and look at them in a co-ordinated way. I am not saying that we will change our minds with regard to Schedule A, but there may be other circumstances to be taken into account when all the reports are submitted.
It is not true, as Deputy Byrne suggested, that the majority in this country are tenants. A very big proportion indeed under Schedule A are owner-occupiers, but all these things must be left aside for the time being.
We have not yet got the full returns under P.A.Y.E. Some employers have not yet made the final returns but as soon as we get them, we shall be able to produce some better statistics with regard to P.A.Y.E. than appear at the moment. Indeed, I should be very glad to supply these whenever we are in a position to give them.
I do not know whether there is anything else I want to say with regard to the questions that were raised on this section. I would not like to allow the Deputy to get away with the point that the Governement had rejected most of the recommendations of the Commission. That is not true. We have accepted quite a number of the recommendations. If the Deputy will read Direct Taxation, he will see that in some cases the decision was only postponed. As I said already, we wanted to wait to have all the reports from that Commission which, I believe, will reach us in the not too distant future.
A safe phrase.
I think, within this year. We want to have all the reports which we can put together and coordinate our findings and then say what our final verdict may be.
On a point of explanation, might I make it quite clear that I did not suggest that the cost of administering and collecting Schedule A tax was £750,000. Rather was it likely to be 50 per cent. of the effective yield of the tax taking the yield to be £325,000, the tax on the notional income of owner-occupiers.
If we dropped that, we would have to drop Schedule A in its entirely.
Tax the rest under Schedule D?
The sum would be £1.5 million.
The cost of implementing the Commission's recommendation was set out as being £270,000, rather than £325,000, the difference, I think, being the tax deducted from ground rents and cognate matters. Has the Minister any indication of the scope of the matters on which the Commission have indicated to him they will be able to submit reports during the course of the current year or is it a general final tidying up report he has in mind? I think the House would be glad to know that.
I should also like to know—I have the figure somewhere but I cannot put my finger on it at the moment— whether the Minister can tell me in relation to last year or the estimate for this year what is the percentage of tax revenue provided by direct taxation, on the one hand, and indirect taxation, on the other? I have the figure somewhere but I lost it in the welter of figures I have.
I think I gave that figure on the conclusion of the Second Stage of the Finance Bill.
That is what I thought but I cannot find it.
I think it was something like 78 per cent.
My recollection is that the Minister gave it but I cannot put my finger on it.
In regard to this question of the scope of the matters yet to be considered, might I suggest to the Minister that he should invite them to consider the position of Schedule E taxpayers, wage earners and salary earners and the necessity for some form of differential relief to equate them with the other taxpayers?
Has the Minister given any consideration to the percentages of the revenue collected in direct taxation, on the one hand, and in indirect taxation on the other, in any of the Common Market countries? I am quite amazed to see certain information on that aspect of the situation, bearing in mind our current problem in relation to the Common Market. The last information I have been able to get is something that was published in respect of the current position as known in those countries on 30th June, 1959, and I have not been able to find any up-to-date information.
As far as I can find there, the percentage of direct taxation in Belgium is 47 and of indirect taxation 53; in Western Germany, it is 53 per cent. for direct taxation and 47 per cent. for indirect taxation; in France, it is 40 per cent. for direct taxation and 60 per cent. for indirect taxation; in Italy, it is 30 per cent. from direct taxation and 70 per cent. for indirect taxation; in Luxembourg, it is 59 per cent. for direct taxation; and 41 per cent. for indirect taxation; and in the Netherlands, it is 60 per cent. for direct taxation and 40 per cent. for indirect taxation.
It is somewhat interesting to note that in anything I could find it was suggested that the highest country for direct taxation, that is the Netherlands. had the simplest tax code of them all. Those figures are pretty illuminating in the light of our problem here in relation to the Common Market: whether we are going to be completely free in Common Market conditions to maintain our own percentage and our own trend of pushing from direct to indirect taxation, and having regard to the necessity to approximate to the conditions in the other member countries, this is a question that poses very serious problems.
I might, perhaps, add that not merely am I told that the Netherlands has the simplest taxation system but I believe it has the smallest number of taxes of any of the member States of the European Economic Community. If it has the smallest number—and I admit I was considering company taxation primarily rather than individual taxation—then I am afraid that we surely are going to be in the situation of having the greatest number and there does seem to be very considerable room for rationalisation and simplification.
The Minister suggested that Direct Taxation at the time of the Budget was only representative of what I might term interim decisions and that, in fact, it represented the announcement of the deferment of decisions rather than the announcement of decisions themselves. I do not think that anybody reading through it could fairly be said to get that impression. There are certain cases, I agree, where such and such a recommendation was not considered. I think the Minister is hardly fair to Direct Taxation when he suggests it is merely in many cases a record of a deferment of decisions rather than a record of decisions themselves—decisions in certain cases, I agree, contrary to the recommendations of the majority report of the Commission on Taxation.
I want to say quite clearly in that respect that while paying tribute to the immense amount of work, energy and thought that members of the Commission put into their job, I do not subscribe to all the recommendations of the majority report. I have said on more than one occasion, in relation to the third and fourth reports, that it seems to me that the views adumbrated in the minority report of Dr. James Meenan approximate in certain respects more to my view than those of the majority report.
The examination they have given to our whole code has been well worth while. I think it is undoubtedly true that were it not for the weight of their recommendations, we would not have got the promise of one tax, one charge. We would not have got the promise of the amalgamation of all the tax-payer's various interests into one return—I think promised to come about 1964-65 when certain electronic computation machinery is available. Nor, I think, would we have got the undoubtedly desirable reform of having surtax computed from some simple return as income tax is computed. There are many other reforms which can be put into effect and which would never have been given any weight at all, if it were not for the Commission's report. These two come prominently to my mind. We must thank the Commission for them.
I think that to have very substantial changes in a pattern of taxation and a pattern of administration in relation to that taxation that has existed over a long number of years is something that will not be undertaken lightly by any Government without the backing of the impartial report of a commission. That does not mean that Governments or Oppositions are bound completely to sign on the dotted line when a commission brings in a report. The commission examines the evidence and forms a view, but we have not yet come to the stage of everybody having only one view on anything, though I know that the Fianna Fáil idea is that only their view is to be considered as appropriate on any step. However, we have not got to that stage and we will not get to it at all. Therefore, so far as commission reports are concerned, in the same way, they are matters to be considered in the light of the informed opinion they put forward but not necessarily merely to be implemented by signing on the dotted line.
As we are on this subject of income tax, I think the Commission should advert to two wider questions before they complete their labour. I think they should advert to whether it is not desirable to change company taxation to an entirely different basis from that of individual taxation. As far as I know, only Great Britain and ourselves in Western Europe assess income tax on individuals and on companies in virtually the same way. Of course, there is both in Great Britain and here the difference in their profits tax, on the one hand, and our corporation profits tax on the other. However, the pattern of income-taxation in these two islands is exactly the same for companies as for individuals and I think we are almost alone in that respect.
I want to make it clear that in commenting on the position of taxation in other countries, as I have done and as I do, I am not purporting in any way to be an expert. Over the past 12 months, I have been endeavouring to pick up what I could in relation to what other people's brains think about the matter.
I think the Commission ought to consider specifically our system of taxation vis-á-vis and compared side by side with the system of taxation in existence in each of the other six member states of EEC. Even if no question of any Common Market were involved, I believe that in so doing, they would get certain useful suggestions of where taxes could be changed so as not to press in an unfair way on any one section of the community.
All of us know that taxation has to be raised and collected to run the State. We may differ on whether the Minister is collecting too much and on the manner in which he is collecting tax in relation to individual duties. However, all of us would equally, I think, welcome an authoritative investigation of the position as it is in other cognate countries to see whether they might not have something which we could, with advantage, borrow and, by borrowing, enable us to ease the load in any respect.
Notwithstanding the reduction in the rate of income tax this year the Minister proposes to collect in income tax, even after that reduction, more than he collected last year by, very roughly, £750,000. I must confess that at the time of the introduction of the Budget, I did not appreciate that the buoyancy in yield of income tax was such that those were the figures. By and large, the Minister proposes to collect, after the reduction in rate, the sum of £27 million this year. Last year, the amount so collected was only £26¼ million. The Minister has from time to time suggested that things were going so well that he was taking far less out of the pockets of the people. It is interesting to note that that figure of £27 million compares with a figure of £22 million—£22,045,000—for 1956/57, when the Minister himself and his minions were complaining bitterly about the amount of direct taxation being collected. However, there is the fact that, notwithstanding the Budget concessions, we are going to have to pay, all in all, another £750,000 in income tax this year.
In regard to the question of direct and indirect taxation, a question on that subject was answered on 26th April last by the Taoiseach. It gives these figures: 28.2 per cent. collected in 1960-61 from direct taxation and 71.8 per cent. from indirect taxation. That was the highest percentage attained for some years in direct taxation. As the Deputy has just pointed out, the yield from income tax and corporation profits tax has been going up, so the percentage is higher. The reason I think the percentage of direct taxation in these European countries is higher than ours is because they are more highly industrialised and the aggregate incomes are higher; therefore income tax and profits are very high in these industrialised countries. That would account for the percentage being higher than in this country.
I do not think it is true to say I ever claimed I was taking less out of the pockets of the people. I did point out we were taking many millions more than four or five years ago but I did claim it was possible to reduce the incidence of taxation. When it is possible to do that and at the same time get more money it is a very happy position to be in. In regard to the Commissioners' reports, I have asked the Commissioners to give me their views on company taxation and as to whether it should not be on a different basis from that of ordinary personal taxation. I expect to get a report on that question.
Does the Minister expect to get a separate report on that question?
Yes. They are also reporting on expenses and all the other allowances that have been spoken of, including items in the amendments that are put down to this Bill. They also intend to report on penalties, whether the penalties are right or wrong or whether they are adequate or inadequate. There may be other things on which they will also report. I am not sure.
Has the Minister any comment to make on the enormous difference between the balance of direct and indirect taxation in this country as against that in other western European countries?
As I have just said, they are very highly industrialised. Therefore the aggregate income is higher and there is a bigger yield from direct taxation than there would be here. However, the tendency here in the past year has also been upwards. Although we did not increase the rate of income tax in respect of last year, last year the percentage yield from direct taxation was much higher than it had been for a few years before that.
I would have thought that if that was a complete answer, Western Germany would have the biggest, not the Netherlands.
Question put and agreed to.
Section 2 agreed to.
SECTION 3.
Question proposed: "That Section 3 stand part of the Bill."
This refers to the increase in the top margin of earned income margin, putting it from £1,800 to £2,000?
Yes.
Question put and agreed to.
SECTION 4.
Question proposed: "That Section 4 stand part of the Bill."
I would like the Minister to explain this section to us.
As the law stands, a man is entitled to an allowance for his wife. If he is a widower with children he is entitled to a housekeeper allowance. However, where the man's wife has left him, not being a widower, he is not entitled to a housekeeper allowance and therefore gets only the single man's allowance. Particular cases have come to the Revenue Commissioners which appeared to them to be very hard cases. This gives relief to a man whose wife has left him and who has to employ a housekeeper to look after his children.
This is a section that could have very undesirable social implications.
There are hard lines there, too.
I would like to express my appreciation of the Minister's action in introducing this very desirable and necessary amendment which will remove a strong sense of grievance from a few taxpayers who have laboured under such grievance for quite a while. It is not the purpose of tax law to impose any form of behaviour.
That underlines the comment about the social aspect.
Question put and agreed to.
NEW SECTION.
I move amendment No. 1:
Before section 5, to insert a new section as follows:—
"Subsection (3) of section 21 of the Finance Act, 1920 is hereby amended by the substitution of ‘one hundred and twenty pounds' for ‘sixty pounds' (inserted by subsection (2) of section 2 of the Finance Act, 1955)."
The purpose of this amendment is quite clear. Under the present legislation for income tax purposes the child allowance is £120 per annum. If, however, the child has an income in its own right in excess of the £40 per annum the parents or guardians concerned lose the entire benefit of the present child allowance. I do not know how long that figure of £40 has been effective. I do know that in 1920 the figure was £20. I suggest to the Minister the time is now opportune to raise that ceiling to £120 to bring it into line with the dependant's allowance of £120 per annum which he introduced this year.
Was it not increased from £40 to £60 in 1955? I think I increased it.
That is correct. I should have said £60 instead of £40.
I do not think there is a very good case for this amendment. Where children have no incomes of their own, children's allowances are fairly generous but where the child has an income in its own right a limit has to be fixed. What we have to decide is where shall that limit be fixed. If a man has, let us say, £1,000 a year and three or four children he does not pay much income tax but anyway £120 of his salary is free of income income tax in respect of each child. This means less than £40 income tax saved to him. In this case, the child has an income of, say, £60 before exemption is removed. Therefore, he has the net £60. Taking the comparison in that way, the £60 is more generous than the allowance we are giving to a man for his child. I do not think the Deputy can make a very good case for an increase in this allowance.
Could the Minister give us a figure for the cost of this amendment?
I do not think the cost would be very high.
There must be very few cases involved. I am basing my case on the argument that that figure of £60 was regarded as equitable a number of years ago. As the Minister has made other adjustments, particularly in regard to the question of dependants' allowances, I considered it only equitable that this figure should also be adjusted.
The Minister will agree that if £60 was equitable in 1955, it should be about £80 now, as the equivalent in terms of present-day values. That is a nice round figure— it means exemption in respect of 30/- per week. I suggest the Minister and Deputy Russell should do a deal and compromise on £80. Will the Minister let me make a deal between himself and Deputy Russell at £80 ?
I am afraid not.
The Minister is not in a bargaining mood.
Amendment, by leave, withdrawn.
Section 5 agreed to.
NEW SECTION.
I move amendment No. 2:—
Before section 6, to insert a new section as follows:—
"The proviso to subsection (2) of section 53 of the Finance Act, 1920, is hereby amended by the addition of the following paragraph:
‘(1) where in any accounting period a company incurs a loss in any trade or business carried on by it, that loss may be carried forward and deducted from, or set off against, the profits of that trade or business for the next accounting period or any subsequent accounting period.'"
The purpose of this amendment is to permit losses forward in a business to be set off against corporation profits tax in the same manner as they are at present allowable against income tax losses. I put down this amendment because in his Budget speech this year the Minister changed the provision whereby corporation profits tax could be charged as an allowable expense in assessing a company's profits. I felt it would be only a fair quid pro quo that losses forward should be allowable against C.P.T. as they at present are allowable against the ordinary profits of a business.
I did say when speaking on the Budget that I thought the Minister had made a mistake in making that alteration. I said I thought it was a retrograde step. I should like to reiterate that. I think the Minister should have allowed C.P.T. to stand as an expense against company profits. The Minister did not accept the argument at the time. I suggest it is only equitable now to allow losses forward to be charged against C.P.T. in the same manner as they are charged against normal profits in a business.
I am sorry I was not a bit kinder to the Deputy on the last amendment, but I might say posthumously that I shall consider it. I think, however, that this is a much more serious one. The argument against it is that corporation profits tax is charged only after the first £2,500 are exempted. If we were to consider a matter of this kind, the carrying of losses from one year to another, we would certainly have to charge corporation profits tax on the whole profit, whatever it might be.
As Deputy Sweetman asked me about the Income Tax Commission, I should say the Commission are considering this matter activity at the moment. It is quite possible they may make a recommendation that may mean one tax instead of two, corporation profits tax and income tax. For that reason, I think it would be better to postpone this issue for another year to see how we stand. I may say that if we compare our position with the position in Great Britain, we find there is no exemption on the first £2,500 there. I do not know if any other country exempts the first £2,500 as we do. That makes it more difficult to consider a matter of this kind. The whole question will be much clearer by next year as to what the future will be in regard to company taxation. Therefore, I think we should postpone the matter until then.
Would the Minister agree with the argument in principle?
If there were only one tax, I certainly would agree.
I do not think the argument put up that we exempt the first £2,500 would preclude the Minister if he accepted the amendment.
It does.
The Minister is giving me a wonderful argument against Section 6. He has made the best case that could possibly be made for the deletion of Section 6.
In regard to the point about the first £2,500, it would be unfair to expect the Exchequer to cover all the losses, if we cannot get all the profits. Corporation profits tax would have to come from the very beginning with no exemption at all. While I have no idea of what the Commission may recommend, it is possible that there may be a change and that there may be only one tax. It would be better, therefore, to leave this over until we see what the recommendations of the Commission are.
The position at the moment is simply this. If a company loses £5,000 in one year and brings it forward to the next year and if it makes a profit of £5,000, it is set off against the losses forward for income tax purposes, but it must pay corporation profits tax on the excess over £2,500. Is that not correct? It should be quite simple to set off the losses forward against that, too. The mechanics of the thing should not involve any great difficulty.
The Minister said he was not aware of the existence of a minimum figure in any other country. I should like to point out to him that, in regard to corporation profits tax, Italy assesses only the excess of six per cent of the net worth and Germany has a minimum of 50,000 Deutsche marks. In these two countries apparently on the face of it—when you dig down, it may not be the same—there is this minimum provision.
I am not sure, though, that they are allowed to carry on their losses.
Neither am I.
I think I am correct in saying that in Great Britain profits retained for reinvestment are not subject to C.P.T. There are certain compensating allowances in Britain which we have not got here. If the Minister will undertake to ask the Commission to examine the matter, I shall be glad to defer it.
Amendment, by leave, withdrawn.
SECTION 6.
Question Proposed: "That Section 6 stand part of the Bill."
I am very grateful to the Minister for advocating in relation to this section an argument I was going to put forward. Section 6 is an entirely new concept. The Minister himself suggests that the Commission is considering this whole problem and he suggested that, since that was so, Deputy Russell should not press his amendment. If the argument the Minister has just made against Deputy Russell's amendment is valid, it is equally valid against this section. What is the sense in bringing in this section for one year if, as the Minister says, we will know much more about the whole problem next year? Dealing with the matter in this way, when the whole question is under discussion, is obviously an attempt to jump the gun.
I confess I thought the Minister's reply to Deputy Russell a reasonable one—the matter was being considered at the moment and should be left until next year. If that is so, is this section not an attempt to get in before the Commission finalises its report and have it there as something requiring change, instead of taking the appropriate line of referring it to the Commission as a specific matter upon which the Government and the Minister wish to have adduced some evidence and recommendations?
Apart from that, the section is bad in itself. We had some discussion on the Budget and on the Second Stage of the Finance Bill in relation to this matter. Quite clearly, the Minister did not on either occasion understand the case I was making. I evidently failed completely to put my argument in clear terms. Suppose, for the sake of example, 100 people agree to put £100,000 between them into a "kitty" to start some new common venture. If they start an industry here and they believe they can earn seven per cent. on their money, that means the earnings of those 100,000 people would be £7,000. That would be taxed, first of all, at 10 per cent. on £4,500 and on £7,000 at 6/4d. The Minister will be just as good as I am in calculating what £7,000 at 6/4d. would be.
Suppose they used that £100,000 in buying shares in England, they could get a return of £7,000—the same seven per cent. return—and they will have to pay on that return, after the effect of double taxation relief, income tax at 6/4d. on £7,000 but they will not have to pay the extra £4,500 C.P.T. they have to pay here under Section 6. That reduces the argument to its simplest form. I agree it is most unlikely there would be a case as simple as that. When one goes out, however, from the elaborations of an ordinary business deal in that respect, one will find exactly the same differential. That means that there is, in fact, a penalty on a person investing money in an Irish enterprise as compared with investing money outside the country.
That is bad fiscal policy, very bad fiscal policy, and that is the effect of Section 6. I agree that if these people went into the export market, they would get certain other things. If they went to Foras Tionscal and the West, they might get certain grants. But these alleviations are beside the point where this section is concerned. This section imposes a penalty on people who are willing to invest money in the country to produce goods for the home market and give employment. Anybody who does that will have to pay more in taxation than will his brother who invests in British securities. That is a wrong approach. No matter how one takes the section, that is the inevitable result.
The Minister tried to befog the issue, but his argument was not relevant at all. I agree that by virtue of the change in relation to subsection (1) of Section 1, even with Section 6, unless it is a very big company, a person may be paying less than he paid last year, but he will still not pay less in taxation than he would if he invested the money outside the country at the same rate of interest. That is bad policy. I think the Minister did not advert to that aspect of the situation when he introduced this change in the Budget. Now that it has been emphatically brought to his notice, he should do something to remedy the position. He can consult any firm of accountants in Dublin and they will tell him exactly what I have been telling him. I know he will be told by the Revenue Commissioners and his own officials: "On that net issue, yes, but that does not arise". But it does arise. It arises directly on Section 6 that, in the very rough and ready simple case that I gave, the company concerned, out of an income of £7,000 would pay £450 more in taxation than if the same people, instead of forming a company to promote an Irish industry, decided to invest their money at 7 per cent on the other side, without coming into a company at all.
I agree that in present circumstances you want to try to get all Irish manufacturing companies into the export market as far as possible. Certainly we do, but, at the same time we do not want to use a means of doing that which provides an incentive that will operate against anyone starting an industry here in circumstances such as I have outlined. That is the last thing anyone of us wants to do and I am sure it is the last thing the Minister wants to do but it is the effect of his section. If he were a wise man and were anxious, as I think he is genuinely anxious, to promote Irish industry rather than give a tax incentive to foreign investment, he would amend this section very substantially indeed before the Report Stage.
I want to be quite clear that I am not trying to make the case that the Minister with his eyes open went out to provide an incentive to people to invest money outside the country. I do not think he did. It is a result of his section that he did not visualise at the time because he was comparing what an Irish company would have to pay this year with what it had to pay last year. That is not the effect. What one must consider are two new aspects, both in this year. Undoubtedly, if people want to come together and put down a certain amount of money for the purpose of starting an Irish industry for the home market, because of the employment it gives we should ensure that they get encouragement. The effect of this section is that the same people, by neglecting to form a company here and investing at the same rate as they anticipated, across the water, will pay 10 per cent. less in tax. I do not think anyone would desire that position.
I do not think the Deputy is stating a fair case at all. He takes an Irish company that has a profit of £7,000 and he assumes that the ten people who have £10,000 each will just sell that company and invest their money in England at seven per cent.
No. I did not make myself plain. I assume that they will not set up an industry at all.
The Deputy's assumption is that they will invest their money in England at seven per cent?
Yes, without any difficulty at all.
Supposing the Deputy has £10,000 and that I have £10,000 and I invest my £10,000 here at seven per cent. and the Deputy invests his £10,000 in England at seven per cent. we will see how we will get on. Here we are talking about a company and, therefore, we must take a company in England. That is the only fair comparison.
No.
Surely you must take a company in England and compare it with a company in Ireland. It is the only fair comparison. If you take that, you will find the taxation on the company in England is 53¾ and here it is 41? per cent. There is a vast difference between the amount that is left after taxation in England and the amount that is left here. That is the only fair comparison.
As a matter of fact, the example the Deputy takes could equally be quoted against any Minister for Finance in the past ten years, that if instead of putting money into an Irish company, a person invested it at seven per cent., of course he would do better.
Will the Minister explain how, before this section came in?
What difference does this section make as far as that goes?
All the difference.
It makes very little difference. It makes the difference of income tax of £2,500 on £100,000 and that is very little difference when you add it all up. No, I am wrong. It makes a difference of income tax on 10 per cent. of £2,500. That is the difference it makes. That is a very small difference in this whole calculation.
Ten per cent. of the excess over £2,500.
Oh, no. Anyway, my point is that we should compare one company with another, an English company with an Irish company. If you do that, you will find that the taxation taken in England is very much higher on the company than it is here. In addition to that, of course, you have all the other benefits here of relief on exports and relief under Section 7 of the Act of 1932, and so on. In every way the person who puts his money into an Irish company, provided, of course, the company here is equally competent with the company in England, is very much better off on his investment.
The Minister is bark ing up the wrong tree, if I may say so. We will assume for the purpose of this argument, but no further not otherwise, that the Minister and I have each £10,000 to invest. I do not know about the Minister but I should not like to say that I had. The Minister's case is based entirely on whether there is an equal likelihood of our forming a company here for the purpose of developing an Irish industry and of our forming a company in England for the purpose of developing an industry there. Of course, that is nonsense. The Minister knows perfectly well from the pattern of investment that there are two possibilities. One possibility is that the money will be used here for the formation of a company for a new industry. The other is that it will not, that the Minister and I will not form a company if we are going to invest it in England, but we will invest it individually in England. Because of the very proper provisions of the Double Taxation Agreement, we will get back the tax suffered at their rates and will only have to pay at our standard rate here and will not in that case have to pay Corporation Profits Tax.
The whole trend of investment is precisely against the case that the Minister makes. If Irish enterpreneurs were just as prone to form companies in England as they are to form companies in Ireland, for the development of industry in either place, then the Minister might argue that he was comparing like with like but the Minister knows very well that the person who has money to invest here considers whether he will put it into an industry to develop something here or whether he will invest it, not as a company, but as an individual, across the water and, if he invests it as an individual across the water, he will pay less tax and that means that this section is providing an incentive to investment outside the country.
I should like to ask the Minister his reasons for introducing this section. If my recollection is correct, during the Budget debate he said he thought he was doing pretty well for companies by reducing the standard rate of income tax. That is quite strong as an argument but he is taking back a substantial part of that reduction by this new device of not permitting corporation profits tax to be a chargeable expenses against profits. If my calculation is correct he is taking back approximately 50 per cent. of the reduction he is giving in income tax.
I think he has said on more than one occasion that it was his endeavour to reduce as much as possible, or to continue to reduce, costs, particularly of industries. I suggest this is a step in the opposite direction. I should like to appeal to the Minister to delete that section altogether and allow the industries concerned to enjoy a genuine reduction of eight pence in the pound in the standard rate of income tax. He is not doing that here; he is giving on one hand and taking half of it back on the other. As I said—and I think the Minister agreed with me—it is absolutely necessary that firms here, particularly with this emerging and competitive free trade area, should be encouraged to plough back as much as possible of their profits into plant and equipment. The best way to encourage that is to reduce taxation. The Minister is doing the very opposite. This may not amount to a very big sum but it amounts to a figure which might, perhaps, provide a new piece of machinery or cover some reconstruction of the business. Would the Minister reconsider it from that point of view which I think is a valid one?
I want to point out to Deputy Russell that, while I have not got the figure at the moment, he must realise that the great majority of companies, about 65 per cent. or more, get the full benefit of this income tax provision—in other words, all companies with profits to £2,500. The number is rather small but it is the most important companies, I admit, that do not get the full benefit of the reduction in income tax. On the other hand, no company is worse off than they were last year, taking corporation profits tax and income tax combined, except to a nominal amount in the case of companies with profits of over £52,000. I do not think companies have anything to complain of. No doubt they would welcome it if we could do more for them but they really have nothing to complain of.
Did the Minister give the number of companies that were suffering?
About 130 companies out of 7,000 are worse off but only to an insignificant extent. I think the most they can lose is £300 a year and that is on a £250,000 profit.
Can the Minister say what yield he expects from this section?
We are not getting any yield from it.
You are; you are getting the equivalent of ten per cent. income tax on companies' profits in excess of £2,500. If you like, instead of using the word "yield," you could say you are not refraining from collecting that amount from companies.
I shall put it this way: if we did give the full benefit of income tax without making this change——
That is the figure I mean.
I think we would suffer a loss of something like £600,000.
Question put and agreed to.
NEW SECTION
Mr. Ryan
I move amendment 3:
Before section 7, to insert a new section as follows:—
"In connection with any assessment for liability for income tax, where a person proves that he has incurred expenditure on the provision of necessary medical services or treatment in respect of illness or infirmity of himself or any of his dependants and that he was unable to insure himself against the said expenses, there shall be deducted from the income to be assessed the expenses so incurred."
The case for this amendment I am sure is apparent to many people and I feel that most members of the House would be in sympathy with it. I trust the Minister will be able to accept it and that he will not approach this with the mind of the Revenue Commissioners alone.
We know only too well that the cost of a long illness in these days can be quite heavy. Indeed, in the average family, recurring illnesses to which we are all subject can be quite a heavy burden spread over the year if there is only one breadwinner in the house. In this day and age when anti-biotics and expensive drugs assist in bringing about quick cures, the cost to the individual who may have to meet the expense is almost as great as a long illness might have been in the past. But there are cases which arise from time to time of serious hardship where people are unable to pay the chemist's bill, unable to meet the heavy cost of drugs which in some cases, as we know only too well, may be as much as £1 or £2 per day.
It is for the purpose of coming to the assistance of people who incur necessary medical expenses of that kind that this amendment has been put down. I believe it is administratively possible to operate it and I would strongly urge the Minister to give it sympathetic consideration and not to allow the dull mind of the tax collector to decide what in justice I believe is what ordinary human beings are entitled to.
I have said elsewhere that I regard medical expenses, the cost of curing human beings, as quite similar to the cost of running a business. The tax code allows a person operating a business to charge the expenses of that business against profits. If the human being tires, he or she can no longer earn any more but if the person can be kept alive, earning capacity is maintained so that I believe it is fair, even from the purely financial point of view, to say that this is a necessary expense which the person incurs in order to maintain his earning capacity, an expense he incurs because of keeping necessity to keep going and by keeping going he continues to earn.
The tax code recognises the right of certain classes of people to set off losses in one year against profits in another and allowance is also given to make provision for the replacement and repair of capital. Our tax code also provides for exhaustion of equipment. Where we err, and err seriously, is that we have no provision whatever for allowances for the replacement or repair of the human being. We make no provision to come to the assistance of human beings suffering from exhaustion.
All these are perhaps rather inhuman references to human beings' sufferings but I have made them in order to indicate that what is proposed in this amendment is something that is already considered acceptable and quite orthodox in relation to material things.
I believe it is justifiable to defend this amendment on the ground which has been accepted as being proper in relation to our tax laws for many years past. It did occur to us that were we simply to put down an amendment asking for allowances for necessary medical expenses and doing nothing more, it might well have the effect of discouraging people from insuring against illness. We in Fine Gael have every reason to be proud of the success of the Voluntary Health Insurance Board. We are glad to see that provision was made at that time to allow insurance contributions to be deductible before assessment of income for tax purposes. One effect of that has been, in some cases at any rate, to encourage people to subscribe to the Voluntary Health Insurance Board. We did not want to put down any amendment which would discourage people who should insure against ill-health from so doing. There are many medical expenses which are not provided for under the Voluntary Health Insurance scheme. One which falls very heavily upon fathers of middle-class families, who usually are outside the scope of the national health services, is that of maternity expenses.
It seems unfair that where a man may have maternity expenses of £50 or £60, he will have to pay on top of that sum about £25 in tax, which would represent the amount he would have to earn to pay that necessary expense. That is something which is not provided for in the code. There are other people outside the scope of the insurance because of age or some other incapacity. Certainly we hope that in time there will be an extension of the benefits given by the Voluntary Health Insurance Board. I believe they will come in time, but there are people outside the scope of the Voluntary Health Insurance scheme and who are not in an insurance scheme at the moment and who, I believe, should receive some consideration. We have specifically phrased the amendment so as to provide that allowances will not be given to people who could have insured but failed to do so.
I appreciate that there might be cases of extreme hardship, of people who would find it impossible to pay £12 or £15 a year to the Voluntary Health Insurance Board, or who, even to a greater extent, would find it difficult to meet ordinary medical expenses, but we feel that it would be unfair and undesirable to discourage the excellent work done by the Board. Our amendment as it stands will encourage people even more than in the past to make provision for ill-health by insuring themselves against such contingencies as are insurable at the moment. There are other things outside the Voluntary Health Scheme which we believe should be covered. The cost of medical treatment outside hospitals can be extremely great and on that account and as that is not something for which there is any normal health insurance available, we believe that if it can be proved that a person has incurred necessary medical expenses, then an allowance should be given in respect of such expenses.
After all, there are some sections of the community who receive free medical benefit and it is not taken into consideration at all in assessing their income. Of course, most of these people are outside the income tax bracket, but within the bracket there are many people who incur necessary medical expenses and they should receive some assistance in meeting them. I know that the Revenue Commissioners must be well aware of people who find it difficult to meet their income tax bills because they have had heavy medical expenses. I appreciate that in such cases the Commissioners have not been unsympathetic and allowed time for payment, but sometimes it takes a person a considerable length of time to pull up again after heavy medical expenses have had to be met. On that account, we believe that this concession should be considered.
I understand that in some countries there is a flat allowance for medical expenses, something like £50 or thereabouts, per taxpayer. I do not think that is the best way of doing it. Most of us do not expend £50 per year on medical expenses. I believe the best system is one in which a scheme would be worked out whereby necessary medical expenses could be proved and once proved, the allowance would be made in respect of the income of the people in question. I pointed out that very few people expend money on medical attention unnecessarily. There are, of course, the people who imagine they are ill, or the people who go to a psychiatrist for the thrill or excitement it gives them, but they are few and far between. I feel it would be possible to prevent an abuse of the scheme suggested in our amendment. Therefore, I hope the Minister will give serious consideration to it.
I should like to support this amendment for a slightly different reason from that given by Deputy Ryan. I feel that the inception of the Voluntary Health Insurance Board, and the tax relief that was given in respect of premiums to those who insure with that Board, have been one of the greatest boons to the class of people one may roughly describe as income tax payers. The success that has attended the efforts of the Voluntary Health Insurance Board is a matter for congratulation by all of us. The manner in which it enables people to insure against the unforeseen expense of illness, which we all know very often completely knocks out families for a generation, is something that is highly desirable as a social object.
I am concerned, and I think the Deputies named here rightly mean to cover the case perhaps more so than any other, of a person who proves he has incurred expense and was unable to insure himself. The case I want to put to the Minister is the case of a person whose health is not too good and because his health is not good, the Voluntary Health Insurance Board cannot accept him. It seems to be hard on that man that he should be in the position of not being able to cover himself in the manner the State advocates, by reason of the incentive it gives by the deduction of premiums from income, and of being more likely to incur heavy medical expenses for which he cannot get any income tax relief. So far as I am concerned, I regard this amendment as covering virtually entirely the case of the man who applies for insurance of that sort and who, through no fault of his own, because of his state of health, is rejected.
Once we accept that principle, we can improve the amendment slightly from the administrative point of view by providing that the expenditure incurred shall be expenditure in excess of a minimum sum. It would creat administrative problems far beyond the advantage gained if the section were so phrased that if one had medical expenses, one would be entitled to get a refund of that sum. We could say that where a person incurred medical expenses in excess of a certain sum in any tax year, and the proofs were satisfactory to the Revenue Commissioners—and the proofs in this connotation would obviously have to be in accordance with the ordinary tenets of the income tax law much though we may dislike them—that those expenses shall be deducted from his income tax assessment.
I think the situation in Australia is that there is provision that where medical expenses are incurred in any year in excess of any certain sum, the excess is an allowable deduction from the individual's assessment for income tax purposes. It is something on that line that I should like to urge on the Minister to include in this Finance Bill, and I would urge that that is really the basis on which the amendment should be considered.
While one tries on this side of the House, in so far as one can, to draft amendments as precisely as possible, the Minister will, I am sure, accept without question that it is never possible for the Opposition to draft amendments in the same precise and exact terms as it is for the Minister, with all the resources of the Parliamentary draftsman as well as the Revenue Commissioner's draftsman, behind him.
During the past couple of years, several hard cases have been brought to my notice of people who applied, bona fide, to the Voluntary Health Insurance Board for membership and the Board had to reject them because of the existing state of their health. Unless something like this is done for them, they will be under a dual disability: the disability that their health is not good and that they are more likely to incur medical expenses, on the one hand, and on the other, that they are not getting the same tax remission as their healthy neighbours and colleagues can get by joining a voluntary scheme.
I should like to support this amendment. Although the income tax officials and the Revenue Commissioners may look upon this as an innovation in the income tax code, I fully agree with what Deputy Ryan has said, that it is long overdue. We must acknowledge the fact that some few years ago, when people underwent treatment for illness, the cost was relatively small compared with what it is today. It is a well-known fact that if a family incurs expenses by reason of any type of illness, even over a short period, when the bill comes, the amount is found to be considerable. The Minister is a medical man and he must be fully cognisant of the fact that there is considerable hardship in many of these cases.
The amendment seems to me to be reasonably well drafted. It provides that anyone who, through no fault of his own, has no voluntary insurance, or any form of insurance, may get a remission for income tax purposes. Voluntary insurance is intended to protect against illnesses but there are one or two illnesses of which voluntary insurance companies fight shy. One is the case of a man who has suffered from any major illness, and perhaps the most prevalent in the world today, in the rush and bustle of modern life, is coronary thrombosis. The man who has that disease cannot insure himself in any way against the expenses he may have to meet. In fact, that disease rules him out straight away.
The point made by Deputy Ryan was an excellent one, that from the point of view of the Revenue Commissioners who want to get people back on the market as quickly as possible, insurance for such people is a good thing. I know of nothing that will keep a person suffering from coronary thrombosis ill for much longer, and make him less likely to recover, than the fact that he had to face expenditure which he was unable to meet. That would give him an anxiety neurosis and keep him sick longer. I should like the Minister to bear that in mind when he is taking an unbiassed look, as I am sure he will, at this excellent amendment.
No insurance company will touch a man who suffers from mental disturbance in any shape or form. A man who has had a mental disability will get no insurance in respect of that disability. He will get no benefit even from the Voluntary Health Insurance Scheme. Those are two specific and special cases which will have to be considered in dealing with an amendment such as this.
There are many other cases of hardship as well, but it is a well-known fact that mental illness is perhaps the disease which most frequently takes from people a regular ability to work. There are cases in the middle income group, and not necessarily in the middle income group but in the higher income group as well as the white collar and salaried classes and in the farming and business community as well, of a family with a mentally defective child or a child who is mentally below par. The parents find themselves in the position for a great number of years that they have to pay a certain sum to some institution to maintain the child. It is not a question of having to pay for one or two years; it may carry on for 20 years.
Let us take a man with an income of £1,000 a year. That may seem a lot of money to many people. It is what we Deputies get, and everyone knows how well off we are! Supposing he has three or four children and he has a recurring charge to pay to some institution or home for mentally defective children in respect of one child who is unable to look after itself. There is no real hope of recovery; it is a lifetime charge. I know of one man who told me the other day he is paying £170 a year with no prospect of any reduction because it is fixed at rock bottom at the moment. He cannot get 1/- relief for the sum he must pay. Even if his income is £1,100 or £1,200, he has to maintain himself and so on and, in addition, has to pay income tax.
I think this is an excellent amendment. It is something that is long overdue in our income tax code. I would ask the Minister to think upon the arguments advanced so far. At least if he does not accept the amendment in its entirely, he ought to give it his most full and sympathetic consideration.
I sympathise very much with the motives of those who put forward this amendment and I would tend rather to support Deputy Sweetman in his subsequent comments. I feel that the amendment, as drafted, is one which would almost invite tax evasion of all sorts. There are very many cases deserving of consideration but it is an extraordinarily difficult job to deal with them by legislation.
The amendment, as it stands, refers to incurring "expenditure on the provision of necessary medical services or treatment." Even those quite simple words can lead to quite a lot of twisting and, shall we say, varying interpretations. What sort of medical treatment is absolutely necessary? What sort of medical treatment is merely necessary or what sort of treatment is desirable? I can see all sorts of ways of tax evasion there. Even when we come to consider the phrase "that he was unable to insure himself against the said expenses," we find that there are a number of reasons why a person might be unable to insure himself.
Some of those reasons have already been given: either he is already over the age limit for voluntary health insurance or at the time of his application, his health is not sufficiently good to make him an insurable risk. But there are also cases where people may be unable to insure themselves because they may have misconducted themselves in some way, such as by making a false declaration on the application for insurance which would disqualify them in the eyes of the insurance company. I think we would have to amend the amendment very considerably in order to tie up these loose points.
The fact remains, however, that there are a fairly considerable number of people suffering grave hardship through no fault of their own. This hardship is not only something which has to be suffered in itself but it is something, as Deputy Esmonde said, which will give rise to increasing ill health as time goes on. I should hope that the Minister would consider the thought behind the amendment itself. If he could give any indication that, with the expert advice available to him, he could hold out any hope of producing a more watertight amendment of his own on Report Stage, I am sure that the Deputies who put forward this amendment would be only too glad to withdraw it at this stage.
I hope that the Minister will deal with the merits of the case rather than the merits of the actual amendment. I could not support the amendment as it is but I feel there is a very genuine case to be made for it. If the Minister could see his way to give any indication that he would seriously and sympathetically consider it, I personally would be glad and would appreciate it tremendously.
With regard to Deputy Booth's last point, we appreciate that the wording of the amendment could be very much improved. If the Minister can give any form of approval to the principle enshrined in the amendment and if he would consider between now and Report Stage the manner in which it might be improved to remove some of the doubtful points referred to by Deputy Booth, we should be happy to accept that undertaking from the Minister.
With regard to Deputy Booth's points as to what is necessary medical treatment, the obvious answer is that whatever treatment is prescribed by a duly qualified medical practitioner is, in fact, necessary.
It is desirable to emphasise that no new principle is involved in this amendment as since 1955, provision was made permitting the premiums paid to the Voluntary Health Insurance Board to be charged against taxed profits. The precedent was created there. At this stage, we are primarily anxious to cater for those cases not covered by existing legislation and particularly those people who may be rejected by the Voluntary Health Insurance Board as bad insurance risks.
There are five amendments dealing with expenses that might be allowed to an income tax payer. I must say that I have more sympathy with the movers of this one than I have with any of the others. I have no great sympathy for any of the others at all. It is a case that should be sympathetically considered, I feel, but how it is to be considered is another matter. I do not know whether it is a case which could be considered under the income tax code at all. As I have said already, the Income Tax Commission are, I believe, going to report on expenses generally to be allowed to the income tax payer but whether they cover medical expenses or not, I do not know. Possibly they will but that would not, I think, cover the whole problem.
In my experience, anyway, the worst case I came across was that of a man who was earning about £8 a week for himself and his wife. His wife had to get insulin treatment which I was told would cost about 10/- a day. She had to pay for that herself until the case was brought to the notice of the county manager. After some consideration, he allowed the expenses to be paid in that case but from what I heard about that case, if that man had been earning £10 a week, he would not have been allowed the expenses.
I do not think a remission of income tax would go anywhere to meet that man's problem. I am inclined, therefore, to think that while the case I am talking about deserves very sympathetic consideration, it is really more a case for the Health Act because for one thing you can be very much more generous from the point of view of benefit under the Health Act. It is, I think, also much more satisfactory compared with what you can do out of income tax. It will, of course, be more costly no doubt, because bigger benefits will have to be given under the Health Act but I believe—it may be wrong; I do not know—it would be a more just way of doing it. I think it would be a more just way of doing it.
What crossed my mind also only this evening—I have not considered it in any way—is whether it would be possible to get the Voluntary Health Insurance organisation to take these cases on a certain arrangement with the Minister for Health and look after them somehow or other. There are various ways in which it could be done.
I am not at all sure that a remission of income tax is the best way of doing it. Certainly, it would not be as satisfactory as having it done through some health organisation. The benefit would not be as good in many cases as it would be under a health organisation of some sort. Therefore, my general approach would be that we should consider it.
If it is to be done through income tax, we should have to wait for a report from the Income Tax Commission to see what recommendation they are making generally on expenses to be allowed to the payer of income tax. Then, having received that report, we would have to see what the Government might decide to do in respect of the report.
I might add that where these expenses are allowed in America—I do not know about elsewhere—the Income Tax Commissioners have access to records of doctors in hospitals, and so on, to verify the expenses. I think there would be great resistance here to giving the Revenue Commissioners the same powers of examining doctors' books, hospital records, and so on, as they have in America. I am afraid it would be difficult to administer that relief without some safeguard to check on the figures put in by the payer of income tax.
There is great sympathy for the amendment on all sides of the House. I have sympathy with the case, too. However, I cannot agree that we should accept this amendment for this year at any rate.
Mr. Ryan
The answer to the Minister's first objection is this. He sees two men drowning. He says: "I cannot save X, therefore I will not save Y" and both men drown. I have never known of any person to be condemned who saved one drowning man and was unable to save the other.
I would rather save the two, though.
Mr. Ryan
I am completely with the Minister but if today there are two men drowning, they may be dead before the Minister, with all this passing of the buck, gets around to giving assistance to the unfortunate people. The Minister is at least sympathetic to us. That is a considerable improvement. We want to harness that sympathy for the sake, at least, of some of the community and certainly not to do so in such a way as to jeopardise the other people in the community.
I see an objection to fixing a floor for medical expenses. Supposing you take it at £25 or £50. If our amendment were to insert after the words "expenditure in excess of £25 or £50 in any taxable period", what would the effect be? Take a man whose income tax bill is only £25 per annum. If his medical expenses are £25 he would find such a bill a considerable burden. His income would be small enough and he would find it extremely hard to pay £25 to the Revenue Commissioners and £25 to the doctor. That is taking a very low figure. It could be £50 income tax and £50 to the doctor or £25 income tax and £50 to the doctor, and so on.
If you fix the floor, you will be grossly unfair and you will not come to the assistance of the man who needs it most. If a man has an income tax bill of £500 or £1,000 and his medical expenses bill is only £25 or £50, it is only a drop in the ocean of his outgoings to have to meet medical expenses of that kind. I do not believe it is beyond the resources of the Department of Finance and the Revenue Commissioners to devise some scheme which will be of assistance to people who deserve to receive it.
I believe that our income tax code is based upon a taxation on that portion of a man's income in the expenditure of which he has a choice. That is a fundamental approach to income tax, or it ought to be. If we extend that, we ought to have greater individual allowances, marriage allowances and children's allowances than we have at present. In any event, that is the justification for these allowances. You allow a man a personal allowance in respect of necessary expenditure over which he has no control but you tax that portion of his income where he has a choice of expenditure.
Who has a choice where medical expenses are concerned, except in choosing some secondary treatment or trying to cure an illness with a cheap bottle of medicine, instead of getting decent treatment and paying for it? In most cases, it will be necessary medical treatment. There will be no choice. If his income is nominally £500 and his medical expenses are £50 or £100, the income over which he has control is only £450 or £400. That is the justification for this amendment. He never gets into his hands this 100 per cent of his income because portion of it is a necessary expense which may as well be paid direct by the State or the employer to the doctor. It is something over which the man has no choice or control; it is something ordained by destiny and beyond the control of the unfortunate individual.
As Deputy Esmonde said, where you have a case of illness, the cure of the illness will be prolonged because of financial worry. In fact such worry may even do injury. That is particularly so where the breadwinner is ill. It is even more so where the breadwinner has a large number of dependants and where, as in the case cited by Deputy Sweetman, such people are unable to insure themselves because their medical condition necessitates heavy expenditure.
I do not believe it is good enough to say: "If we cannot help all mankind, we will help none." If the same theory were to apply in relation to charity, it would never have been indicated by the Almighty as the greatest of all virtues. We must help and it is up to the Minister to help some people in the community. If, by doing so, he denies help to others which it is not within his power at the moment to give, I still think he ought to do it. The cost to the Exchequer would be purely nominal but it would assist in the hardship cases.
While the Minister is sympathetic, his sympathy is of little value. On account of the principle enshrined in the amendment, we feel we cannot accept the Minister's sympathy. We do not think it is sufficient. As Deputy Sweetman said, we appreciate that we are not the Revenue Commissioners. Thanks be to God for that. Nobody on this side of the House has the responsibility of Government for the time being. We have not at our disposal the genii of the tax offices who might be able to frame an amendment to cover every contingency and not allow any escape route such as Deputy Booth has in mind. On that account, we feel the principle is one which we must defend and that the Minister should have gone further than he did.
While I also am grateful for the Minister's sympathy, I do not feel it is getting us very far in this amendment. The Minister offered his sympathy and we thank him for it. Next, he said it was a matter that would probably be discussed and that we must await the outcome of the deliberations of the Income Tax Commission now sitting. I do not know a great deal about the working of the Income Tax Commission or in what direction their minds move but it is more likely they will give primary consideration to the existing income tax code. I support this amendment because it is an innovation and a necessary innovation. Since this Commission has been sitting for a considerable period and no suggestion on these direct lines has been made to them before, it is extremely unlikely they will give it their consideration. It is poor consolation for the Minister to reply to us on those lines.
The third point he dealt with was in connection with payment for insulin. It seems to me that has no particular relevance to this discussion. That is a question purely between the county manager and the individual concerned. It is a minor consideration in the administration of the Health Act. The Minister further stated that it might be possible to reach some agreement between the Department of Health and the Voluntary Health Insurance Board to ensure that cases that were uninsurable will be insured by the Voluntary Health Insurance Board. Surely that is nonsense. The Voluntary Health Insurance Board is a non-profit-making company whose function is to give the best service they can to those who entrust the financial side of their health to them. They have certain standards and rules and if they are to accept cases such as that, they must be backed by the Department of Health. The Minister has stated, in effect: "Although we are sorry for these people, there is nothing we can do about it. We will pass the buck back, first of all, to the Commission and secondly, to the Department of Health."
I should like to give the Minister this information: I am a member of an advisory board and one of the things we recommended to the Minister for Health was that he might give consideration to this problem. We did not go to the extreme to which the Minister went in suggesting they should take uninsurable cases but that they might in some way associate the State medical health service with a Voluntary Health Insurance Scheme so that there would be a wider scope for the class for whom we are speaking this evening. The answer we got back was that it was unconstitutional for us to recommend that. Apart from that, the Minister for Health knows the position. Has he made any move in that direction? Is there anything in the mind of the Government, of which the Minister is the financial controller and one of the principal Ministers, in regard to such a scheme? If the Minister even told us that I would be more satisfied.
I personally regret the Minister's reply just now. We always welcome sympathy; every Deputy likes to feel he has the sympathy of the Fianna Fáil Government if he is sitting on these benches. However, that is not enough, nor is it enough for the people on whose behalf Deputy Ryan, Deputy Byrne and Deputy Cosgrave have put down this amendment.
I ask the Minister in all seriousness to give consideration to it. After all, Deputy Booth in the benches opposite gave it his support. Deputy Booth is a Deputy for whom I have respect. He is broadminded and likes to say things perfectly frankly as he sees them. He is not particularly tied one way or the other and likes to express his opinion. He said this is a matter for sympathetic consideration. He practically indicated to the Minister that it would be a good thing to bring in a proposal on Report Stage. We have had no indication in that respect so far, and I would ask the Minister to go further and give us an indication, not only of his sympathy but of his intention to do something on this important question.
I do not care about the sarcastic remarks of the Deputies opposite in regard to my sympathy. I have sympathy for these people but Deputy Esmonde should have understood what I meant. I did not intend that the voluntary health organisation should do this alone; I meant that if the Minister for Health had a scheme for treating these people he could ask this organisation to work the scheme for him at his expense, not at their expense. As I said, that occurred to me as I was sitting here this evening. There may be nothing whatever in it and it may be found to be a very silly idea when it is examined. I had in mind very much the same case as Deputy Ryan mentioned, that of the man with £10 a week having to spend £3 10s. Od. on insulin. The income tax relief is not much good to him. If he is paying £25, he gets only £8 a year in income tax relief. Of course the important thing is that we should do more for him and not so much for the man who is earning £3,000 or £4,000 a year. More can be done for the deserving case through the Health Act or through some scheme of that kind than can be done through income tax relief. I am very doubtful if it is a provision that should be put in the income tax code at all.
That is tantamount to saying that the voluntary health premium should not have been allowed for income tax purposes.
That is a very different matter.
It is the same idea.
After all, the person is getting a fair cover there for his premium, but he is not getting very much if he is spending £50 and getting less than a third of it back.
A third is better than nothing.
Amendment put.
The Committee divided: Tá, 39: Níl, 63.
Tá
- Belton, Jack.
- Burke, James.
- Byrne, Patrick.
- Byrne, Tom.
- Casey, Seán.
- Coburn, George.
- Coogan, Fintan.
- Corish, Brendan.
- Cosgrave, Liam.
- Costello, Declan D.
- Crotty, Patrick J.
- Desmond, Daniel.
- Dillon, James M.
- Esmonde, Sir Anthony C.
- Fagan, Charles.
- Giles, Patrick.
- Jones, Denis F.
- Kenny, Henry.
- Kyne, Thomas A.
- Larkin, Denis.
- Lindsay, Patrick.
- Lynch, Thaddeus.
- McLaughlin, Joseph.
- McMenamin, Daniel.
- Manley, Timothy.
- Mulcahy, Richard.
- Murphy, Michael P.
- Murphy, William.
- Norton, William.
- O'Donnell, Patrick.
- O'Higgins, Michael J.
- O'Higgins, Thomas F.
- O'Reilly, Patrick.
- O'Sullivan, Denis J.
- Reynolds, Mary.
- Rooney, Eamonn.
- Ryan, Richie.
- Spring, Dan.
- Sweetman, Gerard.
Níl.
- Aiken, Frank.
- Bartley, Gerald.
- Blaney, Neil T.
- Boland, Gerald.
- Booth, Lionel.
- Brady, Philip A.
- Brady, Seán.
- Brennan, Joseph.
- Brennan, Paudge.
- Breslin, Cormac.
- Browne, Seán.
- Burke, Patrick.
- Calleary, Phelim A.
- Carty, Michael.
- Childers, Erskine.
- Galvin, John.
- Geoghegan, John.
- Gibbons, James.
- Gilbride, Eugene.
- Gogan, Richard P.
- Haughey, Charles.
- Healy, Augustine A.
- Hillery, Patrick J.
- Hilliard, Michael.
- Johnston, Henry M.
- Kenneally, William.
- Killilea, Mark.
- Kitt, Michael F.
- Lemass, Noel T.
- Lemass, Seán.
- Loughman, Frank.
- Lynch, Celia.
- Clohessy, Patrick.
- Collins, James J.
- Corry, Martin J.
- Cotter, Edward.
- Crowley, Honor M.
- Cummins, Patrick J.
- Cunningham, Liam.
- Davern, Mick.
- de Valera, Vivion.
- Donegan, Batt.
- Dooley, Patrick.
- Egan, Kieran P.
- Egan, Nicholas.
- Fanning, John.
- Faulkner, Padraig.
- MacCarthy, Seán.
- McEllistrim, Thomas.
- Maher, Peadar.
- Medlar, Martin.
- Millar, Anthony G.
- Moher, John W.
- Moloney, Daniel J.
- Mooney, Patrick.
- O Briain, Donnchadh.
- O Ceallaigh, Seán.
- O'Malley, Donogh.
- Ormonde, John.
- O'Toole, James.
- Ryan, James.
- Teehan, Patrick.
- Traynor, Oscar.
Tellers:—Tá: Deputies O'Sullivan and Crotty: Níl: Deputies Ó Briain and Loughman.
Amendment declared lost.
SECTION 7.
Question proposed: "That Section 7 stand part of the Bill."
This section deals with open-cast mining. I do not know whether the Minister has received any representations in relation to the operation of these provisions. I am not quite clear whether the case I want to make is entirely relevant under this section. It is, I think, relevant to some extent. When a company receives a tax remission the State, by giving such a remission, is under obligation to ensure that a company behaves reasonably. I have received some complaints that certain mining works have been carried out without adequate regard to the compensatory provisions in mining legislation. Companies have gone in under the Mining Acts on certain lands. The question of compensation has been submitted to arbitration. Before that arbitration has taken place and before compensation has been fixed the companies have folded up and gone away.
When we give our blessing by way of remission, we are under obligation to make sure that mining operations are carried out with due regard to the rights of individuals. While I do not think the Minister can do anything in that regard under this section, I would urge on him that he should bring this matter to the notice of his colleague, the Minister for Industry and Commerce. The law definitely requires to be tightened up and, if the Minister intends to continue giving tax concessions to those who engage in mining operations, he must ensure that adequate arrangements are made for compensating those people whose interests are damaged.
I shall do that.
Question put and agreed to.
SECTION 8.
Question proposed: "That Section 8 stand part of the Bill."
The existing life insurance legislation covers, I think, an insurance company registered in any British possession.
That is right.
May I take it that it covers an insurance company which is registered in any part of the world, or does an existing British possession now fail to be caught under this section?
No. The present position is governed by the Act of 1918. The position in regard to a company legally established in the State or in a British possession—that means, of course, Great Britain or Northern Ireland—lawfully carrying on business in the State continues. This will apply to a foreigner coming in, having lived abroad for more than ten years before coming in, and having been insured before coming in. If he applies, he will get the concession on that particular insurance premium. The condition is that he must be ten years living abroad and, during that ten years, have taken out that insurance policy.
It is then operative as from 5th April of this year?
Yes.
And the position prior to the year 1960/61 is not being amended. I thought there were certain concessional arrangements before that which are now being incorporated on a statutory basis. The position is not being changed in so far as the earlier years are concerned.
No.
Question put and agreed to.
SECTION 9.
Question proposed: "That Section 9 stand part of the Bill."
Could the Minister give us the figures in relation to this?
As the Deputy is aware, contributions for a contributory pension will be counted as earned income and relief will be given to the extent of the premium. I do not think it will cost very much. We have not got a firm calculation yet of what it will amount to.
I do not mean the total cost. I mean the amount per individual. As I understand the position, on an insurance stamp costing 9/- a sum of x shillings will be attributable to life insurance and will, therefore, be allowable under this section.
We shall have to get a certificate from the Minister for Social Welfare as to what part is for a contributory scheme.
The Minister has not got that yet.
I do not think so.
Perhaps, if I put down a question to him, the Minister will inquire.
Question put and agreed to.
Section 10 agreed to.
SECTION 11.
Question proposed: "That Section 11 stand part of the Bill."
An inspector may ask for a full return of all income for the previous year under this section in making an assessment for the present year. It is to some extent necessary to tighten up procedure, and especially necessary as a preparation to combining income tax and surtax in the one operation.
Has the inspector not got this right already?
It is doubtful if he has full right to get all this information.
Does the Minister mean he has not got the right because it is the previous year, or does he mean he has not got the right to require certain details under these subsections? Which does the Minister mean?
There are certain points that have to be covered by this section. Without going into detail, one point is that the Special Commissioners issued a precept to the inspector to give them the information they required. Now that precept will no longer be necessary because he will get all the information he wants under this section. He will be able to assess what the income tax should be and he will also be able to assess what the surtax will be but he does not actually go further than that. He will still send it on to the Special Commissioners to make a final assessment for surtax.
Previously, could he not get it without a precept?
We are dispensing with the precept so that he will not ask for it twice, really.
It will be news to most people, including most taxpayers, that the income tax inspector was not entitled to ask for all the information he could possibly think of. Whether he got it or not, of course, was another question.
That was why a precept was issued.
Question put and agreed to.
NEW SECTION.
I move amendment No. 4:
Before section 12, but in Part 1, to insert a new section as follows:—
"In connection with any assessment for liability for income tax, where a person proves that he has incurred expenditure by way of fares on public transport in travelling between his normal residence and the place where the income is earned, he shall, subject to a maximum of fifty-two pounds in any one year, be allowed such expenditure as an expense wholly, exclusively and necessarily incurred by him in earning such income."
It is one of the fundamental principles of our income tax code that the taxpayer must not in any circumstances whatsoever be allowed to charge against his income for assessment purposes the expenses of travelling to his working place. I do not know why that is a fundamental principle, but it is. It is based in respect of salary and wage earners on Rule 9 of the Rules to Schedule E, a rule which goes back to the Income Tax Act of 1853. It may go back even earlier than that. I have traced it back to 1853. In so far as it applies to business people, it relates to the Schedule D Rules. I do not know how old that is but it is quite old.
The question of revising these century-old rules has not previously arisen because it is not very important. Pre-war, not very many people were paying income tax. Indeed, originally, after the rule had been laid down in 1853, it was held that income tax was a temporary measure. For that reason, I believe the question of revision was not given very much attention at that early stage.
Now there are no less than 180,000 people in this country assessed to tax as wage and salary earners, not to speak of business people and others, property owners and such like. The vast majority of our taxpayers are paying tax under Schedule E as wage and salary earners. The Minister has already given us an advance indication that he was more favourably disposed to amendment No. 3 than to any of our other amendments. I do not know why that is so. I do not know why this question of not allowing expenses of travelling to and from one's place of work should be regarded as being such a cardinal principle. I am not aware of any of the existing allowances, earned income relief or personal allowances, which purport to provide relief for the expenses of travelling to and from one's place of work.
The tax code does not anywhere define taxable income but it is generally regarded as the surplus of the receipts from any classified source over the cost of obtaining the income. That is a reasonable definition of taxable income. Nobody can gainsay the fact that in order to earn your income at your place of work you have to travel to your workplace. That is axiomatic. Possibly, 100 years ago one did not have to travel very far to get to work. Even up to 40 years ago, in this city of Dublin, the greater part of the city was confined within the canals and probably very few people had to travel more than half a mile or so to get to their work place. Travelling expenses, particularly for wage and salary earners, are now a most significant and heavy item in their budget.
It is quite illusory to argue, as the Minister might argue, that the taxpayer has freedom of choice in deciding where he is to live. In respect of many working people in Dublin, those who are now being taxed under P.A.Y.E. in a big way, they are Corporation tenants and have to go to live wherever they are sent. The average busfare from schemes such as Ballyfermot, Coolock, Crumlin and such places is 8d. or 9d. Taking the double journey to and from work, ignoring the question of lunch-time, the busfare would be 1/6d. to 2/- a day per worker. An expenditure of 10/- 12/- or 15/- a week is a moderate estimate of the busfares paid by working people. It is an expense beyond the control of the worker who has not freedom of choice in deciding where he will live.
Those of us who are familiar with the housing problem in Dublin know only too well that those who are eligible for housing by Dublin Corporation are very reluctant to go to the housing schemes on the outskirts of the city. People will endure considerable hardship in order to retain their housing accommodation in the central city area. It is interesting to know, for example, that many workers in the dock area live in Ballyfermot. The fare from Ballyfermot to the centre of the city is 9d. and from the centre of the city to the North Wall is 3d. In the Dublin vernacular, Ballyfermot is known as "Bally-Far-Out". That may be an indication to the Minister of the extent to which Dublin workers are affected by transport costs.
Dublin busfares are very high. I think busfares are high in Cork also. Transport expenses are a burden, not only on the worker but on his wife and children. Children from many outlying areas have to travel to the city to schools. It is significant that all our dormitory suburbs are not self-contained, not industrial towns in their own right, as similar areas in Britain may be.
There are no workers' fares in the Dublin area. Britain operates on the same tax rule in this respect as we do but in most British industrial cities the transport authority provides specially reduced workers' fares. Despite many representations from Dublin County Council, C.I.E. have always refused to institute such a facility for Dublin workers. Indeed, I will go further and suggest that the fact that Dublin bus services subsidise rural transport to a considerable extent has some bearing on this amendment, which I suggest is very reasonable, very restrictive and should be acceptable to the Minister.
We ask the Minister to allow the taxpayer the expenditure incurred by way of fares paid on public transport in travelling between his own residence and the place where the income is earned, subject to a maximum of £52 in any one year. There are working people, salaried people, who live at such distances from the city that they pay more than £1 a week to travel to their work but we are ignoring that because if a person wants to live in, say, Drogheda, Kildare or Wicklow, and work in Dublin, there is an element of personal choice in it. He can come nearer to the city than these places, but travelling expenses of up to £1 a week are, indeed, in many cases unavoidable for the average taxpayer.
I shall go further and say that, for my part, I would even be prepared to accept restriction of this concession to persons taxed under Schedule E, that is, wage earners and salary earners, on the grounds that they are more deserving of relief than any other section of taxpayers in this country, that they are the one section of taxpayers who have allowed no expenses whatever and are the one section of taxpayers who have no way of evading their tax liabilities by reason of the fact that their employers are forced to act as collectors for the Revenue Commissioners. The question of providing parity of treatment between wage earners and salary earners and others is of the utmost importance. By allowing this reasonable concession something could be achieved towards that end. Again, we are confining the amendment to expenditure on public transport. We are not even suggesting that the person who travels to work in his own car should be permitted to charge that expenditure for tax purposes.
The amendment is therefore restrictive and reasonable. There is great need for a strong wind of change to blow through the Office of the Revenue Commissioners and the Department of Finance in relation to tax reform. The Minister, as I said earlier this evening on Section 4 of this Bill, has shown us what can be achieved when he puts his foot down and resolves to face up to the necessity for revising this antiquated tax code with which we are afflicted here. I suggest to him that acceptance of this reasonable amendment would be another step in the right direction.
I should like to endorse what Deputy Byrne has said for the reason that, whatever may have been the original arrangement under which the cost of travel was not allowed as a deductible expense, circumstances have very largely changed. So far as Dublin is concerned, the city has grown considerably and tenants of corporation houses are obliged to live wherever houses are provided. Many of these schemes, particularly the schemes provided since the war, are on the outskirts of the existing city. In fact some of them were provided outside the city boundary altogether, in the county, and while it may be argued that people have a choice of where they live, corporation and council tenants have no choice.
Every Deputy who has had experience of dealing with either corporation or council tenants can testify to the demand which exists for houses adjacent to centres of employment. That applies whether the person represents the city or a constituency adjacent to it. In the case of workers employed in the centre of the city or, as Deputy Byrne said, at the docks or other such place, they are in the main obliged to travel from wherever the corporation houses them.
I know from experience that many people have to travel from Dún Laoghaire to the city to work and even in a particular locality the demand for accommodation adjacent to the pool or centre of employment is considerable. Applicants who seek the assistance of a Deputy, a councillor or a member of the corporation, as the case may be, invariably preface their applications by suggesting that they wish to live in such and such a locality adjacent to the area where they are employed and in that way convenient. It is true that some effort is being made to provide employment adjacent to these schemes but in the main the vast majority of persons living either in Dún Laoghaire, Cabra, Ballyfermot, Crumlin or Kimmage work either in Dublin or, in the case of some of these outlying schemes, further in than the place in which they reside. While this may not have been allowed in the past as a deductible expense, workers previously had, in the main, to travel only short distances.
The growth of the city and the development of housing schemes outside the area where people are employed involves them in considerable distances. When one considers that in the past four years bus fares have increased by over 12 per cent.—bus fares were already high but are now 12 per cent. higher than they were four years ago—one must admit that it is a very considerable burden on a great many workers. City people are obliged to live where they can get accommodation. That imposes on a number of people, particularly council dwellers or corporation tenants, the obligation to travel to their place of employment. These people have no choice. They may opt on a form for a particular district but they find that a great many more people opt for the same district. In fact, if the majority of the tenants had a choice they would live much closer to the centre of the city and centres of employment.
Similarly, the experience I have had is that people in Dún Laoghaire prefer to live nearer to their place of employment than further away, entirely on the grounds of cost of travel. Cost is involved in two ways; either wage-earners have to travel or housewives are obliged to travel but, in the latter case at least, they have an opportunity of shopping in some centre adjacent to where they reside. I believe there is a case for considering this proposal and allowing some expenses for travelling to and from employment.
I should like to support this amendment. Deputy Byrne wondered why something had not been done about this already. I think the answer is that we have to a large extent taken over British legislation; one of the greatest mistakes was to retain so many aspects of it. It would have been preferable to have retained the better aspects and got rid of those which were not so good. A reasonable case was made for the amendment by previous speakers. There might be some difficulty in the administration of it if it were not for the fact that the amendment specifies "for public transport" only. It should be possible for the Minister and his advisers to give this consideration.
I know the Revenue Commissioners do not like accepting amendments as a result of which they would be likely to lose money nor, with their inherently conservative outlook, do they like anything that savours of change. There is no reason why we should not strike out on a completely new road. We have our own Government and just because the Government across the channel adheres to these archaic laws I do not see why we should continue to do so here. Lest the Minister and his advisers feel they might lose a good deal of money by this proposal, I should like to put this point to them. If the allowances are effective on public transport it is likely that those seeking income tax relief—and, mark you, there is no one paying tax who does not seek relief in some shape—would be more likely to use the public transport than they did heretofore. By using it, they will enable it to pay its way better and the Minister for Finance would then possibly be spared the subvention he has to make to public transport to keep it solvent.
There are many types of people who would be affected by this amendment. They are mostly people of the lower income group who find themselves on a small budget trying to live from day to day and to find the wherewithal to make ends meet. That is the state of affairs largely to be found in this lower salary group who are subject to income tax under P.A.Y.E. This would mean a considerable amelioration of their condition.
There is no need to stress what the two previous speakers have said in regard to distances, which are now greater than before, and the difficulty of obtaining accommodation in the city of Dublin. These points are well known. Deputy Byrne said that a case might be made against those who worked in the city and live in other places, in County Wicklow, or perhaps further away from that. In many cases through necessity they have to live there, because they cannot get houses in Dublin. As far as I can see from applications I get from people who came from my county originally, and are now looking for houses, they just have not got a hope but have to wait in a queue. If they have not more than two or three children, they have not a hope of getting houses in Dublin. These are the people who are being hard hit by transport and get no relief. If we grant relief to other people, we should grant relief to people who have to travel to their work. It is not their fault that they have to travel.
Deputy Cosgrave said that it was quite obvious that if they could get building sites or living quarters adjacent to their places of employment they would live there, but they have to live elsewhere. For that reason there is a considerable argument in favour of this amendment.
There is another section of the community which comes to mind also—the members of the teaching profession. There are many people in the profession, particularly music teachers who are not employed in one particular place but very often teach in five or six different convents or schools as the case may be, in widely scattered areas. Although they get certain fees for teaching music to a certain number of pupils, those fees are very largely nullified by the fact that they may have to pay 2/- or 3/- in bus fares. Such teachers are not by any means overpaid and if the Revenue Commissioners think they receive large sums of money and are able to afford the transport fares to bring them to their work, they are making a big mistake.
I am sure we shall have the Minister's sympathy on this amendment. In fairness to him I think there might be some little difficulty in administering it. It is not as easy to operate as the last amendment which he was not prepared to accept. It is a public transport amendment and as such it would not be beyond the ingenuity of the Department of Finance, who are so good at arranging our affairs, to evolve some scheme by which it would be possible to give relief to the section of the community who find it hard to make ends meet.
I should be interested to hear the Minister's argument in relation to this amendment because, although we have all heard arguments in relation to the general principle of disallowing expenses incurred in going to and from work, I do not think we have ever heard the case argued in relation to a specific allowance for the cost of public transport alone. That is a different case from the general case. We have arrived at a situation in relation to the city of Dublin where it is desirable that there should be some extension of the surburban dormitory. The centre of the city has become overcrowded and it is inevitable, and will be much more the situation, that the building of new houses, if this city should increase — and whether it should increase is another matter but it is obviously going to increase—will take place further and further away from the centre. If that is so and if it is not possible in future for workers to live near their work, then there seems to me to be an argument that at least requires to be rebutted in relation to this problem.
Certain small towns in my constituency—Leixlip, for example—would be devoid of half of their activities, were it not for the people who perforce live there and go to Dublin to work. Because their residence is in Kildare county, they are not eligible for houses in Dublin city or county. The number of commuters on the buses from Naas, even from Newbridge, Leixlip, as I have said, Celbridge, Kilcock and even as far away as Maynooth, are quite considerable. By not coming to the city to live, they are assisting in avoiding the creation of worse social problems. That is the kernel of the argument. There would be worse social conditions and problems if they were to scramble towards the centre where there is no housing room. I should like to hear the argument which the Minister indicated he would make against the amendments.
Deputy Byrne truly said it is almost a sacred principle in relation to income tax that no allowance can be made for expenses of travelling to and from work. That has always been the case. I may say it is one of the principles that one is inclined to defend because I do not know what a departure from it would lead to.
Let me make this point, first of all, because it has been raised two or three times. The Revenue Commissioners should not be attacked about anything in this Bill. It is I want the money; I asked them to give me money to balance the Budget. If I say to them: "Give me these concessions", they will do so. So blame me and not the Revenue Commissioners for anything of this kind.
They are not so hidebound as some people think.
Indeed, they are not. Several of these amendments ask for concessions. If they were accepted and the concessions given, they would amount to quite a lot of money. It is quite possible that they would amount to as much as it would cost to take 6d. off the income tax rate. I think it would be better to take the 6d. off than to give these concessions. In other words, I personally am not inclined to give concessions, unless they are absolutely necessary and unless a very good case is made for them. The whole effort should be directed towards reducing income tax, if possible. I think it will be possible to reduce income tax even further in the course of a few years, because, as was pointed out here tonight, the yield from income tax will be very satisfactory. Deputy Sweetman pointed out that we are estimating a higher yield from income tax this year than last year, even though we have taken 8d. off the standard rate.
The estimated increase is virtually the amount to be secured under Section 6. By removing the C.P.T. exemption in Section 6, it is £600,000 against £750,000.
In other words, if we gave some of these companies concessions, we would not get it. That is right. I want to make the point that we should reserve any concessions we give in relation to income tax for a reduction in the standard rate, so far as possible, and consider concessions only where a very good case can be made. I do not think it can be made in this instance. I am entirely against it for that reason but there would also be difficulties in administration.
A person is inclined to live in a certain place. He has a preference for a certain place. If he prefers to live in a certain place and if it cost him a good deal to go to work, I do not think the State should pay in any way for his preference for living there. What is more, a person sometimes lives a long distance from his work and gets a house cheaper because rents are lower, and he may actually save as much on his rent as it costs him to travel. Again, I think there would be no equity in trying to compensate him further by giving him relief in income tax.
I do not know how these costs could be checked if this concession were to be conceded. A man may live a long distance from his work and claim 2/- a day for five days a week. That is 10/- a week. I do not see how the Revenue Commissioners could possibly check that the man had travelled every day, five days a week, every week in the whole year. It would be an impossible task to ask any officials to carry out. I am not making my case on the difficulties of administration. I do not think there is any case at all. Therefore, I would ask the Dáil to reject it.
Our motives in putting down this series of amendments was to emphasise the need for relief for individuals. The Minister says that if he were in a position to provide what he considers the necessary revenue to meet the cost of these amendments, he would prefer to reduce the standard rate of tax. I suggest, for my part, that in our present conditions there is great need for relief for individuals. I will go further and say that so far as tax concessions for industry are concerned, industry has for the moment obtained enough relief until an instalment of justice is done to individuals, and particularly to those taxed under Schedule E.
I am glad Deputy Sweetman mentioned the special need for consideration of the position in Dublin. Unlike Deputy Cosgrave and Deputy Ryan, he is not a Dublin Deputy and cannot be accused of having a special interest in Dublin constituents. In this country now there are 180,000 P.A.Y.E. taxpayers. It would be most interesting to know how many of them are in Dublin. I believe that probably over half of them are in the Dublin area.
Despite my opening remarks, the Minister claimed that there is a choice of where to live, or that a personal choice is exercised to suit a person's preference. I challenge that view. I believe it is true to say that so far as the mass of Dublin working people are concerned, they have to live where the Dublin Corporation send them. As I said before, they frequently go to great pains to avoid being sent to the outlying areas. They will go to great lengths to remain in the more central city areas. Dublin Corporation have no choice in the matter. They have to send them to these outlying areas because there is no room for development in the city centre. I make no apology whatever for making a special plea for Dublin workers in this respect.
The Minister suggests that many people live a distance from their work in order to save rent, in order to have the benefit of lower rents in the outlying areas. I think that is largely a theoretical argument. I said this was a reasonable amendment because we are confining it to public transport.
With regard to the Minister's point as to how the Revenue Commissioners will check up on the individual using public transport, the answer is, what if he does? It is the cheapest form of transport that he can use. If he is using his car to go to work, he should be allowed the expense of public transport. Is that not the very minimum to which he is entitled? If he uses his bicycle to travel to work, good luck to him. It is not unreasonable to suggest that even in such cases he should still be entitled to the cost of public transport.
The time has come when this House should consider and invite the Income Tax Commission to consider the theoretical basis of the various personal allowances on earned income and see if we can instil some kind of logic into the matter. We should ask ourselves what the expenses are meant to cover. Are they realistic for the purposes they are intended to serve? I remain convinced, despite what the Minister said, that the reform we are advocating in this amendment is a very reasonable one.
Mr. Ryan
Deputy Byrne stated the case so well that there is not much need to say anything more, beyond endorsing it in the light of one's own experience and dispel the gloom which the Minister has created in suggesting that a person has a free election in regard to the location of his house. As Deputy Byrne pointed out, if a person's means are such that he is unable to purchase a house of his own, he is at the mercy of the local authorities and in the case of Dublin city, that means he is given a house five or seven miles away from the place of his employment. That necessitates, without any volition on his part in the matter, an expense of, perhaps, £1 for every person in the household who is travelling.
We should bear this in mind. The rents charged for outlying houses, which may be five, six or seven miles from the city centre, will be the same in many cases as the rents charged by the local authorities and Dublin Corporation in the city centre. It is not a question of people going to further away places in order to have lesser rents. One half of the population of Dublin are housed by the Corporation. It is a considerable social problem.
We are compelling them to avail of outlying houses and involving them in considerable transport expenses in order to get to their places of employment and we are making no provision whatsoever for this. We should bear in mind that such people as corporation tenants are taxed as to one-sixth of their income for the purpose of paying the rents of their houses. Under the differential rents system, one-sixth of a person's income is regarded as being the proper rent.
While the children remain at school and are not earning, the householder has still to pay for their travelling expenses. In many cases, the school is a considerable distance away, thus putting an additional burden on him. The Minister may say that in such cases these people are not paying income tax at all. That, of course, is true to some extent, but as the younger members of the family begin to earn, they in many cases find themselves paying income tax, although the travelling expenses of the household are going up and up. When the differential rents system was introduced over 12 years ago, a basic allowance of 10/- per week was allowed to each householder to meet necessary expenses, including travelling expenses.
Since then, under two Fianna Fáil administrations, there have been considerable increases in transport expenses and nothing by way of a decent personal allowance has been given under the income tax code. Deputy Byrne is moving this series of amendments because he is mainly concerned with seeing that substantial increases are given in personal allowances, marriage allowances and allowances for children. That is what should have been done but the Minister has failed to do it. The purpose of the amendments is to indicate that there are increased individual personal expenses for which the Minister under the income tax code has made no provision whatsoever. On that account, we believe we are correct in maintaining our point of view in this regard.
There is a social problem as well. By reason of increasing transport expenses in respect of which people are getting no allowance, sites in the city centre are now sold at what were at one time considered to be exorbitant prices. I believe it is socially undesirable. From the social point of view, there is something to be said for having people content to live in the suburbs.
Let us look at the social programme of the State for some years. It has been to give building grants and other subsidies for new houses and only new houses and many local authorities make loans available under the Small Dwellings (Acquisition) Acts for outlying houses.
The Deputy seems to be embarking upon a debate on housing.
Mr. Ryan
It does to some extent relate to housing.
The Deputy's amendment refers to the fares paid on public transport.
Mr. Ryan
I am refuting the argument put up by the Minister that people have freedom of choice in regard to the place where they reside. The State has deliberately given subsidies to people to live on the fringe of the city. It has denied these subsidies to people living in the city centre. That makes a mockery of the suggestion that there is complete freedom of choice as to where one resides. That is one of the reasons I believe this amendment deserves support.
Is the amendment withdrawn?
Would the Minister not like to answer the argument?
I have answered it fully. Would any of the Deputies listen to this point? Do they prefer all these far-fetched concessions to reducing income tax? I was able to reduce the income tax rate by 8d. in the £ but I could not have reduced it by a penny if I were to do all these things. All this stuff is just eyewash.
This amendment deals with a special type of person. Nobody denies the fact that the Minister reduced the income tax rate by 8d. in the £. The people in question here are people who had considerable charges imposed upon them. They are finding it hard to live. The 8d. in the £ does not compensate them for the extra expenses they have to meet for transport to their business. The Minister stated categorically that people live where they want to live. Deputy Ryan was endeavouring to point out to the Minister—I think he produced a good argument—that people lived where they had to live. These are the people who are suffering the hardship.
Progress reported; Committee to sit again.
The Dáil adjourned at 10.30 p.m. until 10.30 a.m. Thursday, 22nd June, 1961.