Vol. 202 No. 1
I move:—
THAT subsection (4) of section 39 of the Income Tax Act, 1918, shall be repealed and provision may be made as regards any supplemental or ancillary matters affecting the liability to income tax of societies registered under the Industrial and Provident Societies Acts, 1893 to 1936.
What does this mean?
I am told that it is a proposal to abolish the present system in relation to co-operative societies and to bring in new provisions exempting co-operative societies which purchase the farmer's produce or sell him farm requisites.
Is this a proposal to make all co-operative societies liable to income tax? Is this a proposal to abolish the exemption enjoyed by co-operative societies?
Yes, complete exemption.
This is not mentioned in the Minister's speech.
It was mentioned in the White Paper.
If the Minister is going to introduce a revolutionary change of this kind, which proposes to withdraw the income tax exemption which co-operative societies have enjoyed for so long, some reference ought to have been made to it in the Budget speech. Would the Minister not regard this as a revolutionary decision? I can scarcely believe that the Resolution means what the Minister says it means, in view of the fact that he did not mention it in his Budget speech. Am I right in believing that the exemption which co-operative societies have enjoyed since the time of Sir Horace Plunket is now being withdrawn? If that is so it is one of the most remarkable changes in fiscal policy in this House that I can remember since I came into it.
The co-operative society as envisaged by Sir Horace Plunket would be exempt.
The Minister ought to explain more fully. Would he give a case in point of a co-operative society, the fiscal position of which will be changed by this Resolution?
I am sorry that I did not deal with it in the speech but it is referred to very fully in the White Paper.
On what page?
On pages 5 and 6. The intention is to withdraw the provision that related to these co-operative societies and to insert new provisions with regard to them. What it is intended to do is to exempt from income tax profits derived by co-operative societies from the processing of farm products or the selling to farmers of certain requisites, such as seeds and manures.
I am prepared to wait until the Minister deals with the matter more fully on the Finance Bill but I want to make it clear that I think it is a most extraordinary procedure that a Resolution of this kind appears on the paper without any reference whatever to it in the Minister's speech. So strong was my assumption that the Minister would not make such a change without referring to it in his Budget speech that I felt that I could not believe my own interpretation of the Resolution, but the House ought to know what this means.
This means that you are taking from the co-operative societies an exemption they have enjoyed for 60 years. It has often been argued strongly that it gives them an unfair advantage in that they enjoyed an exemption from income tax and corporation profits tax whereas individual traders up and down the country were obliged to meet these costs. That can be argued pro and con but it is most astonishing that Dáil Éireann should be asked by this Resolution to determine this wide and vitally important question without any case being made for it by the Minister. Surely if we are to change the whole basis of co-operative trading as it obtained since the co-operative societies were introduced the House should consider and hear the arguments for and the arguments against?
I must charge the Minister with being disingenuous in his procedure in this regard. I have often placed it on record that the Minister is an extremely astute operator and skilful debater but I put it to him that this kind of ingenuity goes beyond legitimate limits, to put a Resolution like this before the House without giving any explanation in his speech and then to say when he is asked about it "Oh well, I did not mention it in my speech but it is mentioned in the White Paper". That is not a proper procedure and I think the proposal contained in this Resolution, if I interpret it correctly, will be received with consternation and amazement by the agricultural community.
But the agricultural societies will be excepted.
I do not know what the Resolution means. I take it that it will impose an annual charge on the Mitchelstown Co-operative Society of anything from £30,000 to £40,000. Would that be a fair estimate? I imagine that Drinagh under this Financial Resolution will become liable to an annual burden of anything up to £50,000. I imagine the principal co-operative societies in my constituency, the constituency of the Minister for Transport and Power, will be called upon to meet a charge which may annually amount to £20,000. Maybe I fail to understand the Financial Resolution correctly but if I do I should like to be corrected. If I am wrong I want to be corrected. The Minister has a fair, approximate knowledge of the volume of trade of a body like Drinagh, Dungarvan or Mitchelstown or any of the larger co-operative societies. Could he give me a rough estimate of what he thinks this Resolution will impose on such co-operative societies by way of annual tax?
If they confine their activities to taking in farm produce, milk and so on, from the farmers and sell to the farmers what the farmers want by way of seeds, feeding stuffs and manures, there will not be any tax at all. That is the intention of the Finance Bill. This Resolution gives the Revenue Commissioners power to put on a tax but in the Finance Bill that is how it will be done. As a matter of fact, as far as my recollection goes, the Revenue Commissioners told me that the most they expect to get from it in a year is £10,000.
This Resolution has not been drafted to give effect to what the Minister said. This has been drafted, and we are asked to pass a Resolution as drafted, which means that the tax exemption existing at the present for co-operative societies is to be scrapped. I do not know what the Minister's intentions are and when he comes along with the Finance Bill or anything else that will be another day's work and we will examine it, but surely to goodness it is wrong to put before the House a Resolution which says it is giving effect only to the Income Tax Commission's Report when patently it is not? It is a Resolution repealing entirely the provisions of the Act in regard to co-operative societies. If the Minister only wanted to repeal the provisions of the Act in relation to what I might call shop produce or manufactured produce and leave the provisions of the Act for shop produce bought and sold by the farmer member of the co-operative society, why did he not put it in this? The Resolution has been drawn in such a way as to cover everything the co-operative society does and the effect of it is that from now on under this Resolution the entire exemption is gone.
Can the Minister say if this will have any effect on the new co-operative societies engaged in the growing of fruit and vegetables?
They will get the works.
No; they will, of course, be exempt.
They are in under the Resolution.
The present basis must be rescinded before we build up the new system of tax on the co-operative societies. There were co-operatives not connected with farming at all. They were formed into co-operative societies with the purpose of avoiding——
Why not provide against them?
I am putting it to you that what the Government intend to do——
But the Resolution does not give effect to that.
As far as the law goes——
The White Paper is not legislation. We are dealing with legislation here and the White Paper is not legislation.
Of course not. It only tells you what we are going to do.
I cannot see why the Resolution could not be framed to meet the case.
The Minister may make provision to do these things.
There are genuine co-operative societies and co-operative societies which were in existence some years ago as such and have now become limited companies. Is that not the big trouble?
That is one of the troubles.
Why not deal with them in that case?
I am asking the Dáil to repeal the Act and the Finance Bill will do what we intend in the White Paper.
Surely, as Deputy Dillon says, it is a revolutionary step and surely we should have been told about it and not merely have a reference to the White Paper? We have White Papers for production and for "Filling the Gap" and for this, that and the other thing. This is a gap that the Minister should have filled by telling us what he proposes to do. He has not done that.
Before we leave this Resolution, may I ask the Minister if, when he brings in the Bill to implement what he says he has in mind, he could conveniently indicate, when dealing with this matter, typical cases, not naming them of course, but taking a particular society which is today exempt from tax and showing that under the new proposal it would be liable to such and such a tax? If he could conveniently do that it would help.
I think so, yes.
