Finance Bill, 1963—Second Stage.

Minister for Finance (Dr. Ryan)

I move that the Bill be now read a Second Time. The Finance Bill implements the Budget proposals and Financial Resolutions and also deals with miscellaneous matters relating to finance. The basic purpose of the Bill is, of course, to provide revenue to meet the year's expenditure. By careful scrutiny before the Estimates were issued, and again through the specific reductions made at Budget time, expenditure has been confined to necessary purposes and is incapable of further reduction save at the risk of serious disruption of the Government's policy of social and economic development. Opposition members, however, manage to reconcile criticism of the Finance Bill with inability or reluctance to propose specific major economies which would obviate the need for increased taxation.

The Bill is unusually long—and late —this year because it includes some items which either are new to our tax code or represent a change in approach to existing tax problems and which made for difficulty in drafting. Five major matters account for almost two-thirds of the Bill, namely, the turnover tax, the implementation of the "one taxpayer, one charge" principle, the revised basis for the exemptions in favour of co-operative societies, the new rents charge, and the new penalties provisions. All these matters, except the turnover tax, arise out of recommendations of the Commission on Income Taxation. As I explained in the Financial Statement, the turnover tax differs from the purchase tax that the Commission recommended. The other recommendations of the Commission which were accepted by the Government in the Second White Paper on Direct Taxation, and which are not covered by this Bill, will be dealt with on a later occasion.

The policy followed in framing this year's tax proposals was to endeavour to satisfy social justice by seeing that the burden was evenly distributed. The taxation needed was, therefore, apportioned between profits earned by companies and expenditure from wages and salaries. Consequently, the two major items in the Finance Bill are the provisions dealing with the turnover tax and the increase in the rate of corporation profits tax.

Deputies have received the booklet regarding the turnover tax proposals, which is based on Sections 45 to 65 of the Bill.

There has been much misunderstanding about this tax and unwarranted criticism, some of it inconsistent. The argument has been made that it will put traders out of business through their having to bear the tax themselves; at the same time it has been contended that the poorer sections of the community will be caused great hardship by price increases. These arguments are inconsistent and in fact neither stands up to examination. It was never intended that traders would not be free to pass on the tax and, indeed, I issued a specific statement that they would be free to do so. Assuming they would do so specific alleviation provisions were made in the Budget by way of increased social welfare benefits.

On the effects of the tax, discussions have already taken place with numerous trade interests as a result of which many misunderstandings have been removed. I shall be glad to arrange for consultations with any party concerned who may have suggestions to meet the circumstances of particular classes of business. The information which has been published about the operation of the tax should help to remove the misapprehensions of traders and others and to create an atmosphere in which the proposals can be discussed in a reasonable and realistic way.

Mr. Sweetman

On a point of order, it is quite customary for a Minister to read his speech but it is equally customary, when he does, to supply a copy. I thought the Minister was not going to make a long speech. That is why I did not raise the point earlier.

Dr. Ryan

It will not be very long. If everybody is as short, we shall finish this evening.

Mr. Sweetman

Will the Minister guarantee that the Taoiseach will go to the Park and seek a dissolution because, if so, we shall agree?

Mr. Dolan

You are afraid of your life.

An Ceann Comhairle

Order. The Minister for Finance.

Dr. Ryan

Turnover taxes of this type are already working effectively in Sweden and Norway. In choosing this particular form of tax, we have sought to avoid types of sales tax operating elsewhere which would be less welcome to trading interests in this country. Examples of these are turnover taxes of the cascade type such as exist in Germany, or the somewhat complicated value-added type which applies in France. The trade interests, including the retail trade, collect all these taxes so that there is nothing either new or unusual in our introducing the same principle here.

It was recognised from the start that the tax might create difficulties for small traders and I said in the Budget Speech that there would be relieving provisions. The Bill and the explanatory booklet should put an end to suggestions that the tax will have an adverse effect on such persons. If they wish to register for tax purposes, they will have the benefit of the very low rates applicable to the lower ranges of turnover. Alternatively, if their monthly receipts do not exceed £500, they may exercise an option not to register, in which event tax will be collected from the wholesaler and the retailer will obtain stock in trade and other supplies for his business at tax-paid prices.

The exercise of this option will enable between 25,000 and 30,000 small businesses to avoid the responsibility of collecting the tax. The loss in revenue resulting from taxing the wholesaler instead of the retail price will be largely offset by the fact that the reduced rates for the first £100 of monthly turnover will apply to a small number of wholesalers rather than a large number of retailers. For the present year the estimated yield of £3½ million still stands.

Care has been taken to exempt sales of commodities and services entering into production. The tax is designed to have the minimum disturbing effect on the economy.

While the tax will apply to gaming and lotteries for which a licence is required under the Gaming and Lotteries Act, 1956, provision is contained in Section 97 of the Bill for retrospective exemption from income tax and corporation profits tax of the profits from such lotteries. The Irish Hospitals Trust sweepstakes are not affected by either the turnover tax or this tax exemption. Special provision dating from the Finance Acts of 1931 and 1932 was made with regard to these sweepstakes whereby, in lieu of income tax, stamp duty at a rate of 25 per cent is payable on receipts net of prizes and expenses. The figure of 25 per cent corresponded to the standard rate of income tax for 1932/33 and it has not been altered since. On a turnover basis, the hospitals' sweepstakes are already paying more than the proposed rate of tax on other lotteries.

The alleviation provisions made in the Budget by way of increases in social services, including children's allowance, are intended to compensate those sections of the community who are less able to bear the effects of the tax. The rate of tax is so low that it should not create hardship for anyone outside the scope of the alleviation provisions.

I have emphasised that there is no intention of restricting the freedom of traders to pass on the tax. On the other hand, it is only realistic to point out that competition is such a strong force that it may be expected to prevent excessive additions to prices. Swedish experience in 1960 indicated that prices generally rose by roughly the same percentage as the tax. Because of the items exempted here, such as transport and rents, we would expect the tax to increase the cost of living by rather less than 2½ per cent.

The proposal to increase the rate of corporation profits tax with effect from 1st January, 1962, has been criticised. Complaints have been made that this is retrospective taxation; that it is without precedent and that it is unduly severe on small companies. I replied to these complaints when concluding the debate on the Budget but representations have continued to be made to me and I should like to sum up here what I have said in answer to these representations.

The increase in the rate of corporations profits tax and the decision to make it operative from 1st January, 1962, were necessary to raise the required revenue while observing the policy, to which I have referred earlier, of apportioning the additional taxation between profits and other forms of income in the interests of social equity.

As regards "retrospection", 1st January is the most common date of commencement of companies' accounting periods and it has always been the operative date for corporation profits tax. The tax was first introduced as from 1st January, 1920, and all subsequent changes in rates have operated from 1st January. The increase in the charge in 1932 operated as from 1st January, 1931, which corresponds to this year's proposal. What is proposed is not, therefore, unprecedented or unjustified. Had the increase been applied with effect from 1st January, 1963, or later still, as has been suggested, the revenue yield in 1963-64 would have been gravely deficient.

If the increased revenue were being sought by raising the rate of income tax, a greater degree of so-called "retrospection" could have arisen because income tax on trading profits is normally charged by reference to the profits of the preceding year. Had the income tax rate been increased in the recent Budget, companies would be paying tax in 1963-64 by reference to the profits they had made in accounting periods ended on any date during the year 6th April, 1962, to 5th April, 1963. This could mean that profits arising in, say, the year 1st July, 1961, to 30th June, 1962, would determine a company's extra liability for income tax in 1963-64.

Moreover, depending on the amount reserved in companies' accounts for tax, an increase in income tax might have had virtually the same effect as the change in corporation profits tax. If income tax had been increased, companies, as well as having currently to put a greater amount of profits to tax reserve, might also have had to make up a deficiency in the amount reserved for tax purposes in accounting periods ended in 1962-63 in the light of the lower standard rate of income tax then prevailing.

The special position of small companies has been recognised in the concession under which the first £2,500 of profits will be liable only to a rate of five per cent and companies with profits not exceeding £2,500 will pay only 2½ per cent for the first two years.

As I said in the Budget Speech, the increase in corporation profits tax in the special circumstances of this year is a limited departure from the policy consistently followed in recent years of reducing direct taxation in order to encourage earning and saving. Under this policy, the rate of income tax has been brought down from 7s. 6d. to 6s. 4d. in the £ and many reliefs, particularly valuable to companies, have been afforded favouring exports, extension and modernisation. Moreover, Irish taxation of companies on their home profits, even allowing for the increase in corporation profits tax, still does not compare unfavourably with that of most European countries. The Irish combined rate of income tax and corporation profits tax is now 46.7 per cent on profits in excess of £2,500. The general rate of tax on profits in Britain is 53.75 per cent in Germany—for undistributed profits—51 per cent and in France 50 per cent. In continental countries, moreover, company profits are taxed again in the hands of shareholders who receive them as dividends.

Finally, on this point, I should like to say that the indications from company returns are that profits generally are rising and stock exchange quotations would seem to show that a reversal of this trend is not anticipated. There is no reason to fear any ill-effects on industrial progress.

What I have said already relates to Parts IV and VI of the Bill. There are eight other parts. Part I contains the usual charging provision in relation to income tax and surtax and gives effect to several recommendations of the Commission on Income Taxation, including concessions by way of amendment of the "loss" provisions, extension of certain time limits and tax exemption for bodies catering for athletic games or sports. The income limit for the dependent relative allowance is being raised to £120 and, with effect from next year, there will be modified relief where that limit is exceeded. A similar kind of relief will be provided where the income limit for the child allowance is exceeded. The flat 25 per cent exports relief is being extended at reducing rates for a further period of five years and assessment procedure is being altered to give effect to the principle of "one taxpayer, one charge". The Bill includes, in Part I and elsewhere, various anti-evasion measures on lines recommended by the Commission on Income Taxation.

Part II contains a small number of Customs and Excise provisions which are dealt with in the Explanatory Memorandum. None of these involves increased taxation. The effect of Part III, which deals with death duties, is set out adequately in the Explanatory Memorandum. I have already referred to the corporation profits tax increase which is the most important item dealt with in Part IV of the Bill. Of the other two sections in this part, one extends an income tax penalty provision to corporation profits tax and the other applies the proposed extension of the 25 per cent exports tax relief to corporation profits tax.

Part V relates to stamp duties. The most noteworthy provisions are the abolition of the duty of sixpence on bills of lading and the reduction, from 2 per cent to 1 per cent, for reasons explained in my Budget speech, of the duty on transfers of external stocks and shares.

The turnover tax is dealt with in the twenty-one sections which comprise Part VI. This tax is described in the explanatory memorandum on the Bill and in the booklet which has been circulated.

Part VII of the Bill deals with co-operative societies and gives effect to the Government's proposals as outlined in paragraph 9 of the Second White Paper on Direct Taxation.

Since the White Paper was published, there have been representations for an extension of the classes of transactions which come under the new exemption. These representations have been considered in relation to the position of traders whose profits are subject to tax.

I now think the best way of ensuring that the desired exemption is granted to the agricultural and fishery co-operatives without opening the door too wide, is to exempt bona fide agricultural co-operative societies as defined by the Minister for Agriculture and bona fide fishermen's co-operative societies as defined by the Minister for Lands, subject to the approval in each case of the Minister for Finance. The exemption would cover profits from sales of the commodities and services mentioned in the White Paper and such other commodities and services as may be specified by the Ministers for Agriculture and Lands. It was not possible to revise the draft sections of the Bill in time for printing and I propose, therefore, to move an appropriate amendment at the Committee Stage.

Part VIII of the Bill contains new penalty provisions for income tax, surtax and corporation profits tax. The provisions follow on the Government's acceptance in principle of the recommendations on tax evasion made by the Commission on Income Taxation in their Seventh Report.

As I stated in my Budget speech, the measures now being introduced, together with improvements in organisation of the Revenue staff, will mean that tax evasion will be attended by a greater risk of detection. I would, therefore, like to repeat the offer I made to persons who may have been concealing or understating their incomes. Any such person who now wishes to put himself right with the Revenue Commissioners without incurring any penalty should apply to them for a form of undertaking to be completed and returned before 31st March, 1964.

Part IX gives effect to the proposal to tax income from the letting of houses and lands by reference to actual receipts. As announced in the Budget speech, the impact of the new charge will be mitigated so far as residential property is concerned. In the case of rent-controlled dwellings a special deduction will be allowed of 40 per cent of the profit rent subject to a maximum of £200. I have decided to extend the Budget concession by providing that in calculating this limit houses let at a rent not exceeding £52 a year will be excluded. For non-controlled residential property the charge will be abated by 20 per cent for three years subject to a maximum abatement of £100 per annum.

Part X of the Bill deals with miscellaneous matters.

Section 96 is the usual one dealing with the Capital Services Redemption Account. Section 97 proposes retrospective exemption from income tax and corporation profits tax of profits from licensed lotteries. These lotteries will come within the scope of the turnover tax. Section 98, dealing with the removal of the Revenue priority under Section 38 (2) of the Finance Act, 1924, replaces a provision which was withdrawn from the Companies Bill on the understanding that the matter would be dealt with in the Finance Bill. Sections 99 to 101 correct certain defects, which came to light in court proceedings, in the provisions for recovery of taxes and duties. The only other section in this Part upon which comment might be made is Section 102 relating to the Road Fund. The grant to the Road Fund in 1963-64 was reduced from £550,000 to £150,000, but, under Section 102, grants not exceeding £400,000 may be paid to the Road Fund over the next two years.

These, in outline, are the proposals in this year's Finance Bill. Detailed explanation and discussion are more appropriate to the Committee Stage.

Mr. Sweetman

I move:

To delete all words after "That" and substitute:

"Dáil Éireann declines to give a Second Reading to the Bill, Part VI of which provides for a Turnover Tax which will result in an increase in the cost of living with undue hardship on the consuming public and the business community."

The Finance Bill is the Bill by which the Government bring into operation each year the fiscal and taxation policy which they have decided upon. The Finance Bill is, therefore, one of the major items of policy for consideration by the House and by the country in considering the general policy of any Government. It is quite unthinkable that this House would not be permitted to pass judgment at any time on the policy of the Government in relation to these matters as defined in the Finance Bill.

The manner in which the Taoiseach, panic-stricken, rushed to Fianna Fáil headquarters on 12th June, when we gave notice that we proposed to challenge the policy of the Government in this regard, was the action of a rattled man. The speech published in the papers the following day and which has been commented on by his supporters up and down the country was typical of that of a man who realised his bluff was about to be called and who was attempting to prevent that calling by another bluff.

The Taoiseach suggested in that speech that it was irresponsible of this Party or, for that matter, of any Party in Opposition to a Government to challenge a Finance Bill. He hoped, I suppose, that the memory of the people would be short. He hoped they would not remember that in 1954 he, as Deputy Lemass, then deputy leader of the Opposition, in the same way moved a motion by way of amendment to the Finance Bill of that year and asked the Dáil to reject the Finance Bill. It was his right and his privilege as a member of the Opposition in 1954 to request the Dáil to decline to give a Second Reading to the Finance Bill, just as, today, it is our right to do so. It is just stupid nonsense for anyone to suggest that the defeat of the Finance Bill will create any problems anywhere in relation to the carrying on of the business of the country.

This House, by two means, ensures that there is legislative sanction for the moneys collected and the moneys paid. The letters of sanction for the moneys paid consist of the Vote on Account included in the Central Fund Bill passed every March. It is a matter of five minutes for the Dáil, on a promise by the Taoiseach to dissolve for a general election, to pass a further Vote on Account to provide the incoming Government with sufficient moneys to carry on until this House can meet again after a general election. It was done before when there was a necessity to have a general election before the financial business was concluded by the Appropriation Bill in July as it would be concluded in any normal year.

The Taoiseach is not stupid; he is not naive. He knows perfectly well that that can be done. He knows perfectly well it was utterly untrue and irresponsible of him to suggest that the passage of the amendment I have moved on behalf of the Fine Gael Party today would result in there not being sufficient funds to pay civil servants or to pay social welfare benefits or to pay the other proper outgoings of Government. Just as in one way the Appropriation Bill, the Central Fund Bill and the Vote on Account are legislative sanctions to enable the Government of the day, with the permission of this House, to meet the expenditure that has to be met, so also the Collection of Taxes Act 1927 is the Act that provides that Budget Resolutions have the force of law for a particular period. The Collection of Taxes Act provides that Financial Resolutions passed and reported to the Dáil will be operative until after 20 sitting days for the Second Reading of this Bill and operative for a period of four months after Report to enable a Finance Bill to be completed and put through both Houses of the Oireachtas.

I have no doubt the House would immediately give sanction to any proposal the Government might bring in for the purpose of having a special ad hoc Bill for this year to provide that the Financial Resolutions would carry on for a longer period this year for the purpose of enabling the people to be consulted in a general election which, notwithstanding what the Taoiseach says, is being demanded up and down the country. The Taoiseach should realise that it is the duty of a responsible Government, when they get the call that has been made throughout the country for a verdict by the people, to seek their confidence and not to attempt to bluff their way out by an irresponsible gamble suggesting the Government services could not be carried on will not be exposed.

It is clear beyond question that there would be no difficulty in making the necessary arrangement to provide the financial machinery necessary in order that appropriate steps might be taken for consultation with and verdict of the people in relation to the policy of the Government. Speaking for this Party, let me be perfectly clear that we would, after that election, as we have always done, accept the verdict of the people and all we ask is that they be given the chance to register that verdict.

Deputy Colley has expressed the opinion that a vote was necessary first in this House. I am not surprised that Deputy Colley, above all, with Deputy Timmons is anxious to ensure that there should not be a general election because the only constituency in the whole country in which there has been a test since the formation of this Government in October, 1961, is the constituency represented here by the Minister for Justice, by Deputy Colley and Deputy Timmons.

In that constituency at the 1961 general election, Fianna Fáil succeeded in obtaining three out of five seats and 47 per cent of the valid vote, but the other day, in the only test made in the past 18 months, when the people of Dublin in that constituency were given an opportunity of showing their views, the 47 per cent fell to 33 per cent and the Government who previously had a majority over Fine Gael of approximately 5,200 votes, found that majority converted into a minority of 2,500, a change of approximately 8,000 votes, and this in a sector of Dublin which, in normal circumstances, could well be favourable to the Government and was favourable to them, judging by the fact that they had three out of five seats before. Yet, their large majority was converted into a very big minority. They lost 6,500 first preference votes and their percentage of the valid vote fell from 47 per cent to 33 per cent. The election of Deputy Belton was the greatest slap in the face that Fianna Fáil or indeed any Government ever got in any by-election.

Some years ago, there was a by-election in the very same constituency before it was altered. Another Government were then in power. I mention this because some commentators have said that by-elections always go against Governments but on that occasion when the inter-Party Government were in power, the inter-Party Government won the by-election. On this occasion, the present Fianna Fáil Government were trounced so severely that they know it would be bad news for them if the people of the country got the chance to register their verdict.

Quite apart from the policy itself, when a Government in any country becomes too autocratic, too intolerant of criticism, it is always desirable that there should be a change and that they be taught a lesson. We have seen from the very speech of the Taoiseach to which I referred and from the answers given here by Ministers day after day the manner in which they feel that they are the only people who know anything about any public business. It does not matter whether it is the Taoiseach trying to identify himself and his Party with all knowledge, with all patriotism, or whether it is the Minister for Posts and Telegraphs saying again and again that the telephone service throughout the country is perfectly all right and that anybody who criticises it does not know what he is talking about. It does not matter whether it is the disunity between the Minister for Industry and Commerce, on the one hand, and the Minister for Defence, on the other, when the Minister for Industry and Commerce introduces a measure to control imports so as to ensure that there will be a better balance in our trade with various countries, while the Minister for Defence buys in France goods to the value of £250,000 of taxpayers' money and makes no attempt whatever, as he admitted here the other day, to rectify the imbalance in our trade with France where we buy approximately £7 million worth a year and who buy only £1,300,000 a year approximately from us. The Minister for Industry and Commerce was right in bringing that Bill to the House but the incompetence of other Ministers who are unable to follow a united Government policy in relation to these matters was clearly shown up by the action of the Minister for Defence in failing to take advantage of a large Government order in that way.

The position is clear. The Government have shown that they are intolerant of criticism, petulant and apparently unable to accept constructive criticism from anyone inside or outside the House. They wish to domineer and dominate. They do not believe in the ordinary play of democracy, but want autocratic rule purely on their own say-so. That is not a situation that will provide the confidence necessary for a forward-looking economy, an economy that is going to move forward in a proper and reasonable way.

This Finance Bill is the implementation of the Government's proposals in relation to taxation, the implementation of the Government's proposals in the Budget in relation to the expenditure of the people's money during the current year. If this Finance Bill is passed, if these budgetary proposals of the Government are put into operation, then it will mean in this year the current expenditure of the Government will be a sum of no less than £181,570,000. That is what the Finance Bill means—this expenditure on current account to the tune of £181,570,000, compared with current Government expenditure in the last year before they took office of £119,335,000. That represents an increase in that period of seven years of £62,235,000, or slightly more than 50 per cent on the 1956-57 figure.

I wonder does the country realise— do Deputies in Fianna Fáil realise— that seven years of Fianna Fáil Government have had the effect of increasing that current expenditure by over 50 per cent, in fact, by over £62 million? It is difficult for anyone to grasp an expenditure of that size or to understand where the money has gone. The first thing that must be considered in relation to any implementation of that programme is an examination of the manner in which that £62 million has been added and the manner in which the Government are proposing now in this measure to collect it. The opportunity arises in other respects to examine its expenditure. This Bill deals with the taxation to be imposed to collect it.

I feel, however, I would be wrong if I did not make some reference at this stage to one element of that expenditure. I know the Government will say that part of that increased expenditure has to go on social welfare. Of course, every Party in this House is anxious to improve so far as we possibly can the lot of those people who are unable to provide for themselves. Every Party is anxious to ensure that social welfare benefits will be as large as we, as a people, can afford to make them. The only reason why people who have responsibilities in public life do not immediately say —as their heart often urges them to say—"We will double all social welfare benefits" is that we know if we run ahead on an inflationary spiral and arrange to pay out more than we can afford, the only effect will be a depreciation in the value of the money those in receipt of social welfare benefits receive, and this hits the least well off people more than it does the better off.

We have only to look at the situation as it existed before the last war and as it exists today. The present value of the £ compared with mid-February 1938 is approximately 6/9d., roughly one-third. That is the effect of depreciation in the value of money because of the inflation that has occurred since then. The 32/6d. now given to old age pensioners is only value, in terms of pre-war purchasing power, for 10/10d. per week. As I say, every Party in this House, every Deputy—even the members of Fianna Fáil—are all anxious to do everything possible in relation to social welfare benefits. The only reason any of them might have any doubts about increasing them still further is that they want to be quite certain it is not going to go beyond what we can afford and bring about inflation and depreciation of money so that the last state will be worse than the first.

When it comes to framing the Budget on foot of which this Finance Bill is now being introduced, it is, perhaps, interesting to look back and see the various phases of our economic life on which it is desirable to focus attention. The Banking Review in its quarterly publication of last March, referring to the impending Budget, made this statement and I do not think anybody could disagree with it:

It may be stated without fear of contradiction that the aim of the Budget this year should be to encourage saving, to encourage exports, to encourage investment.

I wonder when the June issue of that publication comes out what they will have to say about the proposals of the Minister. As far as I could follow the Minister's speech a few minutes ago—he read it fairly fast, as the Minister always does, but without the courtesy he normally affords us of passing us a copy of his speech while he is reading it—he devoted a considerable time to the statements made by various people that the corporation profits tax provisions he introduced were retrospective. The fact is that they are retrospective. The fact is that the Minister will not get one single accountant in the whole of Dublin to agree with him when he says they are not. If there was any doubt at all about their retrospective or retroactive effect, it is taken away by subsection (5) of Section 38 of his Bill, which says that additional corporation profits tax may be assessed or recovered, notwithstanding that corporation profits tax has already been assessed in respect of that period. It is bad at any time that there should be retrospective taxation. It is bound to have a disastrous psychological effect. Retrospective taxation prevents that certainty, that confidence, which is utterly necessary if we are to have any progress, any forward moving, dynamic economy.

It would be easy to say: "It does not matter a hoot; it will be the big companies who will pay this". It matters very much because the Minister has taken this taxation in a manner that will ensure in the future that funds will not be available for modernisation, for expansion, for the provision of additional employment. The target for a dynamic economy must be not only to induce industry to re-equip plant and machinery but also to modernise and expand continuously. If industry does not do that there will be little chance of its standing still: it is bound to go back, to lose competitiveness, and it is essential that, if employment is to be maintained, much less expanded, there should be adequate funds available in industry for that purpose.

Any economist who looks at the pattern of our economy over the past years will agree that one of the things from which we have suffered has been the inadequate and insufficient domestic physical capital formation. In 1961, the last year for which exact figures are available, 14½ per cent of our gross national product was devoted to domestic physical capital formation; in other words, to building up the future. In other countries, the position was very different indeed. In the United Kingdom, it was 17½ per cent, three per cent more. In Sweden, which the Minister is very keen to quote in relation to the turnover tax, about which I shall have something to say shortly, just under 21 per cent was used for domestic capital investment. In Western Germany, it was 24 per cent and in Norway, which again equates in relation to turnover tax, it was even more than in Western Germany.

If we are to succeed in expanding our living standards, we can do it only by greater investment, by greater productivity, but the Minister, by this retrospective taxation, has struck a body blow at that production. Incidentally, I might add that according to the tables provided on national income and expenditure for 1961, the highest percentage of any year for capital formation as a percentage of gross national production, was in 1955 when it rose to 18½.

The Minister referred in his speech to the position in relation to profits. It is well known here that in our circumstances it is only by the accumulation of profits that we can hope to provide the funds for modernisation and for expansion in employment, but what the Minister has done is to provide a method of raiding that pool, not in a way that could be based on a distribution of profits but in a manner that means it must be taken out of the undistributed share of profits.

Had the Minister felt there was a case to be made for profits bearing a share of additional Government expenditure, the appropriate way to do it was by reference to distributed rather than undistributed profits. It is on distributed profits that the future must depend. We must consider it also in relation to the manufacturing industry and to employment. In the last quarter of 1963, the volume of production in the manufacturing industry was 8½ per cent less than in the previous December quarter. The volume of production in our transportable goods industry in the March quarter of 1963 was 7.9 per cent, just eight per cent less than the volume of production in the December quarter of 1962. In both the manufacturing and the transportable goods industries, the average employment in the March quarter of this year was 900 fewer than in the December quarter of the previous year, showing, therefore, a trend in the wrong direction.

If we look at statistics going back a little further, we will find that in the seven years for which the Government have been responsible, the total number of people in new employment in all the transportable goods industries put together was only 21,500, while at the same time, in exactly the same period, the number in permanent employment on the land went down by 19,200. I am not referring to those working their own land because I am prepared to await the figures of the Central Statistics Office who, in their bulletin at the time of the Budget, said they could not explain where the people had gone to in relation to farm work. All they could do was say that the numbers of people employed in that way were not subject in any way to the same technical difficulties. The point is that 19,200 fewer people were paid employees on farms and only 21,500 more were employed in transportable goods industries, or a total of 2,300 more paid people in employment in Ireland than on the day the Government took office.

That is a far cry from Clery's Restaurant and the promise of the Taoiseach that he had only to turn on a tap and there would be 100,000 more put into employment—20,000 in the first year, 20,000 in the second year and 20,000 in each succeeding year, until at the end of five years there would be 100,000 more in employment in this country. The Taoiseach, when engaged in that bluff, attempting to mislead the country in that way, did not tell the people that these 100,000 would be employed in Manchester and Birmingham, Coventry and Leeds, and that there would be an exodus from this country such as never had been seen in the past 100 years; I refer to the exodus that has taken place during the past six years of Government by Fianna Fáil.

Mr. McQuillan

There seems to be an exodus from the Fianna Fáil benches at the moment.

Mr. Sweetman

I am not surprised that they find these facts difficult to listen to and hard to swallow. The Minister referred in his speech to the provisions in relation to tax evasion. We in this Party, and I think Deputies of every Party, on both sides of this House, are clear in support of any provisions in relation to the prevention of tax evasion. We may differ from time to time as to the manner in which such evasion should be stopped, but we are all united and agreed that it should be stopped.

I am not a bit clear that the provisions the Minister has introduced are the right ones. I am not a bit clear whether, for example, his provision that anybody who carries on farming, and who has any other business or trade of any sort, should automatically be charged tax on the profits of his farm is the correct approach. We all know that in virtually every town and village in rural Ireland the man who has a shop has also a bit of land. We all know that the small towns and villages of rural Ireland are going through a very difficult and rough period. We all know that shopkeepers in these towns and villages are finding it harder and harder to eke out a livelihood. We all know that they will be hit a body blow by this turnover tax under this Finance Bill. In addition, they will under this Bill have to pay not on valuation but on profits under Section 6 in respect of their bit of land.

I want to make it clear that I support completely the idea of ensuring that a person will not be able to siphon off his profits from his trade for tax purposes and pretend they came from the land. It is entirely right and proper that there should be a provision in a Finance Bill to make certain that a person who has a trade and who also has a farm should have to provide farm accounts in addition to the accounts of his trade so that there could be a proper check and a proper calculation of the profits he is making from that trade. But it is wrong that, when he has done that, if he satisfied the Special Commissioners of Income Tax and, in due course, the Circuit Court that his trading accounts are correct, he should be penalised to the extent of paying tax under Schedule D on what he makes out of the bit of land while his neighbour is not so taxed.

It is right that the provision of accounts should be required for anti-evasion purposes. It is wrong that, having been used for that purpose, an extra unnecessary imposition should be put on him as well, and that at a time when the small shopkeeper in rural Ireland is finding it so hard to manage. This will have the effect, too, of the efficient farmer, who has any other assessment, being penalised as compared with the inefficient farmer next door. That is not as anybody would wish, that is not as anybody would desire.

I was unable to follow the Minister in relation to the friendly societies and the agricultural exemption. As far as I can gather from the Minister, Sections 66 to 70, inclusive, of Part VIII are to be scrapped and new measures which he has thought of since they were first introduced will be included. It is an extraordinary thing that we had on Budget Day an exhibition by the Minister of little knowledge in relation to the measures in those Resolutions and in relation to their implications. But now, even now, so long after that, when we have got the Finance Bill, all that part of it is to be scrapped and redrafted. As I say, I find it difficult to follow the Minister. He did not give me a copy of his speech and if I have misunderstood him he has only got himself to blame.

It seemed nonsense to me that subsection (6) of Section 69 would provide proper exemption for a proper agricultural co-operative society. It provided that 90 per cent of the capital had to be held by a farmer. Is it not obvious that a good part of the capital of any co-operative society might be held by either the farmer's wife or the farmer's daughter, but they would not qualify within the 90 per cent under that section? If that provision is scrapped to ensure that agricultural co-operative societies are given the proper exemption and are not penalised by this Bill, then the change the Minister indicated will be a change in the right direction.

When the Minister introduced his Budget Statement I said then, and I repeat now, that there does not appear to be adequate provision made for the person in needy circumstances, be it a farmer with no children to work the land, a permanent invalid who has to conacre the land, a widow whose only method when the breadwinner dies is to set the land. There is no provision for alleviation in that type of case, and that type of case will be hit just as hard as will the man who is mining the land and who would have no sympathy from any person on any side of this House.

I said then, too, that the section of the Bill that deals with rents out of houses in Dublin would have a deleterious effect that would mean that more houses would be sold and fewer available for renting. One of the effects of taxation on rents actually received will be that when owners get the chance, either through tenants dying or going away, they will sell the houses rather than let them and that is bound to have a scarcity effect on the number of houses available to rent in Dublin and that as a consequence dwelling houses and flats for renting are bound to go up in price.

I notice also in the last issue of a paper which the Minister can hardly accuse of being a Fine Gael organ trying to sound Fine Gael propaganda, it is said that the Budget struck an alarming and inconsistent note when it dealt with the retrospective effect of company taxation and it took the Parliamentary Secretary to the Minister for Lands, Deputy Lenihan, to task for his nonsensical statement that the turnover tax would affect mostly those in the higher income groups.

The Minister for Social Welfare at Question Time today chose to repeat an excuse and an assertion that is totally and entirely untrue and, as part of it must inevitably be tied in with taxation policy, I want to refer to it very briefly.

When I had the honour of being Minister for Finance, Dublin and Cork Corporations came to me and asked me, as they had asked many Ministers for Finance before, to give them access to the Local Loans Fund. For the first time, it was done, and I am glad to say that that innovation has since been carried on. I guaranteed at that time that Dublin Corporation would have £3 million a year for housing purposes, that they could bank on that and that £3 million was paid to them every year while I was there and responsible for it.

Mr. O'Sullivan

There were no fatalities in those days.

Mr. Dolan

There was no money. This is more of the bluff.

Mr. Sweetman

Let me turn to the turnover tax, the provisions of which are included in Part VI of this Bill. Let me say, first of all, that the provisions are complicated in the Bill, difficult to understand in the legislative proposals, but perhaps one is helped to some degree by the pamphlet the Minister circulated at the same time. It is, however, fair to say that the only way of approaching consideration of this problem is to accept that everything is included in the tax. Everything is included in the tax.

I remember in 1957 seeing on the wall in Dublin a poster by one of the lady members of this House, a Deputy for whom I have a great regard personally. Deputy Mrs. Lynch had all the available poster space plastered up: "Fianna Fáil is the housewife's choice". I wonder will she dare produce the same poster in the light of Part VI of this Bill? I wonder will the housewife think that Fianna Fáil are a good choice, in the light of the impositions included here?

This tax is called by the Minister in Part VI of the Bill a turnover tax. It is exactly the same as the retail tax described in the first White Paper, Direct Taxation, laid on the Table of the House on 19th April, 1961. Any doubt about its being the same tax is immediately dispelled because the Minister in that White Paper, at the top of page 12, refers to its being employed in Sweden and Norway. It has now become, not the retail tax, but the turnover tax. Why? Because the Minister, and the Government, and the Fianna Fáil Party had not got the courage to produce the tax in a proper, workable form, and hoped, by slipping it on and calling it a turnover tax, to be able to pass on to the shopkeepers up and down the country, and to the retail trade, the odium of trying to find a method by which they could protect themselves.

Of course, everyone knows, as the Minister acknowledged when speaking a few minutes ago, that the tax must be passed on to the consumer. The Minister said not merely that it must be passed on to the consumer, but that he never had any other intention. It is peculiar that if he did not have any other intention, he did not apprise Deputies of his own Party of that fact. They went up and down the country saying that of course the consumer would not pay if they were talking to a consumer, and if they were talking to a shopkeeper they said: "Of course you can pass it on perfectly well." Of course, the consumer will have to pay it. He must pay it to survive and it is, therefore, a very substantial element in increasing the cost of living.

On page six of the turnover tax booklet, the Minister gives as an example the case of a man, a retail trader, whose gross receipts from the sale of goods amount to £950 per month, and who draws out of stock for his own use another £50. Therefore, he has a taxable turnover of £1,000 per month. The Minister makes out, correctly, I assume, that the tax on that will be £23 7s. 6d. per month. One thousand pounds per month is £12,000 per year. A turnover tax of £23 7s. 6d. per month is equivalent to £280 per year.

Anyone who has any knowledge of the grocery trade, for example—and if the Minister has not made any inquiries, the Revenue Commissioners will tell him the figures I am about to give are approximately correct—knows that a grocer who pays labour is lucky if he has four per cent net profit on his turnover, and that a grocer who does not pay labour, who works in the shop himself, without taking into account what he draws out for his own work and the work of his family, has on average throughout the country about seven per cent on turnover. Seven per cent on a turnover of £1,000 a month or £12,000 a year, to use the Minister's example, is £840 per annum. Out of a profit of £840 per annum, £280 would be payable.

Is it not obvious, therefore, that it must be passed on to the consumer and that the retail trader cannot possibly bear the tax himself, no matter what certain Fianna Fáil Deputies may say? Is that not another way of saying that by this turnover tax the Minister is making every trader, whether or not he is a company, liable to corporation profits tax at the rate I have just said, £280 out of £840 a year, and saying to the trader: "I will take that from you. I will take that corporation profits tax from you even though you are not a company. Of course, I am giving you leave to pass it on to your consumer, your purchaser, your customer."

Mr. Dillon

Any sales tax which is imposed at the retail end is imposed only in countries which have decimal coinage. France, to which the Minister referred today, Sweden, Norway, to which he refers in his pamphlet, the States in America, Canada and Austria, all are cases where there is a decimal system of coinage. I admit frankly I do not know much about the currency of Turkey. I think certain Deputies were out in Turkey at a Parliamentary meeting there. They will be able to tell me whether Turkey has decimal coinage or not and whether the tax there is a sales tax or a wholesale purchase tax. It is not workable unless there is a system of decimal coinage. With our system of currency, it will have the effect of driving another nail in the coffin of the small retail trader vis-à-vis the supermarket.

Thirdly, it is a bad tax because it provides for a tax upon a tax. The Minister says he assumes the trader is going to collect the tax from his customer but in the example he gave, page 6 of his pamphlet, the £23 7s. 6d. tax comes out of the gross receipts and if this is to be included in the gross receipts, it means that it is a tax upon a tax. Part of the turnover that is to be taxed is the portion that has been added for the purpose of providing revenue for the Minister.

Fourthly, it is a bad tax because it makes every retail trader in Ireland or wholesale trader in certain small sectors an unpaid tax collector. There are already unpaid tax collectors to a very large degree under PAYE. They are making unpaid tax collectors again in this respect but instead of being honest and honourable about it and calling it a retail sales tax, so that the Government would not have to take the odium, they were trying, until the Minister's speech a few minutes ago, to pass the odium on to the retail trader by calling it something else and by failing to say categorically and positively that it was assumed and expected that the tax could be passed on to the consumer. I am glad, however, the Minister has now, even though it is belated, admitted and acknowledged that it will be passed on because it makes it unnecessary for me to comment further on that part of our amendment which deals with the inevitable increase in the cost of living and the undue hardship on the consuming public. With the hardship on the business community I have already dealt.

This amendment is proposed by us because we regard this tax announced by the Minister as being inequitable, as being regressive and unfair, as being unworkable and unjust. We ask the Dáil, by its vote on this Bill, to show, as Dublin North-East has already shown, that the country has no faith in the present Government, that the country demands that this tax will not be implemented, demands that these budgetary proposals will not be put into effect and that there will be a general election at which the people can record their verdict in a direct and clear democratic way.

An Leas-Cheann Comhairle

The amendment must be seconded formally.

General MacEoin

I formally second the amendment.

An Leas-Cheann Comhairle

By agreement between the Deputies concerned, I am calling amendment No. 3 before amendment No. 2.

Mr. Corish

I move amendment No. 3:

To delete all words after "That" and substitute:

"while willing to support reasonable taxation proposals to maintain public services, including proposals in the Finance Bill, the Dáil declines to give a Second Reading to the Bill unless and until the Turnover Tax, which will increase the cost of living and impose grave hardships on the community, is deleted."

I do not think anybody was impressed by the mock indignation of the Taoiseach in the speech he delivered somewhere in Dublin on 12th June. It was a speech in which he inferred that it was something amounting to irresponsibility for any member of this House to table an amendment on the Second Reading of the Finance Bill. Of course, as Deputy Sweetman has reminded him and the House, the then Deputy Lemass did not seem at all worried about these tactics when, on 23rd June, 1954, he tabled a similar amendment in this House which I assume he did not consider to be irresponsible. I assume he did not believe it would provoke chaos in the country, and I assume he did not expect it would disturb the public services, prevent the collection of income tax, prevent the payment of wages or salaries, or prevent the payment of social benefits.

He does not imagine we are all so childish as to believe all these things would happen merely because Deputies or Parties wanted to express their view in relation to particular provisions in the Finance Bill, and wanted to table an amendment which would be used as a vote of no confidence in the Government. He must remember that the Finance Bill of 1954 also provided for the collection of revenue to pay for the State services. Perhaps those who know him better will understand why he made a speech like this. It seemed to me to be quite an hysterical speech.

Mr. Dillon

Hear, hear. They are all hysterical now.

Mr. Corish

I know that he did not believe he would stampede any of the Parties in the Opposition into supporting the Government or withdrawing an amendment. I am rather inclined to the view that he wanted to stampede those Independents who normally support the Government into rushing into the Division Lobbies with him and his Party on Tuesday night next. However, he himself may know the motive which prompted him to make this speech but as a speech from the head of the Government, I do not believe that it impressed even his own supporters.

There is no ambiguity whatsoever about the amendment. On behalf of the Labour Party, I want to make quite clear what our attitude is towards the raising of moneys, towards the spending of moneys, and in particular towards the proposals contained in the Finance Bill. I want to say straight away that we are in favour of the other proposals contained in this Bill to raise money in order to provide for increases and to run the ordinary services of the country. We are in favour of the new proposals, apart from the turnover tax, and we are in favour of the increases proposed. We have said, and said deliberately, not only in the course of the last Budget debate but over many years, that we wanted to see measures produced which would prevent the evasion of the payment of income tax by certain people who are liable to pay it.

It is a shocking admission by the Government, and particularly it is a shocking admission by the Revenue Commissioners, to say that in 1963 they discovered there are methods whereby they can get an extra £600,000 from people who owe such money to the State. As I say, we have been advocating that for many years past. We pointed out that there is no way in which wage earners and salary earners can evade their responsibility in regard to the payment of income tax. Under the Pay As You Earn system, and even before that, their salaries and wages were returned to the Revenue Commissioners and, after allowances were made, the appropriate income tax was deducted, and it is being deducted, from their salaries and wages so that they paid down to the last halfpenny. It must be known by the Minister for Finance, and particularly by the Revenue Commissioners, that there are many people evading their income tax and surtax responsibilities to a greater extent than £600,000 per year.

I appreciate that there are difficulties in trying to prevent that evasion but surely if in 1963 we can devise some methods to get in the £600,000, there could be, with other aids, more money brought into the Exchequer from these people who owe the State money. We are all aware of the cash transactions which are not recorded and that these transactions are engaged in by people in industry and by some professional people who do not return their whole income and who consequently do not pay their fair share of income tax, or surtax, as the case may be. Therefore, as far as that particular proposal is concerned, we applaud it. The Labour Party will give the Minister for Finance and the Revenue Commissioners every encouragement to extract more of the money which they feel is due by these people to the Revenue Commissioners and to the Exchequer generally.

We approve of the proposals—we have said this already in the Budget debate—contained in this Bill and in the Budget to increase corporation profits tax. It is a proposal that will obtain for the Minister for Finance an extra £3 million this year. We believe it is a just and equitable tax. We believe the increase, in present circumstances, is justified as the contribution from that particular source towards some of the improvements that are necessary and to the improvements that have been suggested as well by the Minister for Finance in his Budget Statement.

We also approve of the increase in the tax on profits from rents. Without qualification, we say these things in respect of income tax evasion, in respect of corporation profits tax and in respect of the increase on the tax on profits from rents. Therefore, it is difficult again to understand the Taoiseach's outburst when, because we do not approve of his proposal in respect of turnover tax, he says that the Labour Party want to deny the payment of social welfare benefits and to deny the increases that will be introduced in this House, by way of legislation, in a short time. The last proposal to which I referred, the increase in tax on profits from rents, will bring in some £400,000 according to the Minister. That, as I say, we applaud.

The Taoiseach on one occasion recently said that the level of taxation is low in this country compared with that of other European countries. With that we agree because the figures available to us say that the level of taxation in this country is light, when one relates it to countries such as Britain, Italy, France and Western Germany. In Ireland, it has remained at 22 or 23 per cent; Western Germany, 35 per cent; France, 34 per cent, and so on down the line until we come to Ireland at 23 per cent.

The Labour Party have never been afraid to support proposals for raising taxation when we are convinced that the money will be taken from the people who can bear it and when we believe that the money so collected will be spent on worthwhile projects, on the promotion of industry, the improvement of health services, social welfare services, and so on. However, we are also conscious that taxation may be levied broadly in two different ways—directly and indirectly. Whilst the Taoiseach says our general level of taxation is relatively light, we find that indirect taxation does not bear any resemblance at all to the percentage of indirect taxation, as related to gross national product, of the other countries which I have just quoted and which the Taoiseach also quoted to us.

There seems to be a tendency on the part of the Government—they are quite frank about this; it is no secret— to place the emphasis on indirect rather than direct taxation. The report of the Income Tax Commission has stated that the burden of indirect taxation falls heaviest on families and on wage earners and on salary earners. When I said that to the Taoiseach some few months ago, he said we have not much wealth in this country and we have not much opportunity to levy direct taxation to a greater degree because we could not get much money from that source inasmuch as there are not many wealthy people here.

I suggest that indirect taxation to the tune of 70 per cent means a very big gap when, again, one has regard to the fact that in Britain, indirect taxation as related to gross national product, is 48 per cent; in Sweden, 37 per cent; in France, 50 per cent; in Holland, 44 per cent, whilst here in Ireland it is 70 per cent. As everybody knows, indirect tax is the hidden tax that hits the masses of the ordinary people —those on pensions, those in receipt of wages and salaries and, generally, those who cannot afford to bear this big burden of taxation. The emphasis seems to be to reduce direct taxation which in my opinion is one of the fairest forms of extracting money for the purpose of paying for social welfare services and doing the other things the State needs to do from year to year.

I cannot understand why, in recent years, surtax was reduced. There was a source of revenue which the Government threw away. Some millions of pounds have been thrown away by the Government in the past few years. What the reason was for the reduction in surtax, I do not know. It may have been given at the time but I cannot remember the reason now. To reduce surtax and, on the other hand, to tax tea, sugar, bread, butter and flour seems to me to be the act of a lunatic Government.

Mr. Coogan

What about the dance tax, too?

Mr. Corish

Furthermore, they raised the level at which surtax should be paid. Coupled with that, income tax was reduced. Therefore, in all these three things, it seems the intention of Fianna Fáil Government is to reduce direct taxation as much as they can and to apply a hidden tax which is called indirect taxation.

It must be obvious to most people that these reductions to which I have referred have all been of much greater benefit to the higher income groups than to those in the lower income groups. It must be obvious that they favour those in the higher salary brackets. Whether or not that is the deliberate intention of the Government, I do not know.

The Report of the Income Tax Commission, to which reference was made this evening, also had something to say about direct as against indirect taxation. On page 15 of the White Paper entitled "Direct Taxation" laid by the Government before each House of the Oireachtas on 19th April, 1961, the views of the Government were given. For the benefit of those who have not read it, I think I should read it. Paragraph 42 states:

The Government share the view of the Commission that income tax is, in principle, a good form of tax and that it must be retained as part of the tax system. In the Programme for Economic Expansion, issued in November, 1958, it was indicated that the fiscal policy of the Government would be guided primarily by the need to encourage production and saving and, in particular, that their aim was to create conditions permitting as soon as possible of a reduction in direct taxation. Such reductions were made in the Budgets of 1959 and 1960 and the process is being continued in the 1961 Budget.

Paragraph 43 states:

The implications, economic and social, of a switch from direct to indirect taxation depend on the extent of the switch proposed.

I suggest there has been a pretty big switch in recent years. The paragraph continues:

It is clear that to reduce income tax by 2s. in the £ and make up the revenue by a sales tax at a rate or rates between 7½ per cent and 15 per cent would be a major change, having important effects on the incidence of taxation. It would shift so markedly the burden of taxation from single to married tax-payers, especially those with children, and from the higher to the lower income groups, as to be, in the Government's view, socially undesirable. Its economic effects might also be adverse: the prices of taxed goods would be increased and, through compensatory raising of money incomes, costs might be increased and competitive capacity affected, with risk to exports and employment. While the Government would not, for these reasons, feel justified in adopting the recommendation in the majority report of the Commission, they adhere to the view, expressed in the Budget Statement of 1957, that it is a good principle in the circumstances of this country to place the emphasis of taxation on expenditure rather than on income. Earning and saving need to be encouraged—and excessive spending discouraged—in the interests of economic and social progress. Recent budgetary decisions have followed this principle. A sales tax as such would not be inappropriate to the circumstances of this country and, if the necessity were to arise for a major increase in taxation, it might become unavoidable. Fortunately, however, this necessity has not so far arisen.

The Government seem to assume that when they mention social services, health services and improvements in connection with such things as these, the Labour Party, in particular, should be prepared to support each and every tax proposal they care to introduce. We always have been and especially now are concerned about the inadequacy of our health services and the general inadequacy of our social welfare services, but when we get proposals such as we have in this Bill—the turnover tax—we want to be satisfied that the money is to be raised from those who, in our opinion, are best able to pay it and that the money so raised is spent in the right direction so that in regard to social services, it will be given to the most deserving section.

According to the speeches we have heard since the Budget, is seems the Government want to give the impression that every extra penny is to be devoted to social welfare services. It is reckoned that the turnover tax will bring in about £10.5 million but the extra amount to be spent on social services is in the region of £4 or £4.5 million per year. Therefore, we are going to collect from the turnover tax, some £11 million plus £3 million from the increase in Corporation profits tax, £400,000 from the increase in the tax on profits from rents and about £600,000 as a result of steps to be taken to curb income tax evasion.

One would imagine, or the Government try to give the impression, that those who oppose their tax proposals, particularly the turnover tax, are, in fact, trying to deprive the people of increased social welfare benefits. When one regards the amount of money the Government are taking and remembers the amount of money the Fianna Fáil Government have taken from the people over the past few years and relate it to what is being paid out in social welfare, I do not think they can say their record in regard to social welfare payments has been so spectacular. Increases have been given over the past five or six years but these increases do not bear a good relation to the amount of money demanded in taxation.

I have quoted these figures many times before but I think I should quote them again. As a percentage of tax revenue, the amount spent on social welfare in 1957-58 was 22 per cent; in the next year, it was reduced to 21.5 per cent; in 1959-60, it was further reduced to 20.9 per cent. In 1961, it was reduced to 20 per cent; in 1961-62, it was reduced to 18 per cent; and in 1962-63, to approximately 18 per cent. I believe the percentage of tax revenue to be spent on social welfare this year will be even less than last year or the year before. Therefore, it should be denied that all these moneys, or a big proportion of them, collected through increased taxation are being devoted to social welfare, because that is not the case.

It seems fantastic that under a Budget by which we expect to get £11 million per annum from turnover tax, £3 million from corporation profits tax and another million or two from other taxes, we still pay the miserable 2/6 a week to the old age pensioner. Surely when we are demanding so much from the public, we could afford a little more for the old aged, the blind, the widows and orphans and those in receipt of unemployment assistance. One would imagine that with such a big drive to get so much money in such a year we would get away from the extra halfcrown a week and try to do something decent for these people. It seems the bulk of this money is to be devoted to things other than social welfare.

In April 1961 the Government said, in their view, a sales tax or purchase or turnover tax—whatever you call it, it amounts to the same thing, an increase in the price of things that ordinary people buy—would not be suitable in the circumstances of this country. That was only two years ago and I should like to know from the Minister what change in circumstances has caused the Government to introduce this turnover tax. In their own words, such a tax would "shift the burden from the single to the married taxpayer". Again, in their own words, such a tax would be "socially undesirable". Therefore, it is fair to ask the Minister or some Government spokesman to say what the change has been in the past two years that made the Government feel it imperative to impose a purchase tax or sales tax that will take from the consuming public £11 million a year.

It was said in respect of the Budget proposals that the social welfare improvements will compensate for any increase there may be in the prices of commodities. It is assumed also that the increase in children's allowances will compensate the family man but that is all on the assumption that the allowances up to now have been adequate, old age pensions, widows' pensions, unemployment assistance, unemployment benefit and sickness benefit. It is generally agreed these allowances have not been adequate. Therefore, in my opinion the increases which will be given certainly will not compensate for the increased cost of the necessaries of life.

The Minister for Finance in his Budget Speech tried to seek justification in the recommendations of the Income Tax Commission for the introduction of the turnover tax. I do not think there is any evidence in the commission's report that they wanted the turnover tax in the circumstances in which it has been introduced by the Minister. The Minister said there was a majority in favour of a sales tax of six to five but there were special reasons why the majority were in favour—they wanted it to reduce income tax and they suggested the sales tax at a certain rate so that income tax might be reduced by 2/- in the £. There were five members against the sales tax or anything like it, five people who, I suggest, represented by far the greater part of our population. They were representatives of the trade union movement which I think must be agreed is representative of the biggest portion of the population. Those who voted for the tax were not in favour of it merely to do the things which the Minister says it will do now. They really wanted it for the purpose of reducing income tax by 2/- in the £. The five people representative of the biggest portion of the population gave very good reasons why it should not be introduced under any circumstances. May I quote from this document entitled Direct Taxation in which the arguments adduced by these five people in relation to a sales tax— which, in fact, this turnover tax is— appear. It states:—

(a) a sales tax, though not necessarily regressive in itself, would, if imposed in consideration of an income tax reduction, result in the net change in taxation tending to be regressive as follows:—

(i) broadly speaking, people in the lower income ranges who pay little or no income tax would be likely to be called upon to bear an additional burden ...

(b) a sales tax might tend to have an inflationary effect;

(d) the scope for saving by persons with small incomes would be reduced.

The Minister referred to the various reports published by these people, but he did not make any reference at all to the very valid reasons put forward by those representative of the greatest portion of our population.

Fianna Fáil want to bulldoze this turnover tax through the Dáil and force it on the people. I am reminded by my colleague, Deputy Tully, that on one occasion Deputy Lemass, as he then was, at some Fianna Fáil Árd Fheis referred to some sort of purchase tax but said it would have to be considered very deeply for a long time and that all sections of the community should be consulted before any attempt was made to implement anything like it. He was careful enough to say that this was not Fianna Fáil policy. He did say that all sections should be consulted, but now we find Fianna Fáil determined to implement this tax, despite the views of the Income Tax Commission, and particularly the views of those five people, and despite spontaneous opposition from the public.

I have not heard it alleged from the Fianna Fáil benches—and it is not true —that any campaign of opposition to this turnover tax was whipped up by any individual or any Party in opposition. I recognise in this campaign against the turnover tax a spontaneous outburst by all the people. It cannot be said that the Labour Party, Fine Gael, Deputy Dr. Browne or any Independent travelled their constituencies in an effort to whip up opposition to this tax. It must be recognised by everybody, particularly by Fianna Fáil, that there is spontaneous resentment by the people against the introduction of such a tax.

I do not now know whether Fianna Fáil place any importance on it, but the vote in the Dublin North-East by-election must be regarded as significant. Irrespective of who won, the fact remains that the Government did not win; and they did not win because they introduced this turnover tax. The turnover tax was an issue in the Dublin North-East by-election. The Labour Party made it an issue and I am sure Fine Gael made it an issue. Fianna Fáil took up the challenge and used every means at their disposal to defend the introduction of this tax. They used television, as other Parties did. They had the Party machine, the Party newspaper and indoor meetings. I do not know if they had outdoor meetings. They used every political device possible to assure the people of North-East Dublin that this tax would not affect them to any great degree. Despite all that, despite the speeches of the Taoiseach and the invective of the Tánaiste, the Government were soundly beaten. There was no issue other than the turnover tax. Yet it seems, because of the false pride of the Taoiseach and members of the Government, despite the spontaneous resentment of the people and despite the defeat of the turnover tax in Dublin North-East, they are going to persist in trying to put it through.

Up to recently, there has been some confusion about this tax. On the one hand, we had Government speakers telling us that the retailers would carry the tax. On the other hand, we had other spokesmen saying it would be passed on. As far as the Minister for Finance is concerned, it is not today he said it would be passed on. I have a cutting here from the Irish Press. On 29th May—I do now know where he was speaking—the Minister said in fact that traders could pass on this 2½ per cent. We did not need to be told that. Deputy Norton said that on the day the Budget proposals were announced. Our primary concern is that this 2½ per cent will be passed on to the consumer, who in many cases will not be able to bear it.

One other significant feature about this tax is that while the Minister for Finance had the task of explaining the tax and while we had the Taoiseach and the Minister for Justice defending the tax, few if any members of the Fianna Fáil Party said a word about it in public. Few came to the assistance of the Government in their defence of the turnover tax. I do not believe that any of these meetings by RGDATA or chambers of commerce were whipped up by any individual in politics. What was significant at these meetings protesting against this tax was that there was no defence by the known members of the Fianna Fáil Party, from those people who usually defend the proposals of the Minister for Finance. It seems to me therefore that the members of the Party themselves are not too enthusiastic about the introduction of this turnover tax.

We had the Minister's speech in which he said the traders could pass it on. Other Fianna Fáil spokesmen said the retailers would bear it themselves. We had a confusion of statements throughout the by-election campaign and no one seemed to know what would happen, what the effect will be on retailers and consumers. We can forget all that confusion and remember that no matter what adjustments are made, no matter what accountancy concessions are made, no matter what machinery is employed, to the ordinary consumer this will be a tax on living.

The trade has declared it will pass on the tax; the various trade associations who were received by the Revenue Commissioners or the Minister for Finance—I do not know which —were told they could—in fact, I think they were told they should—pass this tax on to the consumers. Anyway, it was obvious to all they could not bear this £11 million extra themselves. The 2½ per cent turnover tax has been described as being a mere sixpence in the £, something negligible. Is it not a gift of a tax, from which the Government will get an extra £11 million per annum?

What we object to is the introduction of the principle of a tax on everything. Sweden has been cited, and we were told this sort of tax is operating very smoothly there. But let us remember it was introduced there at the rate of 4 per cent and it is now 6 per cent. If this Bill is passed with the help of some Independents, it means the House will have, by a slim majority, accepted the principle of a turnover tax of 2½ per cent which next year may be 5 per cent, and which may travel up as far as 20 per cent or 25 per cent.

As far as the mechanics of collecting the tax are concerned, it may be relatively simple to operate in Sweden in that they have a decimal coinage. I do not want to go into the many examples given here, and quoted outside in conversation, of the difficulties traders are likely to face in collecting the turnover tax on a commodity costing less than ls. 8d. All these problems are there, and with out coinage it will be very difficult, if not impossible, for the retailers to pass it on in what might be regarded as a fair manner. In many cases, unscrupulous traders will put a halfpenny on a commodity costing as little as twopence or threepence. On items costing a shilling, many of them will put twopence or threepence. Some traders may even make profits on this tax, but what I am concerned about is the person who must go into the shops to buy these things.

I do not know what other people will say about this, but I regard it as scandalous to put a tax on food. We should remember it is not so long ago that we subsidised food and when the State, because it believed people found difficulty in buying tea, sugar, bread and butter, provided something like £12 million a year to subsidise them. Those subsidies were, if my memory serves me, introduced in 1947. Subsidies amounting to £12 million or £13 million were provided until 1952 when a big slice was knocked off by Deputy MacEntee when he was Minister for Finance. The next Minister knocked off the remainder in 1957. I do not see how anyone can show the justification for switching completely from subsidisation of foodstuffs to asking people to pay a tax on food in a period of six years.

In his speech the Minister said that if he exempted food and clothing the tax would get the same amount of money only if it were increased to 2/-in the £. That may be a good reason why food and clothing should be exempted: it certainly is not a good reason to tax food, not a good reason to tax what we regard as the necessities of life. Is it not scandalous to think that while a loaf of bread should carry 2½ per cent tax, a Jaguar car bears only the same rate, or a fur coat costing £2,000? People may describe the tax as equitable and fair because it covers everything, but you can live without a Jaguar or a fur coat but you cannot live without bread, butter, tea or sugar. Again, I say it is a scandalous thing to tax food and the necessities of life generally.

It is clear from what is contained in the Bill, and from speeches made by Fianna Fáil members, that medicines will carry this tax. One of the burning questions in the last election, and recognised as such by Fianna Fáil to the extent that they appointed a Select Committee of the House to inquire into the health services, was the cost of prescriptions. It was generally regarded in this House as being pretty steep. Now we propose to make it even steeper through this turnover tax. People are astounded at the high cost of prescriptions for the treatment of ordinary ailments. Granted, the medicines and drugs are good and act quickly, but people have been unduly disturbed at their cost. They will be dearer in the future, thanks to this new tax.

Those who engaged in hire purchase commitments this year and last year will be subject to the turnover tax. I trust the Minister has examined what the effects of the tax will be on the rates because of increased expenditure by local authorities on the purchase of food and other commodities for institutions. Whether or not there would be exemptions for them is not clear to me. Again, I say, what we object to is the introduction of a principle of taxation under which every single thing one can think of is subjected to a 2½ per cent tax.

The Minister admitted here today it will have an effect on the cost of living. He qualified that by saying that the experience in Sweden in the first year or two was that the tax was reflected in an increase in the cost of living but that after that there was a decline, the assumption being there was keener competition in prices. I do not think that will happen here. The effect of the tax will be an increase in the cost of living and this at a time when the workers are expected to refrain from demanding increased wages, at a time when State organisations and semi-State organisations are, in effect, told that they should not concede increases to their employees. I do not think the trade union movement would be doing their job properly if they were to stand by and allow a situation to develop in which prices were allowed to increase by the deliberate act of the Government and not seek compensation for these increases.

I think we should remind ourselves that there are tens of thousands of lowly-paid workers in the country. We should remind ourselves that there are men in the rural areas working at the present time for something like £6 a week. The agricultural worker in my constituency is handed out, unless he is working on an all-found basis, which is much more miserable, £6 2s. 6d. per week. These workers are asked to refrain from seeking wage increases. On the other hand, they are asked to pay a 2½ per cent turnover tax on the things they buy to feed and clothe themselves.

I said at the outset that we certainly will vote for the Government on the proposals they have in this particular piece of legislation which we regard as fair and equitable and which we believe will represent money spent in the right direction. We will support proposals for the raising of money from people who we believe are best able to afford it. We do not believe the majority of our people are able to afford the turnover tax. As I said, indirect taxation falls most heavily on the lowly-paid workers, on those who are regarded as being in the lower income brackets, and relatively lightly on those who are in the higher income brackets.

We could not support a tax imposed on food, clothing and the different other necessaries of life which the pensioners, the unemployed, the sick and the lowly-paid must buy or use in order to live, and merely in order to live. I believe this tax has been hastily thought up by some member of the Government and the responsibility of putting it through this House has been placed on the shoulders of the Minister for Finance. This is a tax which, if it were as just, if it were as equitable and as fair as some Fianna Fáil spokemen say it is, would have been introduced long ago. It has been described to us, especially by the Minister for Justice, as a simple tax, an easy tax, easy to collect, and one which will do the minimum amount of harm to all sections of the community. If it is such a wonderful tax, why was it not introduced long ago? Are the Government so bereft of financial proposals that they have to fall back on this lazy tax, this tax that is too obvious?

The Taoiseach has been screaming recently, and his screaming has been taken up by his followers, asking what is the alternative: What would you do? I think we ought to remind the Taoiseach what his attitude was when he was in Opposition. I do not know whether this is a complete definition of the duties of an Opposition, but it is what Deputy Lemass said in Dáil Éireann on the Finance Bill in 1954 when he moved his famous motion on 23rd June of that year. I refer to column 472 of Volume 146 of the Official Report:

It is the duty of the Opposition, the duty of every individual Deputy outside the Government, to criticise every proposal submitted by the Government, if it is open to criticism and to expose its defects and faults.

That is what we are trying to do. We are trying to show how unfair this tax is. We are trying to show how harmful it will be to certain sections, how difficult it will be for people to exist, especially those in the small pension class, if this turnover tax is introduced.

Again, in the same debate, at column 499, Deputy Lemass, as he then was, was asked by Deputy Donnellan in respect of the price rise—

What would you do?

The quick retort of Deputy Lemass was:

I am not in the Government.

On other occasions, he said it was the duty of the Opposition to criticise. It was not the duty of the Opposition to make proposals. If we have the responsibility of government, we will take responsibility for expenditure and the raising of money, but I think we are entitled as an Opposition to do what Deputy Lemass suggested we should do—point out defects, criticise. In respect of this tax, we say that it should be withdrawn immediately because it will deliberately increase the cost of living and deliberately impose hardship on many people who are not very well able to bear it.

Mr. Coughlan

I second the motion.

Dr. Browne

I move:

To delete all words after "That" and substitute:

"Dáil Éireann declines to give a Second Reading to the Bill until the wishes of the people thereon have been ascertained by means of a General Election."

We believe this Bill should not get a Second Reading. The reaction in the country to the proposed turnover tax has been universal, as everybody knows, and covers all sections of the community; they have made their deep-rooted objection to the tax fairly clearly felt, I think. Listening to the speakers who preceded me, and speaking in the context of the results of the by-election, I think the Government can now be in no doubt at all that this tax is an unjust tax and one deeply resented by the people. It is a tax which will bring great hardship to a large section of our community.

I do not believe that a Minister of the standing of Deputy Dr. Ryan, or any of his colleagues, learned about the seriousness of the implications of the tax from us here in Opposition, from the RGDATA group, from the NFA, or anybody else. They introduced this tax knowing full well all its implications and appreciating fully that it would bring very great hardship on all our people. This action was taken by the Government knowing that it must bring greater unpopularity to the Government and in circumstances in which the Leader of the Government had spent the past 18 months assuring the country that we were in a state of prosperity never before equalled in this Republic, that there was a position of boom in all sectors of our economy, and that this boom was of such quality that there appeared to be no ceiling to it.

In the anti-climax period that has followed the failure of our application to enter EEC, it is difficult to recapture the ebullient euphoria that swept across this House, directed in particular at myself and Deputy McQuillan when we questioned the validity of the suggestions made here, by the Taoiseach in particular, supported to a lesser extent by the Minister for Industry and Commerce and other Ministers, and, probably least of all, in fairness to him, by the Minister for Finance.

It is difficult to believe that we had reached such a level of wellbeing. It was completely false, unfounded wellbeing. In this House and outside this House the case was put forward by the Taoiseach that, in fact, we were in a position of permanent prosperity, of permanent wellbeing of the economy, that we were in a state of expansion to which there were no bounds foreseeable.

Consider the complete falsity of that programme, in respect of which I attach to the Taoiseach the major responsibility for its creation, its generation and its mainteance throughout the period of time when we were jeered at here repeatedly, attacked, abused and misrepresented time and time again because we questioned the validity of this suggestion that ours was, in fact, a prosperous economy or a prosperous society, that industry was in a healthy state or agriculture was expanding.

Again and again we said we are not fit, our industry is not prepared for the competition of the Common Market; agriculture is not prepared for the conditions under which it will have to operate in the Common Market; our social services are not capable of being brought to parity with those of the Common Market countries in the present state of our economy without very radical and fundamental changes being brought about which could not have been brought about in the period before the changes were made demanded by the Common Market countries.

Nobody would accept the case we put forward here. Nobody would accept that this country is in a semi-bankrupt situation, that industry is not booming, that industry is highly inefficient, that industry is stagnating, that agriculture is stagnating, that our social services are of such a rudimentary form that it would need millions of pounds to be found somewhere in order to bring them anywhere near the level at present found in most European countries, that we are still, 40 years after the attempt by the joint great Parties to create a viable economy, a socially just and prosperous economy, still, 40 years virtually as far away from it now as when we started. That is not as much of an overstatement as it appears, if you take into consideration the fact that anything that has been done here has been done at the expense of exporting the best part of one million people.

I believe that the Taoiseach did a very serious disservice to the whole conception of parliamentary democracy, which is under a strain now never before equalled in its history, when he used all the processes of communication, as he did in the most unscrupulous and dishonest way, in order to misrepresent the position of the country, in order to try to purchase his way into the Common Market on a completely false, dishonest prospectus that he put forward to these European countries, which, incidentally, I do not believe fooled them for one moment. I do not think we would ever have got in as a full member.

However, he had his propaganda on television, the radio, his newspapers and support for his steamrolling methods in this House to shut us up whenever he could, to prevent us talking, to prevent us criticising or commenting or putting the other point of view, small and all as we were.

The Taoiseach did a very great disservice to the whole idea of parliamentary democracy in misrepresenting the position as he did and he is now facing the reality of the situation and having to tell the public here and the public in Europe that, in fact, this society is so seriously in need of money that it must now impose a tax which will take in our country the fantastic sum of £12 million in the form of indirect taxation from those least able to bear it. The Government are not doing this because they believe in flagellating the public or crucifying the public or punishing the public. They are doing it because they have so mismanaged the economy over the past 30 years that they have no alternative but to impose this penal taxation. It is merely one of the repercussions, merely one of the end results of the mismanagement of our affairs by these people over the years.

As Deputy Corish said, an attempt is made to attack those of us who do not agree with this tax, to attack us with the line: "Will you hit us now with the baby in our arms? Will you hit us now with the old age pensions? Will you hit us now with the social welfare benefits that we want to hand out?" and the line: "If you do not vote for this tax, then you are voting against better conditions for old people, better children's allowances, and so on". Of course, that is a completely false equation. It is a completely dishonest misrepresentation of the position. It is like saying to us: "We are going to give £10 a week to the old age pensioners. We are going to give £20 a week to the widows and orphans" and so on, without bothering to tell us how they are going to get the money. Would we be justified in giving £10, £20 or whatever it may be by way of increases if we are not content about where the money comes from?

Of course, we favour taxation. One has to have it. Taxation is merely the way in which there will be brought about a redistribution of the national wealth in order to provide the various services one must have in a civilised and Christian society. What is disturbing about this tax is, of course, that it brings forward at an unprecedented rate the development referred to by Deputy Corish, the development in recent years of the greatly disproportionate increase in indirect taxation as opposed to direct taxation in the community.

We now know that this tax is to be passed on. The Minister for Finance, if he goes back on his opening speech, will find that whether he intended it or not, he left us with the impression that he did not believe the tax would be passed on. The impression he created, certainly in my mind—I think his words were that the tax need not be passed on—was that he was hoping that the tax would be taken out of profits. It is quite clear that this tax will not be taken out of profits, but will be passed on to the consumer. Since the consumer is the man in the street and the person who bears the burden, we think he should be given an opportunity of passing a decision on the matter, once and for all.

We agree that the decision in the by-election is particularly significant. It is a decision taken on this tax in a reasonably representative city constituency. It was a reversal, and, I should imagine, a very unexpected reversal from the point of view of the Fianna Fáil Party, led by one of its ablest Deputies, Deputy Haughey, Minister for Justice, with the tremendous financial resources which they now have at their disposal. In all the circumstances, the Government must accept that the reversal was of particular significance, and they should now take the same decision in relation to the general public as was taken in the small area of Dublin North-East.

The tax is, of course, a complete reversal of the policy to which for years we listened, sceptically, with justification quite clearly, which laid down that the great incentive, the great dynamic to public enterprise capitalism, was to give them freedom to operate as they chose, and to reduce taxation to the minimum; that by giving them such incentives, they would increase production, increase output from industry, increase their own wealth and, in that way, increase the national wealth. Of course, this was never believed in. It has now proved to be completely fallacious. Obviously, by the imposition of this tax, it is now completely repudiated by the Government and reversed. Everyone will now be asked to pay this tax.

We believe that the ideal approach to taxation is taxation imposed in the direct form and based on the general principle: from each, according to his ability; to each, payment according to his needs. That was a just form of taxation. I know well charges have been made that it was a very difficult tax to implement, but I find it difficult to believe that the problems involved in collecting direct taxation were insuperable. Over the years since the State was formed, it seems to me that the wealthier minority who paid direct taxation have become more and more powerful and more and more influential with the Government. The result has been that while they have had to accept that certain rudimentary social services had to be made available, such as primary school education, old age pensions and unemployment assistance, they would not pay for them. Those people, best able to pay, would not pay.

The nice thing about direct taxation —and it is probably the only occasion on which I agree with a means test— was that there was a means test in its collection. It meant that no one paid tax he was financially unable to pay. Whatever he paid was according to a fixed rate and a fixed scale applicable to everyone equally. The married man was left with enough to rear and educate his family, and what he had in surplus was handed over to help the less well off sections of the community.

I cannot for the life of me see what is wrong with that conception of taxation. It seems to me that we should be concerned with the less wealthy people who are less able to care for themselves because of their lack of education, lack of skill, lack of training, lack of know-how, and because they are unable to get the highly-paid jobs. It seems to me that the wealthy should pay for the less wealthy and see that their children have access to secondary schools, universities, and the best medical care when it is needed. I cannot see why that taxation cannot be accepted as being the ideal taxation and, above all, the most just taxation to impose on a society such as ours which professes so loud-mouthedly the general Christian belief in the responsibility of every man for his neighbour.

If we look over the years, we see that there has been a progressive alteration and inversion of the whole taxation system. There has been an increase in the amount of taxation paid by the mass of the people, and a reduction in the amount of direct taxation paid by the wealthy minority who, of course, have always opposed as bitterly as they possibly could, the idea that it is an essentially Christian conception that they should look after the underprivileged in their own society. In order to do that, they have used the newspapers primarily and the radio, and they are now using television, and most of the schools and universities have preached the idea that the creation of what has come to be known as the welfare state was undesirable, that it was a bad thing, that it would undermine the independence of the individual and all that sort of rubbish.

It is now clear that the Taoiseach has nominally accepted the conception that we should go to the left, as he said. It has been accepted now, following the Encyclicals of the late Pope John, that it is possible for a society such as ours to have all the advantages of a welfare state, and still not be in any way in conflict with basic principles.

The result of this propaganda has been an increase in the payment of indirect taxation. It is disproportionately high in Ireland compared with other countries. Of course, indirect taxation is in no way as just as direct taxation, because indirect taxation, as was pointed out by Deputy Corish, bears on everyone but, in particular, it bears most heavily on the man with the large family, and on the socially dependent groups, the old age pensioners and the widow and her children.

Obviously, in a family, or a home, where there is a limited income, and where a man is trying to educate his children, to look after them when they are sick, to feed and clothe them, it is quite clear that the proportion of money spent on luxuries, or semi-luxuries, is very tiny indeed compared with the amount of money which must go on the necessaries. In the wealthy family where there is plenty of money, the price of the essentials is of relative unimportance. It is only of relative importance to that family. The consequence is that the person who will be hardest hit by this taxation is the white collar worker and the manual worker. Outside them, the people who will not be greatly inconvenienced by this taxation are the wealthy minority.

This is not a new development. It has taken place over a number of years, that is, the great pre-occupation of the Government with the protection of the privileged minority in our society, and the perpetuation of this privileged minority against the interests of the mass of the people. There is this retention of the old two-classes ideal which we had away back in the British days with no attempt to make any significant change, talking about making changes but, in fact, making no changes at all.

Consequently, there is the position in which a tax like this seems to be the last straw. Not only have we taxation in the direct way, which is at a fairly high level in spite of what the Minister, Deputy Dr. Ryan, may say, but we have a progressively increasing level of indirect taxation over the years and, in addition to that, there is the imposition of a further form of indirect taxation, and then this business of the rates. In Ireland we have four different types of taxes paid by the people.

I am not doctrinaire about the kind of tax we pay. As long as we collect tax I would sooner it was collected from those who are best able to pay than from the person who has family responsibility and who is already put to the pin of his collar trying to make ends meet. I would sooner tax was collected from the wealthy people but, apart from that, the Government should not try to create the impression that this is a separate creation which will cover all their taxation needs in our society. It is a supplementary tax in addition to, as I have said, three other different types of taxes and because of that it is particularly unjust.

On all occasions when we are discussing legislation of one kind or another, there are references, particularly on this Bill, to other countries, to what happens in Sweden, and so on. How anyone here can talk in the same breath about the social services here and the social services in Sweden or talk about any other conditions here and in Sweden is beyond my understanding. However, we do have these references in regard to Sweden, Britain, France, Germany and so on. There are all these taxes here and then an attempt is made to relate them to the same taxes elsewhere, but there is this difference here. While our people pay a very high rate of tax, there could be some excuse for it were we to give our people with that tax some compensatory reward. This is not so. We seem to take the view that the mass of the people must be penalised in every possible way; in rates, in direct taxation, in indirect taxation and then in this new taxation. We do not even bother to compensate them on the basis they have in Sweden, Britain or Western Germany, who have simply magnificent social services of one kind or another.

Personally, I do not believe, for various reasons, in the conception of, say, the British welfare society. I do not think it is a true redistribution of income in the socialist connotation. Leaving that aside, there is the fact that at least the people do get their own income redistributed because, in my view, that is all the welfare State is. The money is provided by the worker and it is given back to him. I want the money of the wealthy people as well but in Sweden, Britain and Western Germany the money is at least given back to them. They have the benefit of first-class health services and are able to have their children educated. They can be certain that if they are manual workers with a very limited income they need not worry because if they have an intelligent child they know he can acquire a skill or a craft, if he is that way inclined, or he can go to a higher educational establishment, such as a secondary school or a university and they will not be told they cannot get this for their children because they cannot pay for it, as people are told here. Nobody denies that, even the Minister for Education, because he tells us there will be a reorganisation of the educational services.

Not only do we penalise the people in taxation but we do not even distribute it amongst them again in the ordinary orthodox way in a liberal society such as the Government are pretending this is. We take the money from the people and we deny them the right to use it to get an education for their children or to help themselves to get better health services or to put the money by for their own old age. There is no attempt in the form of an insurance scheme to protect people against various things or to provide for better education. Therefore, it is grossly misleading and misrepresents the position to pretend that in imposing this taxation we are doing what other comparable societies do.

Not only will this new tax not add greatly to the position of the worker in society but it leaves him in the position in which he is denied these various social services. Furthermore, he is being asked to pay this tax at a time when he is faced with a wages standstill order, when he is told that he cannot recover what he will need in order to keep himself and his family in essential commodities. Here we have grossly defective social services as compared with other countries. In addition, we find that in this supremely Christian society the average wage of the worker is less than in most of these European societies. He pays more for the very much less advantageous benefits which he gets from the employer in our society and, as Deputy Corish said, he pays indirect taxation to a greater extent than is paid by his European comrades.

The workers in Ireland, both white collar workers and manual workers, are at a very serious disadvantage as compared with workers in other societies and this attempt to create the impression that there is a comparison between them is completely misleading and wrong. We cannot even complain that we have had a great outlay of money or great expense in the repair of war damage. We were talking this afternoon about the present housing position. There were unfortunate men with their wives and children parading last Saturday or Sunday night outside the horrible Mendicity Institute, tossed there with the local authority refusing to take any responsibility.

Surely that is a scandalous position in a society which pretends it is interested in the welfare of all its members. Why is it, with no significant war damage at all, we find ourselves unable to provide houses? We are not in the position of most of the European countries and we cannot even pretend that we have to pay large sums of money to provide for defence of one kind or another. We have practically no defence commitments whatsoever. In spite of this, we do not seem to be able to pay out the money or to make money available for building houses, for educational services, for the health services, or for the care of the old people. One wonders what we do with it. Of course all this is an inevitable end-product, as I said earlier, of years of mismanagement, of years of inefficient economic policies, policies which cannot be made to work not only here but in practically any country anywhere.

We have the position that there is a shrinking population—from nearly four millions down to 2,700,000, or whatever the figure is, since the State was formed. If money has to be found where industry is badly organised, inefficiently organised, where agriculture is stagnating and where the population is shrinking, clearly the only policy for an inept Government is to increase taxation on that already shrinking, captive population which remains behind. All of this is due to the Government's reliance over the years, and particularly the reliance of the Taoiseach on private enterprise capitalism. This reliance must be faced. Of course it will not be faced and I know it will not be faced. I know quite well that there are men with a much better knowledge of this than I have on the Government benches. They are well aware of the failings of their own economic policies over the years. They know where they failed and how they failed and I believe they know how they could be righted.

In spite of the betrayal of the objective of the freedom movement of the 'twenties to create here any kind of social, just or prosperous society, they will not change the organisation of a system which is responsible for all this, the reliance on private enterprise capitalism, when it comes to the ordinary type of productive investment in industry. When we said that industry was quite incompetent and quite incapable, in the majority of cases, of standing up to European competition, we were of course accused of being anti-national or pro-this or pro-that, that we were trying to undermine confidence in the country and all the rest of it. But now we have the irrefutable evidence from the Minister's Department which corroborates in the clearest terms the indictment which we have levelled time and time again in regard to the inefficiency and ineptitude of Irish industry as worked under private enterprise capitalism.

Every one of the CIO reports—I do not think that is an exaggeration— contained disclosure after disclosure of ineptitude, of failure, of lack of dynamic, of any serious intention to create a productive expansion in industry, to create a really significant export trade, to concern itself with the national income and with the national welfare as a whole. Every single report—on the motor car industry, the paperboard industry, the cotton and linen industry, the boot and shoe industry and recently on the shirt industry—showed grave deficiencies in Irish industry largely because, and, in my view, primarily because, it was financed by private capital and for that reason was concerned with the benefit of the minority who invested their capital in the industry. To that extent, it must be conceded that private enterprise capitalism has been highly successful. It is successful in its own limited objectives, that is, to make a lot of money for a few people. It does that very well, as we know.

There is a very wealthy minority, utterly callous, utterly cynical and utterly thoughtless about conditions of society as a whole. There is that minority unhealthy growth in our society which is not concerned with how the rest of their own people live. Recently I read about 500 of them who could afford to pay £4 a head for a dinner-dance. Four pounds a head! That may not be an awful lot of money to some people but I think that it is outrageous to spend that amount of money on that sort of thing in a society where there are poor people going to bed hungry every night, people who are slowly dying of starvation on 37/6 a week. It is monstrous and I think these people are semi-savages. I also saw where two people paid £1,000 for a box at the opera for a week. This is the type of thing that took place in Czarist Russia or in pre-French Revolution times, but it is going on in our society now and nobody seems to mind or object.

As I say, the purpose of private enterprise presumably has been achieved, but at what expense? We are told by the Department of Education that they cannot afford to provide radios or television sets or schools or universities or scholarships to universities and secondary schools. They have not got the money to do that. That is part of the penalty that has to be paid not by the wealthy or by the people who speak for them in this House, but by the youngsters who are growing up illiterate or semi-illiterate, without an education. We see youngsters of 14 or 15 pedalling around this city in the highly dangerous traffic carrying heavy loads—the poor little mites — because somebody cannot afford to give them secondary education. We make up some fake ecclesiastical objection in order to satisfy our conscience when we tend to develop any kind of a conscience and say that we must not help these people because it will undermine their self-respect.

We had the Minister for Health sniggering here when Fine Gael suggested that we should have a proper, comprehensive health service and he told us, when the price was mentioned, that it was too high. He did not see the indictment in that admission, that we cannot afford to look after our sick. That is all it meant. As Deputy Corish said, the unfortunate white collar worker cannot afford to be sick. If he pays for the wonder drugs that are available, he will go bankrupt: he cannot afford to feed or clothe his children. These are all the consequences of this reliance on private enterprise capitalism. We have had the same position in the Department of Social Welfare. All we can give to our old people is 37/6d. per week. It tells us the same story.

These are not acts of God. These are the end result of decisions which the Government have taken in Cabinet. They must accept responsibility for them. Industry has never bothered its head about expanding. Industry can make enough for the owners and main shareholders by supplying the home market. They have rigged the business so that they have not any competition on the home market and can sell at any price they want to. That is an admission made on many occasions here by many Deputies.

It is a well-known fact that no attempt is made to increase efficiency by having free competition. The result is that industry has never expanded. It has never made any serious attempt to go abroad to get foreign markets. The result is that industry has never expanded sufficiently to create employment to absorb the youngsters leaving school, the people driven out of rural Ireland by mechanisation and the ordinary unemployed people—the 6, 9, 10 or 11 per cent, or whatever it may be. This is another failure of our reliance on private enterprise capitalism in industry and, as a result, a million people have had to get out. Are there any limits to this insistence on the implementation of these inane, futile policies?

Consider the man at the street corner who is unemployed, the person standing at night in the rain with a placard outside the Mendicity Institute looking for a home for himself and his wife, the old age pensioner on 37/6d. a week, the emigrants, the inadequacy of our schools, the failure to educate our children. There is no sector of society in which Governments have not failed abysmally time and time again and this is a joint failure of Governments over the past 40 years. Yet, they come here, one year after the other, with idiotic financial proposals and plans for prosperity which is always around that same unending corner. Is it not about time they gave up the pretence at Government and got out——

Mr. Leneghan

And let you in.

Dr. Browne

——and allowed somebody in who could make some attempt at solving our problems? Instead of that, we indulge in prestige spending in order that we shall be able to say we are able to go from here to America in an Irish plane. If we are concerned with the prestige of our country, I think we should try to turn people's minds away from the fact that some of the greatest colonies or expatriate colonies in this world are formed of Irish people—in Birmingham, Liverpool, London, Boston, New York, Australia, New Zealand—people who were hunted from Ireland to get food and clothing because——

Mr. Leneghan

The RIC chased a lot of them.

Dr. Browne

——because we were not prepared to give up our vested interests, the wealth we were making out of this society, in order to give them the living at home to which they constitutionally had a right. Instead of that, instead of the prestige spending we go on with, the great luxury hotels, the transatlantic airlines, the palatial embassies in various parts of the world, the inside of which the average Irishman never sees, we would be better employed, and especially we would have a genuine prestige, were we able to say: "Look at the way we care for our sick. Look at the standard of education, of literacy of our young people when they leave our schools and universities. Look at the way we treat our old people"—which is probably the supreme test of all. On every single one of these tests, we have shown that we have betrayed the trust placed in us by past generations.

I do not completely share Deputy Corish's attitude on the question of the excess profits tax or corporation profits tax for the reason, naturally, that I am in favour of taking as much money as possible from these people. However, I have little doubt in my mind that when that tax comes to be paid, it will be paid, as always, by the selfsame person, the consumer. I have little doubt in my mind that, no matter what decision the Revenue Commissioners may take, a tax like the turnover tax will also be passed on to the consumer and that, in fact, it is just another excess tax on the ordinary white collar worker and the manual worker and that the wealthy minority for whom I believe it was intended— assuming bona fide intentions on the part of the Minister—will not pay that tax at all.

So, we shall find ourselves having a real tax imposed very much in excess of the 2½ per cent proposed in the turnover tax. I do not know how long the Government think they can go on with their policies of recent years. We have this continued exploitation of the mass of the people in order to maintain the benefits and privileges of a minority. Sacrifices are asked always of the same people—the unfortunate manual worker and the white collar worker. How long do the Government think they can go on demanding these sacrifices and not get repulsion on the part of the worker?

We have had the Wages Standstill Order. We have had the dreadful proposition that if a man looked for an increase in wages he would get five years in jail. We have the 2½ per cent tax. We have the excess profits tax. We have the corporation profits tax, We have the various other taxes I have mentioned — indirect and direct taxation—and the rates. In return for all these, the public are denied any proper return for the money they are investing.

I am glad to feel there is at least a consciousness developing on the part of the worker. I think he knows at last that over the years he has been seriously misled in his belief that the idea of a welfare society was something which would not benefit him, which would be a bad thing for him. The idea that if society were organised so that, no matter what he might have in the form of income, his children would not be denied education or health services or himself some sort of a reasonable pension in his old age, that simple conception of the welfare society was smeared and misrepresented here over the years but I understand, it is now likely to become one of the main objectives of both of the major Parties, and that is a good thing.

The recent election, I think, showed that the public are becoming very much more conscious of the real issues involved in politics in any society. It was a good thing it was fought on both sides, or three sides, or whatever it was, on the idea of better social welfare services, a better old age pension, the iniquity of a particular kind of tax, the inadequacy of different forms of services, the question of education, and so on. This is a great development. It is sad that it should be a development which has taken place only in very recent years. We are starting the whole of this advance towards a socially just and prosperous society more than 40 years too late, but better late than never.

Because of this background of exploitation over years—it is now becoming palpable exploitation—it is clearly obvious to the mass of the people—they showed that in their repudiation of the Government candidate in Dublin North-East—that they must take part in the serious consideration of policies as they affect them in their own lives. Because of that, I believe there is basic resentment of the Government and I think, therefore, the Minister will not succeed in his attempts to get some sort of wage policy linked to productivity. This suggestion is one which simply cannot operate equitably so far as the workers are concerned in a society such as ours where private enterprise capital dominates the economy. It is obvious that if the worker was in complete control and ownership of industry generally he would have a vested interest in relating productivity to his wages. That is not so here. The worker has no say. When I talk about the worker, I mean the white collar worker as much as the manual worker in industry. All of them have little or no say in the development of industry. Therefore, they cannot determine the extent to which profits or money will be used to improve, mechanise or automate industry or whatever it is necessary to do to increase production.

Why should the worker bind himself to any agreement in which he cannot have any part in its operation to his advantage? If the Minister in the 'thirties had got this arrangement with the workers, if he had been given an undertaking that wages and salaries would increase with productivity, what an absurd position the worker would have been in for the past 30 years. He would find himself linked to an industrial arm which was not interested in getting optimum development, an industrial arm which, on the evidence of the CIO reports, is grossly incompetent, inefficient and not operating at maximum productivity.

Would the worker not have been very wrong to link himself to this idea of productivity which has become so fashionable now among conservative politicians? He would have been linked to a stagnant productivity over the years. There was very littleabout one per cent on average, if that —increase in productivity in these years. In addition, he would have been presented, as happened only one and a half years years go, with a law which tells him he will be put in jail if he asks for an increase in wages to meet an increase in the cost of living. He would be very foolish to do it. Obviously, there can be no compromise, in my opinion, on the question of wages and profits because wages are profits and profits are wages. If one belongs, they both belong to the worker, in my view, whether he is a manager or managing director or the ordinary worker at the bench.

In the trade union movement, while there are certainly some complaint trade union leaders whom the Minister may be able to bring along with him, fortunately, there are some extremely militant leaders and I hope they will strongly resist any attempt to link the advance of the workers towards a better position in society to the advance of Irish industry organised as it is by private enterprise capitalism.

One of the saddest things that will come as a result of this tax is the necessity for demanding, insisting on and getting wage increases in order to meet the higher cost of living. I believe there is no doubt this must follow the imposition of this tax and the result will be unfortunate in that it will not improve the standard of living of the worker because the prices of commodities will go up. Inflation will be the end result and jointly we shall probably do more damage to our prospects in Europe and find it more difficult to develop our export markets all because of the Government's decision and not because the worker looks for a legitimate increase in wages. It is because the Government imposes this taxation that we will have all the evil effects they are constantly preaching about and by which they justified the recent wages standstill policy—the danger of inflation if increases took place, the danger of repercussions on our position on external markets. Through all these ideas they are now driving a coach and four by this tax which, without doubt, will increase the cost of living and bring about a definite demand for increased wages.

There could be only one useful increase—if these taxes were imposed where the tax could not be passed on. Of course, this was unthinkable but it seemed to me the Minister believed, in the first instance, that the turnover tax should not be passed on. In fact, it will be. In relation to the corporation profits tax it could only be of value in the way the Minister appears to want it to be of value, if it took money from the wealthy people, if he at the same time by some curb on profits or dividends could say that they may not be in excess of a certain amount. I am certain that unless he applies some profit standstill in the same way as he demanded a wages standstill the corporation profits tax will also be passed on.

I wonder when it will become clear to Deputies in the big Parties that there can be no viability in industry as at present organised. It is suggested that one is dishonest if one refuses to advocate or accept taxation in order to give social benefits. That is not true. There are ways in which a nation can make money other than by taking it from the consumer. The failure of industry and agriculture to make money to the extent that would enable us to give our people what we say we want to give them in the social services of education and health is the great failure of our various Governments over the years. The failure to utilise land, labour and capital, the three raw materials we have in plenty, to the optimum benefit of the nation as a whole has been the failure of our society through the years, the lack of sufficient capital investment, so much of our capital invested abroad in industries in which the investors feel they can make more money for themselves, indifferent to whether or not that benefits the mass of the people in our society, indifferent to the position of those people because of the low level of private investment by private capitalists in Ireland. Capital invested abroad makes money for the investor but no money for the mass of our people.

The second drawback is the introduction here of foreign capital by Japanese, Germans, Americans and Britons. That foreign capital investment here puts us at their mercy, leaves us victims of their whims, caprices and decisions. If they decide to take their money out, they can take their money out. We have no control over them. These people will never create prosperity for Ireland. They will create it for themselves, for the Germans, the Japanese and the Americans. They will stay so long as they can make a profit. When the day comes that they can no longer make a profit, they will get out.

Successive Governments have failed to control the direction of capital investment and capital expenditure. Successive Governments have failed to prevent capital expenditure on luxury goods, failed to establish a system of priorities, failed to create a system of necessaries, first of all, and then semi-luxury and luxury goods. I remember well in the post-war period when there was a great deal of money available from America. I was a member of the Government at the time. I remember the opposition. That money came here and was, I believe, largely misspent in so far as it was spent on consumer goods of a luxury or semi-luxury character. It was not spent on essentials. It was not spent on the things on which it should have been spent, on agricultural machinery and machinery for industry. Because of the attitude of our people towards capital investment, because of their attitude towards socialism versus capitalism, there was no control over the spending of that money, whatever it was—£40 million or £50 million. If we had it all over again, we would not be able to spend it on anything except television sets, lipsticks, silk stockings and so on. Our present position is due to the failure of successive Governments to take over control of spending in relation to capital investment in productive industry. It is that failure which has put us in the position now of having these truncated, dwarf, unhealthy industries which have palpably and demonstrably failed, and we know this with all the authority of the Department of Industry and Commerce, to create prosperity for anybody in our society except the small handful of wealthy people who established these industries.

For that reason, some Government will have to face taking over the control of spending on industry, the control advocated by James Connolly in which the worker will have a say in ownership, control and the means of production. That is socialism. That is the only solution. Over the past 40 years, Governments have tried, well-meaning Governments no doubt—to make private enterprise capital work. They have failed again, and again, and again. Ultimately, some Government must have sufficient interest in and sufficient compassion for the people we see all around us suffering as a result of Government's failure to make this decision, the decision to reject the opportunist, conservative ideas and to accept that there is only one solution for our difficulties, as there is only one solution probably for the difficulties of most of the countries in the world. I refer to a socialist solution.

Anybody who doubts this has only to look around—as they say in Latin, “Si monumentum requiris circumspice”—if you want to improve look around you. Look to America, the wealthiest country in the world. What has she? 5 million unemployed and 30 million, President Kennedy said, on the verge of poverty. Burning land in order not to grow food of one kind or another and obviously unable to solve their economic problems. It is heartening that a debate here should at last have taken on both realism and rationality. We are now getting people to think and to talk about the effects of taxation, the purpose of taxation, the various forms of taxation, the various forms of organisation for industry, the prosperity and success of different kinds of industry. Indeed, we have now reached a point where a decision has to be made as to whether we should go left, or right, or keep to the centre of the road.

President Kennedy cannot export his labour. He has his labour on the breadlines. We have been able to get rid of our surplus labour. Had we not been able to do so, our unemployment figure over the past 40 years would have run at 100,000, or more, every year. We were able to send them to England to have them fed and clothed. We have had the advantage of being able to conceal our ineptitude and our failure because we have been able to export our labour. The public are, I think at last beginning to understand that there has been a monumental failure on the part of conservative Governments here over the years. I do not think the people will be fooled for one moment by the Taoiseach's hint about turning left; presumably turning left means taking an interest in the mass of society instead of in the minority which has concerned him over the years. I do not think the people will be fooled by that hint of turning left when he follows it by imposing this universal tax on those least able to bear it, on the manual worker and the white collar worker. But it is a great thing to have a shrewd, opportunist politician of his kind deciding he is going left. There is hope because apparently the idea of going left is growing less objectionable than it has been in the past. It will put a stop to the misrepresentation and the lieing, dishonest debate that has gone on in regard to it in the past.

I believe that where we went wrong 40 years ago was when we left the teachings of James Connolly. We will go right when we come back to them, genuinely going left and establishing a Republic in his terms, a socialist Republic. We will, I believe, join with many other nations of the world because most of the emergent nations —the African and Middle Eastern nations—are all going left, all becoming socialist. They are all going left, all becoming socialist and relatively soon, I hope, it will be unpopular to be on the right or even in the middle of the road. The only place to be will be on the left.

An Leas-Cheann Comhairle

Is the amendment being formally seconded?

Mr. McQuillan

I formally second the amendment.

Minister for Industry and Commerce (Mr. J. Lynch)

When the Government introduced the turnover tax in the current Budget, they knew well it was not going to be a popular provision and for that reason very careful consideration was given to it. I am sorry Deputy Dr. Browne is on the way out because I shall have some observations to make on his contribution.

Mr. Coogan

Is he on the way out?

Mr. J. Lynch

He is leaving the House, at any rate. It is inevitable, I suppose, in the political climate in which we live, that the political Parties opposed to the Government should have taken advantage of a new provision in taxation to express their views in the House, to try to convince the country that what they feel is right and what the Government has done is wrong. For that reason, as soon as one amendment was put down to the Finance Bill, the other two amendments followed in quick succession, worded slightly differently but all seeking to achieve the same purpose, that is, to curry public favour and to bring a certain amount of criticism to bear on the Government for what they have done.

As I said, we knew it was not going to be popular but it is essential in any democracy, and certainly in any economy run in any democratic circumstances, in any economy in which we want to expand, that a reasonable investment be put into it. In business unless investments are put into the business and profits go back into the business, then the business will not be an expanding one. In the economy of a country which is mainly the responsibility of a Government, there are no profits available to the Government and therefore they must rely on taxation in order to make the economy run and where taxation is not sufficient in any one year, new taxation will have to be found in order to expand the economy.

Nobody, not even Deputy Dr. Browne, will deny that in recent years we have had that expanding economy and in order to keep it expanding, we will have to find new finances for it because in any expanding economy, there is an increased demand on all sides for public expenditure. As we all know, it is easy to criticise taxation and, at the same time, to criticise the lack of public expenditure on this or that desirable project. In order to make progress, we in this country will have to be prepared to spend money on progress. The Government have no means of finding money for capital purposes except from the savings of the people and for ordinary revenue purposes from the taxation the people can afford to give them.

To justify the claim I have just made that we have an expanding economy, I might refer to the increases in industrial employment in recent years. Between March, 1958, and December, 1962, there were increases of 24,000 in manufacturing industry as such and 25,000 in transportable goods industries. The unemployed register in the same period was reduced from about 78,000 on average to 58,000. Exports of industrial goods increased from a figure of £22 million in 1956 to £48.2 million in 1962.

Mr. Coogan

Has the Minister the emigration figures there?

An Leas-Cheann Comhairle

Order.

Mr. J. Lynch

The emigration figures, fortunately, have declined to the point that last year—and I should like to repeat this for the benefit of the Deputy—the natural increase in population exceeded the net emigration figures in two periods in succession, which has not been achieved for a considerable time. Therefore, we can look to, not only an expanding economy, but an increased population to work in and to support that expanding economy.

Mr. Coogan

What evidence has the Minister of an increase?

Mr. J. Lynch

Deputy Dr. Browne, in his melancholy denigration of the Irish scene generally, economic and otherwise, spoke about there being no expansion. He ought to remember that in the few years since the economic expansion programme has been in existence, there has been a steady increase in the rate of expansion. As the House will be aware, the increase envisaged was a two per cent increase in the gross national product. That rate was more than doubled in the event. There was a slight falling off in the current year of this five-year economic expansion programme but the expansion is continuing and, if I may refer to the rate of expansion in manufacturing industry, it was, in 1960, 8.6 per cent higher than the previous year; in 1961, 8.7 per cent higher than in 1960 and even though there was a slight falling off last year it was 4.9 per cent over the previous year.

What all this means in terms of taxation is that expansion must be aided by the Exchequer and, on the industrial side, to which we look to take up the slack that is appearing in employment availability on the land, that expansion is aided by the various provisions made for industrial grants, which have been increasing year after year; technical assistance grants, the grants available to adaptation councils for both industry and trade unions, Córas Tráchtála which assists in our export promotion drive, productivity committees and all that kind of activity. All these things take money and without a reasonable provision in the finances of the State, none of them could take place.

We are now on the eve of the introduction of a second five-year economic development programme and in order to implement that programme finances will be needed. If the Opposition wish that the progress that has been made should be in any way retarded, then it is a simple matter not to provide the necessary finances.

The Fine Gael amendment is to the effect that the Finance Bill should be rejected because it includes a turnover tax. The Labour Party say they favour the other provisions of the Finance Bill but do not favour the provisions dealing with the turnover tax and the National Progressive Democrats' amendment calls for a general election before the turnover tax is implemented.

We have no illusions about the fact that people do not like taxation and would naturally reject it if they had the opportunity but I should like to ask Fine Gael—and I will ask, despite what Deputy Corish says—what provision would they make for the finances necessary to carry on national expansion? If they were to reject the £3½ million this turnover tax will provide in the current year, and the £11 million or so it will provide in a full year, it is not an unreasonable question to ask Deputy Corish and Deputy Sweetman fairly and squarely—and the £3½ million would have to be provided elsewhere—would they cut back on services and, if so, on what services? If they would not cut back on services, how would they propose to find the money necessary to provide the services in question?

For example, would they levy 6d. more on income tax, which would provide £2¼ million and would go only some of the way to make provision for the extra money required? Would they find the £3½ million by putting 2d. on a packet of 20 cigarettes which would account for £1½ million? Would they put 3d. on petrol which would account for £1 million, and 2d. on the pint of beer which would account for £2 million, remembering at all times that these limited forms of taxation seem to have reached their saturation point a little over a year ago?

They might suggest a luxury tax to take the place of the turnover tax which it is now proposed to introduce, but I think any reasonable examination of that situation will indicate that the base of the luxury tax would be so limited that the rate of tax would be too big to enable a reasonable return to be expected from it and, at the same time, enable the industries making those articles to survive. Taken all in all, we have not heard from the other side of the House in what way they would provide the moneys that will be raised in this fashion to provide the services they are intended to provide.

We have been told about the great hardship that will be suffered by the ordinary people if this tax is implemented. I have a few examples which give a fair indication that if the full provisions of this Budget are implemented, no such hardship will be suffered by the ordinary people. The social welfare benefits will be increased at a cost £4.7 million as a result of the Government's provisions. They are being spread over children's allowances, unemployment assistance and widows' and orphans' pensions. If we take the example of a man earning £10 a week who has two children, assuming that he spends 75 per cent of that income on items that would be subject to the turnover tax, it would amount to 3/6d. per week. A two-child family will get an increase of 2/3d. a week; a three-child family will get an increase of 3/3d. a week; and a four-child family will get an increase of 4/3d. a week.

The Deputy will have every opportunity of making his own speech. I am not a bit afraid of questions but I have a right to make my speech. The Deputy is trying to stop me by interrupting me. I will not be side-tracked by the Deputy.

Mr. Donegan

Let us get back into good humour now. I am sorry; I do not mean to interrupt the Minister.

Mr. J. Lynch

I am not in bad humour. I am entitled to express my view as forcibly as lies in my power. I like to be interrupted because a bit of temper may better my delivery.

I do not want to follow Deputy Dr. Browne up all the highways of his criticism. We have heard the same speech over and over again from him. He started by saying that he never gets an opportunity to express his point of view in the House, but, to my knowledge, every time he gets up in a debate, he speaks for longer than any other Deputy. He repeats himself over and over again. That is not a reflection on the Chair because in the usual run of Deputy Dr. Browne's speeches, two or three people are in the Chair and it is impossible for any one of them to know whether or not he is repeating himself.

While he is entitled to eulogise the type of politcal system he advocates, this extreme form of socialism, I did not like the rather sinister note he struck at the end, when he advised the workers that they ought to have nothing to do with the suggestion that wage demands they are entitled to make might be in some way linked with productivity. I think that is a sinister note, and I have accused him of introducing such notes before. Let him look to other countries where there is complete ownership of industries as he was advocating here. He spoke of other European countries where progress has been made, but I know of no European country where there is complete State ownership of industries except behind the Iron Curtain.

Deputy Dr. Browne speaks as if the world commenced for Ireland in 1922 or 1923, in the 40 years since we established our own State. He forgets that we have a long history of economic subjugation which it was difficult for us to overcome, but which we are slowly overcoming. We are doing what we can to achieve the form of society the vast majority of our people want, and to achieve the standard of living to which we all aspire.

He spoke about the capitalists of this country who do nothing to assist the advancement of industry except take out undue profits at the expense of those who work for them. The Deputy tried to prove his point by saying that the reports of the Committee on Industrial Organisation have arraigned industry as being incompetent and incapable of expansion, and exploiting the workers for the benefit only of those whose investment is in industry. For his own argument, he selects the worst possible features that can be picked out in order to prove it. It is no credit to him that he should try to denigrate honest Irish industrialists as he has done here over the past hour and a half or two hours. There are people in Ireland who have been protected in their industrial investments but that is not peculiar to this country. Every country in the world has a system of tariffs and it is for the purpose of reducing tariffs that the Kennedy Round has been introduced whereby tariffs in the United States and in the Common Market countries will be reduced at certain rates in order to achieve a freer degree of trade.

The type of country to which he points, where workers might have a say in running industry, may not be all that rosy as far as their conditions of employment are concerned. We know that some countries which he possibly admires have State trading agencies and that they, in exporting goods to other countries, can sell at whatever price they like. No matter what is the competitive price in one country, based on costs of production, they can always undercut because they have no cost of production to regard and workers in these industries have no right to demand minimum rates of wages. I do not think I need go further on that line of economic thinking along which Deputy Dr. Browne is trying to lead this country. The vast majority of the workers support the type of system under which we live and when Deputy Dr. Browne can get majority support for his point of view, it will be time enough for him to suggest that we ought to introduce these systems in this country.

I am sorry the Deputy introduced this note of advocating that workers should resist the advice of their trade union leaders who are trying reasonably well to establish a modus vivendi as far as labour relations and wage increases relating to productivity are concerned. He has no right whatever to talk on behalf of the workers. He speaks about people among whom most of us in this House have lived, have been educated with and have never left during the course of our lives, people we know better than he does and I submit we know much better than he does because we come from them and are living amongst them. He has no right to point the finger at members on this side of the House or even on the other side and suggest they have not the interests of the ordinary people at heart. As I say, most of us have come from the ordinary people and have lived with them all our lives.

The Deputy tried to suggest that the result of the Dublin by-election was not so much a victory for Fine Gael as for his way of thinking. I do not know how he can possibly claim that in respect of a by-election in which he himself did not put up his point of view by way of a candidate and was not represented on the hustings in any way. Nevertheless, he tried to make the victory of Deputy Belton a justification of the point of view he has adumbrated over the years.

Let me get away from Deputy Dr. Browne, even though it is difficult to do so at times, having regard to the amount of fodder he throws into the debate. The net point we are discussing, and apparently it is a net point, is whether we should pass the Second Reading of the Finance Bill because the Bill includes provision for a turnover tax. Let me come back to the point I started with. First of all, if by any chance Fine Gael succeeded to power as a result of a vote on this Bill, would they continue with the turnover tax and, if they did not, what form of taxation would they introduce instead or, if they did not introduce a form of taxation, what services would they drop?

Before the Budget was considered at all, each Minister, in the preparation of his Estimate, was told his Estimate would have to be realistic. Having submitted it, each Minister again was asked to prune his Estimate to ensure that only the least possible amount required would be provided for. That process of pruning went on realistically and objectively, not like the occasion —and this is one of the reasons I am sorry he is not in the House—when Deputy Dr. Browne was a member of the inter-Party Government and was asked to cut £300,000 off his Estimate for presentation purposes, without any suggestion that the money would be denied him when he would come to look for it. It was purely for presentation purposes and it would make it easy on the appearance of whatever new taxation might be required for Budget purposes. That happened here apparently when Deputy Dr. Browne was a member of the inter-Party Government. The result, as we saw ultimately, was that when his Government left office and when the food subsidies to which Deputy Corish has referred had to be reduced, they were reduced only because practices of that kind were common in that Government and adequate provision was not made for necessary expenditure. We had the same situation in early 1957 when they again succeeded to office. Normally, a prudent Government would be looking to see how their Budget balanced but when we succeeded them in office, there was the situation in which several millions of pounds, had to be made up by way of new forms of taxation and, later on, by dropping some more subsidies.

It is far more honest and better policy in the long run, a policy the people understand, that if services are demanded and judged by the Government to be necessary for the expansion of the economy, these services ought to be paid for. As we have said on a number of occasions, the balancing of a country's Budget is the same as balancing a household budget and one cannot go on from week to week and from year to year ignoring the making of provision for necessary expenditure because the day of reckoning will come. We saw how that happened in the year 1956 when there was no adequate provision for certain——

(Interruptions.)

Mr. P. O'Donnell

The Deputy was not even there.

An Leas-Cheann Comhairle

Order. Deputies should allow the Minister to make his speech.

Mr. J. Lynch

Unless the financial provisions are properly made for Government expenditure by way of assisting the economy, then the economy will run into trouble and the economy ran into serious trouble in 1956 whether it was in the housing end of things or elsewhere. Unemployment rose and I remember when the figures reached 96,000 in the winter of 1956-57. That was the result of imprudent financial provision by the Government. As I said, it is far more honest that a Government, having faced the expenditure that it considers necessary to supply the services that people want, as long as they are satisfied that these services are in the best national interest, should make the appropriate provision for them and not go on from year to year, hoping that the bad news will in some way be cloaked from the people. It will not be cloaked for very long because the day of reckoning will come inevitably. Therefore, if the services are to be provided, then assuming that Fine Gael get office by some chance in the immediate future, they will have to make up their minds whether to continue these services. If so, will they maintain the level of taxation that this Budget proposes and, if they propose to drop the turnover tax, will they put 6d. on the income tax plus 2d. on the 20 packet of cigarettes, which would have the same effect, or 6d. a gallon on petrol, or 2d. on the pint of beer, which would have the same effect, or how otherwise will they go about making the necessary provisions?

Labour, of course, are supporting Fine Gael in this bid for office. I wonder will Labour support this laissez faire approach to running the country which Fine Gael seem to advocate. Even from the very negative point of view, assuming that the unpopularity of this tax, which of course applies to any tax, in some way did bring about a general election, then would the combined strength of Labour and Fine Gael be provided to form an alternative Government, or if not, would Fine Gael expect themselves to be able to form an alternative Government? I am putting this forward in a purely negative way. I do not think that Fine Gael, or does the country believe, that Fine Gael could of their own resources form a Government sufficient to carry a majority in this House. Even from that narrow and negative point of view, I think that Fine Gael themselves naturally are making a tilt at this turnover tax, that they want it rejected, but, assuming that they get into power, they will be very glad if it is not rejected and it will be there for their use.

Mr. Donegan

The Minister for Industry and Commerce might have been expected in his contribution to this debate to produce some concrete arguments in relation to the Department which is entrusted to him having a direct bearing on the necessity for the taxation he was speaking about. He has not. I listened very carefully to him and I came to the conclusion at the end that he had said practically nothing. He referred to the fact that there was some increase in industrial employment and he also referred to the slackening in employment on the land. After that he asked us where would we get the money. He asked us would we cut back on certain services and he produced his own computations, which really are of no interest but which I accept as correct, to ask us whether or not we would have put a different type of taxation into the Budget this year if we were in office to raise the same sort of money that his Government define as the amount required.

My answer to all that is that we would run the country's business in a better way. It is not our job to say where exactly we would get the money, or where we would not spend it, but in a general easy way I am prepared to make three points to the Minister for Industry and Commerce which he may ponder upon. The first is that very probably we would not spend £5 million per plane on transatlantic planes, a debt which has to be serviced and the servicing of which has to be found in the Budget each year. We would probably see to it that the Government in relation to the money spent on land, the division of land, the purchase of land and the improvement of land, and the erection of houses upon it, by the Department of Lands, would not require one civil servant for every £1,000 spent. That is the figure if anybody wants to look it up. If there is any greater evidence of bad housekeeping I do not know of it. If you look up the Estimate for the Department of Lands this year, you will find estimates of the sums of money which are being spent directly on land, its improvement and its purchase. You will find the figure of £1,030,000. If you look up the number of civil servants working on this you will find that the figure is 1,030. It is quite a coincidence that a simple division produces £1,000 spent on land for every civil servant.

It is one particular Department in which I think we could do a much needed job of cleaning up. If I was to give a third reason to the Minister why we think we could do better, it would be that we would not have allowed agriculture to stagnate over the past six years. We would not have faced the people with a referendum to try and place ourselves in power for the next 20 years, at a time when the 10 per cent differential which we had as far as the entry of our goods to the British market was concerned was removed and the Danes and others for the first time were placed on the same level as ourselves, and at a time when the Minister for Agriculture was passing from fair to fair in Cavan not seeking information on agriculture but finding out how many he could get to vote for his referendum.

These are simple things. They are three reasons why the ship of State could have been steered on a safer course and could have had her sails set to better advantage over the past six years. This is why if we get the opportunity now we can set the ship of State on a better course with its sails set to meet the winds that we hope can be met and harnessed to bring the people home to a better stage of prosperity and employment.

Recently the Taoiseach referred, and I am quoting from the Irish Independent of the 3rd June, 1963, to the fact that Fine Gael had declared their intention of putting down an amendment to the Finance Bill asking that it be not received or passed in the Dáil. I was amazed to read this speech because I remembered one of the first speeches I ever made about ten years ago on a political platform. A very old campaigner said when I sat down: “That was all right but if your opponent is Fianna Fáil, do not advertise him.” He was right. I have not done it in any public speech since but I note that in the Taoiseach's speech to the central organisation committee of Fianna Fáil at Upper Mount Street on Wednesday, June 13th, he referred to Fine Gael 15 times in the first column. This is the same Taoiseach who said not six months ago that we were a surplus Party and that, in fact, his opponent, he would wish, would be Labour. He now says he is moving to the left, but 15 times he mentioned Fine Gael in this report in the Irish Independent on Thursday, June 14th.

I think one of the oldest and formerly cutest political campaigners in the country has now got a Fine Gael fixation. Proof positive of that is the slightly petulant attitude of the Minister for Finance this evening when the Minister for Industry and Commerce was interrupted. I believe Fianna Fáil are worried, they are shaking in their shoes and feel that this attempt to put themselves in a position of power by means of the Budget and the turnover tax has brought them to a bad situation. That is also shown by the result in Dublin North-East and the general opposition to this tax all over the country. That is something they must face seriously.

In the speech to which I referred, the Taoiseach said that Government spending on current and capital accounts was the life blood of the nation's economic organisation. We accept that, in modern circumstances, there must be greater entry by the Government into the financial affairs of the nation than was formerly the case but we say that encouragement of private enterprise and encouragement of people to make their own efforts to secure prosperity is better than attempting to buy prosperity by taxation. That is what Fianna Fáil have been trying to do over the years.

Let us see what has occurred. From 1956 to 1963, if we do not take this Budget into account, it is costing £50 million more per year to run the country. If you take this Budget into account for a full year—it is only a matter of months until its provisions will operate—it will take £63 million more to run the country. If the Taoiseach's assertion is correct, if, as he says, Government spending is the life blood of the nation's economic organisation, he should be judged by the results. Let us see the results of that period.

Three hundred thousand people have emigrated; 18,000 left the land this year. What might be regarded as a small thing but it is something the Government must face up to and we regard it as very important, the telephone system is in a shambles and the Minister does not seem to know what to do about it. The farmers are disgruntled and insisting that the Government are to blame: co-operative societies are refusing to transmit the levy on the losses on the export of milk products to An Bord Bainne; the NFA are highly critical of the Government and the workers are disgruntled because they know that in real terms they are worse off due to the loss in the purchasing power of their money and because they now see the turnover tax which is a tax for the first time on the decent working-man who, perhaps, has seven or eight or nine children to clothe and feed.

Housing in Dublin city is so bad that four people have lost their lives in the past month. The Health Act is breaking down completely and everybody with any contact with the people knows that it is twice or three times as hard now to get a card giving entry to the lower income group as it was two or three years ago. The whole system of economics of local authorities in relation to rates and subventions from the Government is similarly breaking down. Things were so bad last year that the Minister, in view of the disgruntled attitude of the farmers and the markets available to them, had to subvent the rates by £2½ million. In the following year, when it came to the striking of estimates by local authorities, the £2½ million was gone and more with it and the rates were back on a higher level than they were before the Government were able to provide those moneys.

Does all this not show that, in fact, over seven years of the Taoiseach's freedom to do what he says provides the life blood of the economy—increase Government spending — his housekeeping and his stewardship were bad and that on the results, he is adjudged a failure, as the people see the situation now?

Quoting again from the Taoiseach as reported in the Irish Independent he said that Fine Gael now professed to desire a general election, that they realised that the fruits of Fianna Fáil policy were beginning to develop and they would like to disrupt the fulfilment of Fianna Fáil plans before the full crop of benefits had been gathered. What benefits had been gathered? Can anybody deny what I have outlined? If these are the benefits, we have reaped the wind and are awaiting the whirlwind.

We fear nothing from Fianna Fáil's record. They would need to be not politicians but magicians to convince the ordinary people that they are better off than they were when we were in office. The plain people also know that the turnover tax creates a dangerous precedent. So dangerous is the precedent that I believe the Government saw it also and realised that the immediate introduction of the tax and its full operation would have raised such a storm of protest that it would have brought them down and so they decided, because they needed it for their own purposes, that they would introduce it next November, the idea being that all the talk, discussion and votes here would be over for months before the first day on which the tax came into effect. To balance their book for this year, they retrospectively taxed the business of this country by a retrospective increase in corporation profits tax.

Having done that, I am convinced that it is their hope to weather the storm for 12 months and to enter the next financial year in a position in which they can increase social welfare benefits and do popular things which will benefit for a period certain sections of the community. Then, aware that their policy has failed, they will see creeping inflation, creeping inflation which will nullify the effects of these benefits and, in the following year's Budget, the benefits will be swept away. We will be back where we started having failed to build up our economy or to create constant positions that do not fade away. The Parliamentary Secretary to the Minister for Lands as quoted in the Irish Independent of 1st May, said:

What, in fact, would happen was that in the case of the necessaries of life there would be little, if any, increase because of the highly competitive nature of the retail grocery business.

That statement must be dealt with because when that statement was subsequently used in this House by Deputy O'Sullivan, a former Parliamentary Secretary, the Parliamentary Secretary to the Minister for Finance, laid £5 to 1d. across the floor of this House that there would be no increase in the price of butter. On the same day, there was another little bet which another Government Deputy lost.

Let us consider this matter. I am informed that 60 per cent of the grocers of this country are under £500 turnover. I am a grocer. I keep my accounts separately for bar and grocery. I know what the profits are on bar and grocery. I know I could not run the establishment at all, and pay staff to run it, and make a profit, if I were depending on grocery alone. The bar must subvent the grocery as far as profits are concerned. I am informed on good authority that the grocer's average net profit, if labour is employed, is four per cent on turnover. Let us take it that in a given period there is a profit of £40 on a turnover of £1,000. If the cost of the turnover tax is not passed on, then the turnover tax on that profit would be £25. That would leave the small grocer in the position that in a period of two months he would pay what would be the equivalent of corporation profits tax on a turnover of £100,000 and a four per cent profit; he would be paying the equivalent of 62½ per cent corporation profits tax. That demonstrates just how hard it will be on the small grocer.

I know one cannot make valid comparisons because one has to take the small turnover vis-à-vis an extremely large one but, if you take a grocer with a turnover of £400 a week, he will have a turnover of £20,000 a year. He will have to pay a turnover tax of £500 per annum. His profit will be £800. His tax will be £500. All he will have for himself will be £300. The tax must be passed on. There can be no question about that. Let us consider the effect when it is passed on. If I were in a position to go in tomorrow and buy a secondhand car to give to my wife, and the turnover tax was in operation, I would pay 2½ per cent on that car. If an unfortunate man with seven children working with a farmer went into the local drapery shop for a pair of boots for one of his children he would have to pay 2½ per cent on those boots.

The turnover tax is, in my opinion, completely indefensible. There is no argument that can be made to substantiate such a tax. If we were a rich nation, if the level of our wages was much higher than it is, there might be some justification for such a tax. So long as we ask people to work on farms for as little as £6 10s. per week and so long as we expect them—as has been pointed out, it is their Constitutional right—to rear families on such a wage there is no justification for an equal tax on those who can afford luxuries and those who need the minimum of boots and shoes and clothes for their unfortunate children.

In the Dundalk Democrat last Saturday, a speech by my colleague, Deputy Faulkner, was quoted. He said that Fine Gael in the constituency of Louth had stated there would be a turnover tax on agricultural goods. That was stated in the Budget. I am the person who said that in Louth. I want now to clarify the position. When the Budget was introduced here, that was the situation. When I questioned the Minister for Finance on the matter on Resolution No. 13, he conferred with his officials and he could not give a direct answer. Extreme pressure was put on the Government by various Deputies throughout the debate and it was only when he came to reply three weeks later we discovered that the raw materials of agriculture and industry were being exempted. That was the situation. As the Budget had been introduced, the farmer would have to pay 2½ per cent on the raw materials of his industry. No change was indicated until the Minister came to reply three weeks later.

I am proud that I was one of those who put the pressure on. The Minister did not know, when he introduced his Budget, whether or not there would be a tax on pigmeal. He did not know whether or not there would be a tax on seed and fertilisers. He could not answer whether or not there would be a tax on agricultural machinery. But we made him answer and I think we should be commended for the pressure we put on rather than criticised for having taken the correct line.

I mentioned in the Budget debate and I think I am correct in mentioning again on the Finance Bill, the question of taxation on conacre land. In rural Ireland, there are far too many late marriages. Everybody will agree with that. Over the past 50 years, the practice has been that people on farms get married when they get ownership of the farm. That happens very often at 45 or 50 years of age. As a result, there is a high incidence of cases where for a decade the old people are physically incapable of operating the farm and the young people, where there are any, are too young to do the job. During that period, these people will be asked to pay income tax on conacre lettings and there is no definition as to what they will be allowed in relation to expenses, such as the purchase of fertiliser, if they seek to keep their lands in good shape, and the various other things they must provide in the case of land let on the conacre system.

I do not know what the situation is but let us define it by the Government's method of measuring what is capital expenditure and what is expenditure for profit. For instance, the subsidy on fertilisers included in this year's Budget figures and in the Book of Estimates is below the line expenditure and is regarded as capital expenditure by the Government. What will be the situation in the case of a person letting his land in conacre, who is physically incapable of farming it himself, who is awaiting the time when his son or daughter or nephew will be fit to farm it and who buys a ton of superphosphate to put on the land? That question has not been answered by the Minister and I hope he will answer it when he is replying to this debate.

There is also the question of taxation on land where the owner has another income. It is supposed to be endemic in this country that many farms are too small and farmers have other incomes and other means of earning money. I would say the majority of small public houses and grocery shops in rural Ireland have land attached. There are people whose farms are too small and who work in a local factory if they can get such employment. There are various other ways of supplementing the income from the farm. These people now will be put in a different situation from anybody else in this country. First of all, they will pay rates on their land and will be liable for income tax on the earnings therefrom if the Revenue Commissioners think fit. My interpretation of the situation in relation to income from land at the moment is that the farmer pays rates on his house and outbuildings, does not pay income tax on his land, except property tax, but pays high rates on his land and that this is his way of making a subvention to the running of the State.

If a farmer who has two incomes is now to be expected to pay rates on his house and out-offices and then to pay rates on his land and then to pay income tax on the earnings therefrom, he is paying, in my opinion, double taxation.

The farmer earning £500 a year would be paying a far higher figure in rates than the man earning £500 a year in a shop or in any other type of self-employment but he would not be paying income tax. I regard that situation as equitable but I regard as inequitable a situation in which the farmer would be asked to pay these extra rates on the land and would then have to pay income tax as well simply because he had another income on which legally he must also pay income tax.

That is a very dangerous precedent, a very bad digression on the part of the Government and one in respect of which deep thinking is not evident. It is a matter that should be examined.

Deputy Sweetman mentioned the question of accounts outstanding at November 1st. What are we going to do? That matter should be clarified. It has not been clarified as yet. It is absolutely necessary that it should be.

Let us consider the situation of individual persons. Where I come from near the town of Drogheda, there is a practice that people have agencies for dairies, milk distributing firms. These agents sell from their own carts or vans milk from one of the larger dairies in Dublin or from one of the local dairies. They would sell a pint of milk at about sixpence. How are they expected to collect two and a half per cent on that? Milk is a staple commodity which is particularly necessary for people with young children. There used to be in this House a very definite interest in that sort of person. It was taken for granted that everybody felt for the working man with a large family and would do his best to make life easier for him. No one has defined what this man's situation will be in relation to this pint of milk. Does he pay another halfpenny? Does he have to run on credit for a week or a fortnight so that he can pay two and a half per cent? Does this mean that every man distributing milk must give credit? Or is it, in fact, just another increase in the cost of living? I do not know.

I can give an instance of a man with a horse and van whose takings are £230 per week and whose normal drop, as he calls it, at a front door, is one, two or three bottles. In other words, 1/6d. worth, 1/- worth or 6d. worth, in round figures. One can see, taking that case, the difficulties involved in a tax that has been thrown at us almost like a bone to a dog.

Mr. A. Barry

On the contrary.

Mr. Donegan

A bone with no meat on it, loosely thrown to us without any great detail or explanation. It is a tax which if it were equitable would require the most detailed explanation.

I am glad the Minister for Justice has joined us because he has indulged in some newspaper controversy.

Mr. Haughey

And he won hands down, too.

Mr. Donegan

No. It is the newspaper controversy I am talking about. I did not enter it for the reason that it was meant to end on the night of the election at 9.30 and I did not read his contribution to the newspapers until 9.30 on that night. Therefore, I did not know anything about it. I remember extremely well the sentence which he quoted in my regard. He quoted from my speech on the Budget reported at column 753, Volume 202 of the Official Report. I quote from my speech:

The Minister for Justice opened his speech by stating that our tax structure was on a narrow basis and that the arguments were overwhelmingly in favour of a turnover tax. We have heard all that before.

This is where the Minister quoted from my speech:

Indeed, he said that Deputy Sweetman, on this side of the House, had said largely, in principle, the same sort of thing. If this is true, and I seem to remember that myself also ...

There the Minister stopped. This letter appeared on the morning of the by-election when it could not be answered. The Minister stopped at the word " also ". I shall continue from that word.

Mr. Haughey

The Deputy is wrong. It did not appear on the morning of the by-election.

Mr. Donegan

I accept the Minister's correction. I did not read it. If I had, I would have replied to it. The Minister does not mind if I reply to it now?

Mr. Haughey

Try to wriggle out out of it as best you can.

Mr. Donegan

Not at all. I am not wriggling. I will continue the quotation and the Minister must listen. I said:

If that is true, and I seem to remember that myself also ...

The Minister stopped the quotation there and that is all that was known by the people who read the evening paper. I continued:

... that does not mean that the only alternative was a turnover tax or that the only alternative was the type of Budget we now have before us.

Was it not a pity the Minister did not finish the sentence? Now, who won hands down?

Mr. Haughey

Mise.

Mr. Donegan

That is a matter of opinion. The question of policy adumbrated by the Taoiseach of moving to the left, means a complete digression from some of his past thinking. It is right that in relation to this change in his line of thinking, and of policy in direct relation to this Finance Bill, that we should define Fine Gael policy in that regard.

Today Deputy Sweetman defined Fine Gael policy on profits quite clearly. He said we are a relatively poor country and that capital formation was not sufficient to meet the needs of a growing, expanding economy—growing and expanding naturally, I may say, for the very good reason that we started from a very low ebb——

Mr. Cunningham

Good Government.

Mr. Donegan

——and not as a result of the Government's activities. He defined the situation correctly when he said that a lot of capital expenditure in industry and elsewhere and capital formation must come from profits. We on this side of the House want to be quite clear in our minds that we have no objection whatever to the industrialist, the business man or anyone else gaining his legitimate profits. Our policy, if elected as the Government, will be to encourage the reinvestment of profits and, therefore, to create the level of capital formation that is so necessary.

On the other hand, the Government believe—and I am quoting from a speech made by the Taoiseach—that " Government spending on current and capital accounts is the life blood of the nation's economic organisation ". We believe in encouraging capital formation. We believe in providing all the social services that can be afforded and, having done that, in getting as far as we can out of the lives of the people, and leaving the industrialist, the business man and the farmer in a position to do their best to make profits, knowing that Government policy, if the Government changes, will not be along the lines of the thoughts of the Taoiseach. We will encourage them by Government provisions, perhaps in a future Finance Bill to create capital formation and so provide the employment that is so necessary. That is a sharp divergence, and Fianna Fáil have moved to the left. We have not moved to the right. We are exactly where we were. We have not moved one iota. Deputies may laugh but they do not like it. We will encourage the reinvestment of profits as much as possible. Fianna Fáil believe what the Taoiseach said as far back as 1952, that it is better for the people that they should spend less and that the Government should do their spending for them, and that the Government should take not 5/6d. in the £, not 6/6d. in the £, but 7/6d. out of every £ the people earn. That is a clear definition of the Taoiseach's thinking. There is no change to be found in the report of his speech in the Irish Independent on Thursday, June 13th. The only difference is that he is now in the saddle.

Fianna Fáil think that they can woo the electorate by trying to move to the left. Having got into trouble over the past seven years, as I have explained, and having left themselves in the horrible position they are now in, they think the only way to get back for another five years is to get the turnover tax through during part of this year, go into the next Budget with a surplus, distribute largesse if possible, win the people, and come back for another five years, which would be the most horrible five years in the history of the country.

I charge the Government with bad housekeeping and with financial dishonesty because they have excessively borrowed by guarantee from the commercial banks. Old established firms have no access to capital but by giving debentures to the commercial banks. If they are big enough they can become public companies, but that is a very deep plunge to take, and it is not open to the majority of our companies because they are not big enough and as profits run—at the moment we are quite clear that profits in a lot of industries are too low for expansion—they would not be subscribed to if they went on the public stock market.

Mr. Haughey

The Deputy will not get Deputy Tully to vote with him if he goes on like that.

Mr. Donegan

In the table circulated with this Budget, there is a figure of £8.68 million borrowed from the commercial banks under Government guarantee by various companies. I do not suggest the purposes are wrong, but I do suggest there is a place to get that money, and that is from the public. That is the honest way to do it. If you cannot get it, you cannot spend it. That is £8.68 million less for the decent Irishman who employed his people for the past number of years. That is a difficulty we intend to face up to if we get into office.

Dr. Ryan

The Deputy will not.

Mr. Haughey

The Deputy need not worry.

Mr. Donegan

This Government have lost the confidence of the people because they have also introduced a restrictive corporation profits tax. We on this side of the House believe it is necessary that there should be reasonable profits, and people who have set aside moneys for machinery and equipment will now have to pay a portion of this retrospectively in corporation profits tax. The profits used for capital expenditure have been raided, and deliberately raided, by the Government. The Government got a blank cheque at the last election. Anyone who in October, 1961, observed the situation will remember that Fianna Fáil sought a blank cheque and they got it. At that time, they put up no policy whatever. Their slogans were: "Keep it going" and "Keep the effort on." Those were their slogans. They did not say specifically what they were going to do.

(Interruptions.)

Mr. Donegan

They did not say specifically what they were going to do. They got cracking and they got a blank cheque. Earlier, I detailed their failures. They failed as far as employment is concerned, as far as agriculture is concerned, as far as housing is concerned and as far as health is concerned. They also failed as far as education is concerned and now they seek another blank cheque. I do not think they are going to get it. In such a situation as this, where you have the retailers and various non-political groups in every constituency protesting against this tax, the Government hope to win by one vote. I say it is not good enough and it is their duty to go to the people and seek a mandate from them.

Dáil Éireann díospóireacht - Wednesday, 19 Jun 1963

Finance Bill, 1963—Second Stage.

Dáil Éireann díospóireacht -
Wednesday, 19 Jun 1963