Dáil Éireann díospóireacht -
Tuesday, 9 Jul 1963

Vol. 204 No. 4

Committee on Finance. - Finance Bill, 1963—Committee Stage.

Question proposed: "That Section 1 stand part of the Bill."

Mr. Sweetman

There is just one thing I should like to comment upon. This is the section which imposes income tax and surtax and they are imposed at exactly the same rate as last year. I am not proposing to make any comment or challenge in respect of that at the moment, but it is significant in relation to this section that the comments of the members of the Income Tax Commission in relation to a tax on expenditure, such as a purchase or sales tax, which we will be discussing later on, have been clearly and adequately borne out.

I am particularly reminded of this by the comment of Dr. James Meenan in his addendum to the Minority Report at page 78 of the Third Report of the Commission. I am not going, at this stage, to digress or refer to the regressive effects of a purchase or sales tax, whether you call it a sales tax or a turnover tax. In this section, I am concerned solely with the comments so far as income tax is concerned. Dr. Meenan said: "Finally, I cannot believe for a moment that the implied bargain of a reduction in the standard rate of income tax to 5/- in return for a limited purchase tax would be regarded as inviolable."

Of course it was not even a question of its becoming inviolable. It was violated before it was introduced. Members of the House will remember that the majority of that Commission, by six votes to five, voted for the introduction of some type of sales tax solely on the basis and on the argument that there would be a reduction of 2/- in the £ on income tax if they so did. They were clear that it was solely if there was such a switch that they were signing the report in that way. The fact, of course, is that the Minister has not implemented that part of the switch in relation to income tax and, therefore, any validity the arguments of the Commission might have, per se, in that regard cannot be used for substantiating the view put forward by the Minister.

Apart from that, I want to refer to Paragraph 62 of the First White Paper on Direct Taxation, page 20:

A preliminary draft consolidation of the law up to and including the Finance Act of 1952 has already been prepared in the Office of the Revenue Commissioners. The next step will be to draft this on to the post-1952 Finance Act. The full draft will then be submitted to the Attorney General.

What has been done in relation to that? The Minister for Finance will realise that that is now two years old. Within that period, the House is entitled to be told that some real progress has been made through the submission of that as a consolidating measure. Fully aware as I am that even post-1952 there has been some substantial variation, at the same time in the 34 years between 1918 and 1952, the law in relation to income tax became such a jungle that people find it extremely hard to follow it, not merely the taxpayers as such but also members of this House who are anxious to provide some measure of amelioration and an abolition of the anomalies that arise.

If one is to await the final perfect machine in relation to any consolidation of tax Acts of any sort, the answer would be that they will never see the light of day. It would be far preferable that a consolidation measure would be introduced clearing the ground up to and including 1952 and that that consolidation would be introduced as a consolidation of the law as it then was. It is not necessary to take into account such consolidation, variations and amendments of the law that have occurred since then. Even though we would all understand, appreciate and realise that a consolidating measure of that sort was not the present state of the law, at the same time it would save an immensity of difficulties for all concerned and mean that administration would be much cheaper. In fact, everyone would be saved 34 years of weary work.

Mr. Byrne

It has been my custom on this section during the past few years to pay a little tribute to the memory of a great English gentleman, Sir William Pitt, who invented the laws which, under this section, we are perpetuating for a further 12 months. It gives me no great pleasure to pay that tribute because I feel the laws in question are archaic and obsolete, that they are unsuited to our economy, unsuited to the conditions of this country. They are laws which were invented in the time of the Napoleonic Wars 150 years ago, laws on which the present Minister in every respect is refusing to accept the recommendations of an Irish expert commission, the Income Tax Commission, who proposed many radical reforms of this tax code in two White Papers on direct taxation, the first published in 1961 and the second in April of this year. These have been rejected by the Government.

For that reason, it is appropriate this House should take stock of our general approach to the question of income tax reform. It seems to me that the major problem we should address ourselves to in that connection is the very considerable extent to which this country is relying for direct taxation more and more on a single section of the community, namely, wage earners and salary earners, a section of the community who are contributing far more than the demands of equity or justice. They are taxed under a code of rules laid down in the British Income Tax Act of 1918 and, indeed, many of the rules go back to 1853— a code of rules which is severe and harsh, a code which the Minister is refusing to reform.

I refer specifically to pages 17 and 18 of the second White Paper on Direct Taxation. The Government have rejected paragraph 52 of that report. That report of the Income Tax Commission provided that a deduction should be allowed of all expenditure, or any part of it, by an employee or office holder for the proper carrying out of the duties of his office—in other words, the revision of Rule 9 of the rules applicable to Schedule E, which goes back to 1853, in the form in which it is at present enforced in this country. The Income Tax Commission, in their Seventh Report, unanimously recommended a radical alteration of that rule which would, if implemented, have the effect of instilling some degree of equity and justice into the tax system as applied to 80 per cent of our taxpayers. It is a maxim of the law that equity is a stranger to income tax. That is the saying of a learned counsel in Britain many years ago. Our Minister smugly accepts that maxim. Our function is to make it very clear that we are not prepared to accept that position.

The Income Tax Commission, in their seven splendid reports issued over a period of several years—the fruit of considerable labour and research by experts — made 112 positive recommendations, some of greater significance than others. Those recommendations are summarised in Appendix I of the Seventh Report—all 112 of them, on the face of it, perhaps some more. Of those, the Minister advised me in reply to a Parliamentary question today that eight of the recommendations in the first six reports have been or are about to be implemented and 21 of those in the Seventh Report are to be implemented. I have not summarised from the two White Papers the exact number of the recommendations which have been totally rejected by the Government but I think it is not unfair to say that upwards of 50 per cent of the recommendations of the Income Tax Commission have been rejected categorically by the Government for now and for all time. That is what I particularly resent.

If the Minister were to say that the Income Tax Commission made many good recommendations which he hoped to be in a position to implement in the course of time but which, for financial reasons, he could not implement this year, I could respect that attitude. What I deplore is that the Minister should commit himself on this question of expenses of wage earners and salary earners, for example—the rule I referred to a moment ago—now and apparently for the foreseeable future in regard to this and in regard to the absurd system of Schedule A taxation —the tax on notional income, which does not exist, levied on householders, a tax which the Commission has recommended should largely be abolished. The Minister brings forward theoretic and academic reasons for retaining this tax. The question of medical expenses is another case in point—a matter on which the Commission has made a positive and useful recommendation, which was:

That a taxpayer who incurs expense on himself, or on any dependant, arising out of disability or illness which is serious and likely to be permanent should be allowed the vouched expenses in excess of £50 per annum per person and up to a maximum of £300 per annum per person.

In three lines in this White Paper, the Minister deals with that recommendation which runs into a considerable section of the Seventh Report. The Minister says:

The possibility will be examined of framing a scheme which would be administratively practicable and at the same time would effectively confine the relief to cases of the kind contemplated in the recommendation.

The members of the Commission on Income Tax are not fools. They considered all the difficulties implicit in acceptance of their recommendations. They could foresee the difficulties and the snags. I shall have more to say on this matter on amendment No. 6.

Primarily, at this stage, I want to stress that there can be no section of the community more deserving of income tax relief than the Schedule E taxpayer—the wage earner and the salary earner who are taxed under an antiquated and inequitable set of rules which have been severely condemned by learned judges in court on numerous occasions; a set of rules which, in regard to expenses, has been condemned by the British Royal Commission of 1955 and by our Income Tax Commission in their Seventh Report. At Question Time today the Minister confirmed the Government's rejection of that recommendation of the Income Tax Commission. He proceeded to say that it is not certain that the new terms imposed by the commission would reduce anomalies to such an extent as would justify acceptance of the recommendation.

In the second White Paper the Minister undertook, in regard to flat rate allowances applicable to wage earners, to have the Revenue Commissioners consider a wider application of this arrangement of flat rate allowances. In reply to a question by me shortly after publication of the White Paper, the Minister refused to disclose the existence of such flat rate allowances as there are. Furthermore, he refused to disclose the workers to whom they are applicable—making the case, I think, that there is an element of confidentiality in these allowances, notwithstanding what the Income Tax Commission at page 81, of their Seventh Report had to say:

We have been informed in the course of discussions that many employees are not aware of the expenses which, even at present, they are entitled to; and a flat-rate deduction would help to remedy this defect. When flat-rate expense deductions are granted to particular groups that fact and the amount of the deductions should be well publicised, e.g., by notifying them to the accountancy bodies and by publishing them in the Annual Reports of the Revenue Commissioners.

I ask the Minister to take a further look at that matter and to consider having such flat rate allowances as we have at present publicised so that all persons who may be entitled to them may know of their existence. I urge him to drop his over-cautious and over-conservative approach to this matter.

The Minister has shown in Section 2 he is capable, when he applies himself to it, of exercising independence of mind in regard to income tax technical matters. In Section 2 he is exempting amateur sport from taxation, notwithstanding the fact that the Revenue Commissioners made a strong case to the Income Tax Commission urging rejection of this concession on theoretical and impracticable grounds of an academic nature. To his credit the Minister has taken an independent line and has rejected that official advice. He can see clearly it is equitable, right and proper to exempt amateur sport from taxation. There are many other technical recommendations of the Income Tax Commission which may not appear on first sight to be so equitable, right or proper as the recommendation in regard to amateur sport. That is something everyone can understand. If the Minister would exercise that independence of judgement in regard to these other technical matters, he would be doing a very good day's work.

I have stressed that the major need in regard to tax reform is to provide relief for wage and salary earners who now represent at least 80 per cent of the total number of taxpayers. I want to impress on the Minister that the exemptions and personal allowances for tax purposes have not increased proportionately, either in amount or value, with the changes in money values since 1939. On an income equivalent in real terms to their present wages, there are many people now in the tax net who would have been exempt in 1939. We are relying to an inequitable extent on wage and salary earners for tax purposes. In 1939-40 there were only 70,000 persons liable to income tax. Now there are nearly 250,000. The vast bulk of that increase is in wage and salary earners. It is not only because wages and salaries are now higher than they were in 1939. It is to a considerable extent due to the fact that personal allowances have not increased proportionately to the changes in money values. People with the same income in real terms are now paying proportionately far more tax than they did then.

The disincentive effect of PAYE on working people, particularly those on overtime, is a matter well worthy of serious attention by the Minister. There is a need to promote a better scale of progression in the graduation of income tax. I know the Minister's approach is, as he said previously here, not to think in terms of individual reliefs or specific reliefs for this or that, but to think in terms of an overall reduction in the standard rate of income tax. But I would say to the Minister that an overall reduction in the standard rate provides the same relief to the wealthy person as to the person on a smaller income. It does not give proportionately the same amount of relief to the small man as it does to the person with a large income. For that reason the need to promote a better scale of progression in graduation of income tax is one I would impress upon the Minister.

I am not sure offhand whether the Income Tax Commission had anything to say about this matter. I suppose that is beside the point. There is a strong case for a higher rate of earned income relief for wage and salary earners by reason of the fact there is no element of return to capital in their remuneration. It can be argued, perhaps theoretically, that the business person, let us say the shopkeeper, who gets a flat rate of earned income relief on his earnings has included in his earnings a certain amount of return to capital —the value of his shop. A wage or salary earner has no capital other than his personal skill, which cannot be quantified in terms of cash. It is something which is not saleable. For that reason I suggest there is a strong case for a higher rate of earned income relief for wage and salary earners.

Most wage and salary earners know full well that most business people and professional people have tax fiddles. That creates a very undesirable state of affairs. It creates a sense of grievance in regard to income tax. It creates a position of inequity. The Minister is concerned with the problem of evasion and avoidance of income tax. I welcome the Minister's concern with that problem because there is very great need to make of income tax an equitable tax, to discard this maxim of the law that equity is a stranger to income tax. We have the extraordinary position that if you go to a moral theologian and discuss the matter he may tell you there is no moral obligation to pay income tax. That position exists because income tax as at present levied is an inequitable tax. It is a tax which impinges more severely on certain sections of the community than it does on others. There is no moral obligation to pay a tax that is inequitable and unfair.

Mr. Corish

Who is the judge?

Sir Anthony Esmonde

Almighty God.

Mr. Byrne

We must not get involved in moral theology here, and I merely make the point in passing. I would urge the Minister to drop the fuddy - duddy, over - conservative approach to tax reform. The Seventh Report has many good recommendations which, if employed, would have the effect of making income tax a fairer and more equitable system of taxation. One such recommendation is that referred to in amendment No. 6 in regard to medical expenses. In conclusion, I would appeal to the Minister to exercise that independence of mind he has exercised in regard to amateur sport.

Mr. Sweetman

I do not think Deputy Byrne realised he could be interpreted in a certain way in making one statement, that is, that most business and professional people engage in tax fiddles. If by that he meant that most business people and most professional people engage in evasion of the law, may I say categorically that I disagree wholeheartedly with him? It is an undoubted fact that a minority of such people engage in evasion. So far as this Party are concerned, we want it to be clearly understood that we support any reasonable or proper method of preventing such evasion.

Mr. Corish

He said that people had the impression that "fiddles" were going on.

Mr. Sweetman

That is what I did not know. I was only listening with half an ear.

Sir Anthony Esmonde

I want a little clarification of the curb on profit rents. At present the owner of property let at a profit rent pays charges under Schedule A tax. Do I understand that Schedule A tax is to remain or be abolished? Do I understand that the ordinary rate of 6/4d in the £ will apply in future to rents from houses or flats that are let? If so, if we are to have a situation in which owners of property who are letting it to individuals as houses or flats will have to pay Schedule A tax plus the ordinary tax rate of 6/4d in the £, the inevitable result would be to start a further snowball which is bound ultimately to bring an application for an increase in rents. I should like the Minister to clarify the whole position.

Does this apply to controlled rents? Does it apply to rents that are not controlled? Does it apply only to house property or also to furnished houses let as flats, sub-lettings and so on? Anything that in any degree discourages the provision of private houses or discourages the making of such accommodation available to those unable to own their own houses should be avoided. Ultimately it would mean the turning over of this type of property to the State. Everybody will agree that recent happenings in Dublin do not suggest that the State is in a position to handle the housing question without assistance from private enterprise.

This applies not only to Dublin but to the country as a whole. If people are to be charged a double rate of income tax on house property, it means you will have no private enterprise and will be thrown back entirely on State housing. That applies in my own county and in every county where housing schemes and developments are subject to long delays. The Minister should make clear to the House what the actual position is. Somebody in a position to know told me today that in future owners of property will have to pay two rates of income tax. The inevitable result will be that the people who are paying rents will have to meet increased charges just as they will have to do under any of the new taxes the Minister is imposing.

Dr. Ryan

I agree with Deputy Sweetman that only a minority of business and professional people try to evade income tax and that we should do everything possible to get them into the net. There are provisions in this Bill for that purpose. Deputy Sweetman quoted the Income Tax Commission Report to show that they were in favour of a purchase tax of a kind, provided it replaced income tax. He pointed out that while we brought in turnover tax, we had not reduced income tax. That is true, but in defence I might say that it was a choice of either an increase in income tax or introducing the turnover tax. By putting on the turnover tax, it could be said that we had prevented a rise in income tax. In the past five or six years, income tax has been brought down by ½d in the £.

Mr. Sweetman

And, of course, they envisaged it coming down to 5/-.

Dr. Ryan

We hope to do that some time.

Mr. Corish

Not, I hope, in the manner in which they wanted it done, at the expense of a tax on expenditure.

Dr. Ryan

Deputy Byrne said income tax laws were invented in the time of Napoleon and, therefore, archaic. Most laws did come from that time but they have been changed and income tax laws have been very much changed. I think even since 1923 many changes have been made and in any case he cannot find fault with the present Finance Bill because we have 28 clauses in it dealing with income tax.

Mr. Byrne

Most of the tax rules remain as they were years ago.

Dr. Ryan

The Income Tax Commission did recommend a good many changes but they were mostly changes in detail and not so many changes in principle. They were not departing from the archaic laws to which Deputy Byrne refers. We have adopted a big number of these recommendations. We did not adopt some of them. I think that is the general pattern of a Government in dealing with the recommendations of a commission: they do not always adopt all the recommendations.

Deputy Sweetman asked about codification and I am glad to be able to show him the first draft of it. It will be some months before it will appear in public.

Mr. Sweetman

I thought it was stated in the First White Paper that it was in draft?

Dr. Ryan

Yes, it is still in draft.

Mr. Sweetman

The preliminary draft?

Dr. Ryan

It was at that time in draft up to 1952. It is now in draft up to 1962.

Mr. Sweetman

That is what I am complaining about. In the effort to make it perfect, you will never produce it.

Dr. Ryan

We cannot go any further than 1962 at present. I hope it will reach the draftsman before the end of this year. It is still being looked after by the Revenue Commissioners. I had always hoped that I should have it for the Dáil in 1963 but I do not know if that will now be achieved. It should be here before the next Budget, and in any case, early in 1964.

Mr. Sweetman

This is the consolidation Bill?

Dr. Ryan

Yes. Some other matters were raised but these will arise on other sections.

Sir Anthony Esmonde

What about profit rents? Is there income tax on profit rent?

Dr. Ryan

Part of this Bill refers to income tax on profits from rents and it can be discussed on that.

Sir Anthony Esmonde

It is a new tax?

Dr. Ryan

Yes.

Mr. Corish

I am not accustomed to following remarks such as those made by the Tánaiste in the last few days to the effect that I had advocated an increase in income tax and surtax for the purpose of offsetting some of the expenditure it was now proposed to engage in out of revenue provided by the turnover tax. It was complete misrepresentation if one regards the speech which I believe he had in mind and which I made here on 24th April. When the Minister for Finance was concluding on the Second Stage of this Bill, he also said, I think, that I advocated for this year or said that I would be prepared to vote for, an increase in income tax. I should like to put the record right and correct the two members of the Government in question.

When I spoke about income tax here on 24th April on the General Resolution in connection with the Budget, I had been discussing the weight of direct taxation as against indirect taxation. I pointed out that compared with most other European countries, we had a very much higher proportion of indirect than direct taxation and that as far as I was concerned and as far as my Party were concerned, we would like to see a greater concentration on direct rather than indirect taxation.

Again, in the course of that debate, I pointed out the Government had fully admitted that their financial policy was directed towards a reduction in direct taxation and an increase in indirect taxation. I give the Minister for Finance credit for saying that positively. He said that much in his original Budget Statement and we had occasion to say we disagreed with that policy because we believed that indirect taxes or hidden taxes fell hardest on those who could least afford to pay such taxes. I also pointed out, as I do now, that in recent years the Government had reduced income tax, had reduced surtax and had increased the limit at which surtax had to be paid and that these three changes in financial policy not alone reduced direct taxation but lost to the Government over the past five or six years many millions of money that could be well used by the Minister for Finance.

I am all with Deputy Byrne when he says our income tax laws could be applied much more justly. Certainly, it would be much more equitable if we were to concentrate on reasonable allowances rather than on a reduction in income tax or any other changes in the standard rate of income tax. The Minister hoped he would come to the stage where it would be possible to reduce income tax to 5/- in the £. I trust that financial policy is not pointed directly towards that end irrespective of the consequences. I think most of us accept—I do in any case—a statement by the Government on one of the income tax reports in which they said that to reduce income tax by 2/-in the £ and to substitute instead a sales, purchase or turnover tax would be a major change which would mean that the incidence of taxation would fall on married people and their families rather than on single people who could best afford to pay it. The reference I made to income tax which possibly the Minister and the Tánaiste had in their minds was this one I made when I spoke on direct and indirect taxation in relation to the turnover tax:

If it is a choice between a tax on income and a tax such as is proposed in this Budget, I would vote for a tax on income all the time.

I would have no hesitation in saying that at any time, that if it were a choice between a tax on food, clothing and other necessaries, I would be prepared to vote for a tax on income rather than a tax on expenditure on what are regarded as the necessaries of life. The Government, through the Minister for Finance, I assume, in commenting on the income tax report, said that taxation on expenditure was desirable. It may be desirable but not in the circumstances of this country. We are not a Western Germany that seems to have an abundance of riches. If it were a tax on such goods as cars or things that are deemed even in Germany to be luxuries, I would certainly say "Tax those things" but if we are introducing a tax on what are the necessaries of life, I am all against it.

We are not at the stage in this country where the mass of the people are overspending. There are many tens of thousands of people here who need more of the necessaries of life and who cannot yet afford them. Therefore, let me repeat that if these things are to be taxed or if I have a choice between a tax on food and clothing for many tens of thousands of our people, as against a tax on income, I am in favour of taxation on income, on wealth.

Mr. Booth

I wish to intervene at this stage because there seems to be a complete confusion of thought so far as Deputy Corish is concerned. He more or less denied that he was advocating an increase in the rate of income tax but there again he has stood up to confirm the impression which he gave us all along that he was in favour of an increase in income tax rather than a turnover tax such as is now suggested, that he was in favour of an increase in direct taxation rather than the introduction of any new indirect taxation. That is something we should get clearly on record because that inevitably leads Deputy Corish and the Labour Party to a preference for an increased rate of income tax rather than an expenditure tax.

I would agree with some of what Deputy Byrne has said, that income tax as it stands is far from equitable in certain cases, but there again we have had from Deputy Byrne the perfect justification for the broadening of the whole basis of taxation. I have no more enthusiasm for the present income tax code than Deputy Byrne. I do not think any of us is very enthusiastic in that regard but how one can make this wholesale denunciation of income tax and all its implications and still oppose a new, broadly-based expenditure tax just passes my comprehension.

It is all very well to say that the Commission on Income Taxation have made a number of very helpful suggestions, but, of course, that Commission were regarding the problem very largely from the taxpayer's point of view. They were not concerned with the raising of revenue. The job which the Minister for Finance has to do is to raise the revenue in the best and most equitable way in which he can do so. It is most unjust to attack the Minister for failure to carry out a complete review of the income tax code which has been constantly under review in matters of detail but which cannot be entirely reformed in one fiscal year, least of all in a year in which we are embarking on a new, broadly-based taxation system

I hope, therefore, that Deputy Byrne, who seemed to be speaking unbriefed as far as his Party were concerned and who dropped a fearful clanger when stating quite definitely that many professional and business people were engaged in tax fiddles, will either come over to this side of the House and support the new form of broadly-based taxation which will make fiddles more difficult, or else he will review the whole situation. I resent the remark that was made because it was made quite categorically; he stated these tax fiddles resulted in an inequitable burden of tax falling on certain people. I should love to see Section I entirely redrafted, if we had the time to do it, in order to adjust the burden of income tax. Considering, however, that the turnover tax can apply to only half a year and income tax applies to the whole year, it is better to leave income tax as it stands for one further fiscal year before carrying through a broadening of the whole tax system. By this time next year, we should be, and will be, I think, in a position to make a great improvement on the present system.

Mr. Corish

Will the Deputy allow me to ask him a question? For the record, would the Deputy prefer an increase in income tax or a tax on foodstuffs?

Mr. Booth

If it were purely a question of an increase in income tax or a specific tax directed to foodstuffs, I think an increase in income tax might be more equitable; but, in view of the fact that the turnover tax is not restricted to foodstuffs, that is not a fair question.

Mr. Corish

I have the Deputy's answer for the record.

Mr. Tully

Deputy Booth makes the case for the person who would be seriously affected by an increase in income tax. He is perfectly entitled to do so. We are making the case for those who will, in fact, be affected by a tax on foodstuffs, many of whom do not pay income tax.

Question put and agreed to.

SECTION 2.

An Leas-Cheann Comhairle

Perhaps amendments Nos. 1 and 2 could be discussed together.

Dr. Ryan

I move amendment No. 1:

In page 6, line 30, to insert "or amateur" before "games".

Section 2 deals with athletic games or sports and, as Deputies are aware, the Income Tax Commission recommended exemption in the case of amateur games. We felt there would be some difficulty with regard to one of our football organisations as there might be an element of professionalism involved, although not very much, and we decided, therefore, to say athletic games generally.

Deputy Cosgrave raised specific instances and it was to meet some of the points raised by him——

Mr. Sweetman

Surely what Deputy Cosgrave dealt with are sports and not games.

Dr. Ryan

——that I put in this amendment to cover such things as aerobatics, swimming and other sports and games of that kind.

Mr. Sweetman

I do not understand the effect of the ministerial amendment. As I understand it, it is athletic or amateur games. Does the word "athletic" also govern the word "sports"? Does the word "amateur" govern the word "sports"? In other words, is it to read for the purpose of promoting athletic games, for the purpose of promoting amateur games, for the purpose of promoting athletic sports, for the purpose of promoting amateur sports? Is it intended to cover all those headings, or what exactly is the intention?

As I understand it, Deputy Cosgrave's amendment relates to flying clubs and the other activities he mentions, which are more sports than games. I do not purport to be very clear as to definition, but I always thought a game was something in which there was a more immediate element of decision as against sport, which could be something with an element of display, as apart from rivalry. Under this section, where does the poker party come in? We all understood in earlier years that one member of the Government was very fond of the latter. No doubt members on other sides of the House are, too. Is this outdoor games? Is it indoor games?

Mr. Booth

There are professional poker clubs.

Mr. Sweetman

There are, and there are other types of indoor and outdoor games. I should like to know whether they are exempted.

Mr. Corish

Would the Minister's amendment cover an amateur team participating in a professional tournament?

Dr. Ryan

First, we take the athletic game. They will be covered, whether they are amateur or professional. Then we take after that amateur games or sports and that will cover all other sports where they are amateur but not professional. To give a simple example, it will not cover racing because racing is regarded as professional.

Mr. Cosgrave

Even if amateurs take part?

Dr. Ryan

Yes.

Mr. Cosgrave

It will cover flying clubs?

Dr. Ryan

Yes, aero-clubs, swimming contests and so on.

Mr. Cosgrave

Point-to-points are run under authorised rules but they are operated solely by amateurs. Professionals are not entitled to take part.

Dr. Ryan

The amateur gymkhana would be exempt.

Mr. Cosgrave

All gymkhanas would be exempted.

Dr. Ryan

If they are amateur, certainly.

Mr. Corish

What about an amateur team playing against a professional team in football?

Dr. Ryan

That is all right.

Mr. Corish

The amateur team is all right.

Mr. Sweetman

Both teams are all right.

Dr. Ryan

In athletic games, it does not matter if they are professional, but in other sports, they must be amateur.

Mr. Sweetman

Is the section now to read that athletic games will be exempt, amateur games will be exempt, athletic sports will be exempt?

Dr. Ryan

Yes.

Mr. Sweetman

Whether they are professional or amateur, and amateur sports.

Dr. Ryan

Yes.

Mr. Sweetman

It is a question as to what athletic qualifies. Is it games, sports, or both?

Dr. Ryan

Athletic games, whether amateur or professional, will be exempt. All other sport, if amateur, will be exempt.

Mr. A. Barry

Everything except mental activity.

Dr. Ryan

Yes.

Mr. Byrne

It is quite clear the exemption would apply to Schedule A property tax paid by an amateur athletic association?

Dr. Ryan

It would, yes.

Mr. Sweetman

I still do not understand. A professional game is exempt, but a professional sport is not: is that the answer?

Dr. Ryan

Professional athletic games are exempt.

Mr. Sweetman

But professional athletic sports are not?

Dr. Ryan

Professional sports, not professional athletic sports.

Sir Anthony Esmonde

Are acquatic sports exempt?

Mr. Sweetman

Let me put it another way. Is it clear that when the section is passed, as amended, it will cover all the matters that were recommended to be covered by Chapter 10 of the Seventh Report of the Commission on Income Taxation, paragraphs 367 to 385?

Dr. Ryan

Yes, it covers more than that, because it also covers professional athletics.

Mr. Sweetman

Everything recommended is covered?

Dr. Ryan

Yes, and more.

Amendment agreed to.

Amendment No. 2 not moved.

Section 2, as amended, agreed to.

SECTION 3.

Question proposed: "That Section 3 stand part of the Bill."

Mr. Sweetman

What is the exact purpose of this section?

Dr. Ryan

This is a rather involved section, and I would ask the Deputy to be a bit easy with me as I try to explain it. Section 34 of the Income Tax Act, 1918, deals with the carrying forward of losses and the general purposes of Section 34 are not interfered with. Some changes are made. In the first place, it extends the time limit from one to two years. It provides for appeal procedure which was not in Section 34. The third point is that it lays down the profits that will be taken and put against loss—the profits in the same trade or profession. Beyond that, it takes personal earned income and gives priority, as it were, to the profits that would be taken to be set against the losses brought forward.

Mr. Sweetman

As I understand it, this flows from paragraph 527 of the Seventh Report of the Commission on Income Taxation. In paragraph 527, a recommendation is made which I think has been implemented in this section. Then it adds:

Subject to the consideration that this recommendation will be superfluous if our earlier recommendations regarding "one taxpayer, one charge" and the abolition of schedules are fully adopted.

We have not adopted the abolition of the schedules but, as I understand it, we have adopted the recommendation regarding "one taxpayer, one charge". I do not quite understand in these circumstances why that consideration has not been adverted to in bringing in this section.

As I understand it also, this matter is dealt with in Section 75 of the second White Paper on Direct Taxation. Section 75 covers not only the matter referred to here, but also the extension of the six year time limit in favour of the taxpayer to ten years, and provides that the three year time limit should likewise be extended. That is in paragraph 533 of the same chapter of the Seventh Report. The Minister has implemented paragraph 527, but he has not implemented paragraph 533 and, as the two were taken consecutively by the commission and by the Government in the White Paper, I should like to know why.

Dr. Ryan

The Deputy is right in saying that we were covering paragraph 75 of the second White Paper. I think he will find that the matter is covered in Section 13 of this Bill.

Mr. Sweetman

I apologise; I misread it. Unlike the Minister when I am wrong, I am always prepared to admit it.

Question put and agreed to.

SECTION 4.

Question proposed: "That Section 4 stand part of the Bill."

Mr. Sweetman

Does this section completely implement recommendation 62 of the Commission?

Dr. Ryan

As the Deputy is aware, it deals with the trade unions.

Mr. Sweetman

I have the wrong one.

Dr. Ryan

Paragraph 45 of the second White Paper.

Mr. Sweetman

Surely it is paragraph 87.

Dr. Ryan

I am sorry; it is paragraph 87.

Mr. Sweetman

I misread the section just as the Minister did. That covers recommendation 658?

Dr. Ryan

That is right.

Mr. Sweetman

Does it give everything the Commission ask for in paragraph 658?

Dr. Ryan

Yes.

Mr. Sweetman

Very well.

Question put and agreed to.

SECTION 5.

Question proposed: "That Section 5 stand part of the Bill."

Mr. Sweetman

I do not know whether Deputy Byrne, as an accountant, can understand this, but I admit that, as a mere solicitor, I cannot. Can the Minister say where does it come from?

Dr. Ryan

Paragraph 177 of the Seventh Report of the Commission.

Mr. Sweetman

Does it do everything they ask?

Dr. Ryan

We are meeting their points.

Question put and agreed to.

SECTION 6.

Mr. Sweetman

I move amendment No. 3:

To add to the section a new subsection as follows:

"() Where a person carrying on a trade or profession as provided in subsection (2) (a) hereof satisfies the Special Commissioners (or the Circuit Court on appeal) that he has bona fide furnished correct accounts of such his trade or profession then subsection (1) hereof shall not apply to such person.”

The purpose of this section is to prevent any evasions which the Minister indicated operate at present. I want to be clear beyond question that I myself and the members of this Party, are 100 per cent in agreement that the evasions indicated should be prevented. At the same time, however, the section has been so phrased that while preventing evasions, it may also cause some hardship. As I visualise the position arising under this section, where a person carries on another trade he will automatically be assessed on the profits of any farm he may have. We all know that the pattern of rural life is that virtually every small shopkeeper in every town and village has a bit of land. It is common knowledge that that is the pattern of our rural life. Because that person who has that bit of land is also a shopkeeper, this means that the obligation is being put on him of being compulsorily assessed on his profits on that land and of keeping accounts in relation to it.

We equally know that a very large percentage of those people are quite incapable of keeping accounts and that this will mean that the farmer whose wife keeps a small shop for pin money will have to tell her that she must close up her shop because if she does not do so, he will be assessed on his farm on an accounting basis and will not be able to deal with any tax on the farm on the fixed valuation assessment, if it is free-hold land, or on the fixed original annuity under Schedule B, if it is land bought out under the Land Acts. That seems to be wrong.

As I say, I am entirely with the Minister in endeavouring to prevent people from saying that the accounts of their business are right when the Revenue come back and say: "It is obvious that you made a loss last year but last year you were carrying on a standard of living that was not a standard of living which a man making a loss could carry on. You have only a small farm and you could not be making the profits which you are spending." I am in entire agreement that where the taxpayer in those circumstances says: "I got all the money I am spending out of my farm and I am not bound to produce my accounts to you and I am not going to," in that way there is an evasion. I do feel, however, that where the taxpayer satisfies the inspector, or if he fails to satisfy him, the Special Commissioners, or again, the circuit court judge on appeal, where he satisfies what I may term the appropriate deciding officer, that the accounts of his trade or profession are bona fide, then he should be assessed as he has always been assessed.

What is going to happen otherwise? I know of one case in question. Not far from the edge of my constituency, there is a man who is well known as being one of the most modern and up-to-date farmers in the whole country. His farm is a model and is used as a display farm for foreigners who come here and who want to be shown something that is really expert in efficiency and a model of productivity. That man has another business, a trade within the meaning of subsection (2) here and will be assessed in future, as a consequence, on that farm on an accounting basis. Let me say that there is no question of any evasion. This man submits full and proper accounts for his farm and his business. He is to be assessed on an accounting basis but his next-door neighbour, whose farm is acknowledged as being a model of all that a farm should not be, is to get away with an assessment on valuation. That is a tax on efficiency, as the Minister has the section.

I am not suggesting that my drafting is perfect—it is not—but I am suggesting that where the deciding officer, be he the circuit court judge, the Special Commissioner, or the inspector, is satisfied that the accounts for the trade in question are genuine and correct, there should be no change in the existing method of assessment, but if that deciding officer is not so satisfied, then the Minister's section comes into operation. I may say that I have gone considerably further than I could have gone in this because I have deliberately left it so that the burden of proof is on the taxpayer rather than on the Revenue Commissioners. Where the deciding officer is satisfied that everything is bona fide and above-board, it is not fair that a person should be penalised by something that is brought in, and rightly brought in, to stop the crooked case but which in so doing, hits the man who is being fair, honest and above-board.

Mr. Donegan

I have not got a copy of the Minister's Budget speech but my recollection is that he said that the purpose of this section was to stop evasion and he indicated that where the Revenue Commissioners felt there was evasion, they could opt to ask the man for the accounts of his farm, if his standard of living indicated he was living at a higher rate than he could have if he were declaring a small loss or a clear profit. This section, however, as it stands seems to indicate that the ordinary publican or farmer must now be assessed on the profits of his public house or farm, that the ordinary person who supplements his earnings by having a small farm is to be taxed on his operations as a farmer. This seems to be out of line with what the Minister said in his Budget speech. I am not saying this in an antagonistic way. I know this is an extremely difficult and complicated measure but he will agree with me that when we heard him on the Budget, we felt that this was merely to stop evasion. Now the position is that it embraces all people with mixed incomes, or if not all, nearly all, and from that point of view, the Minister would be well advised to look at it again.

Dr. Ryan

Deputy Sweetman says that he is all with me in stopping evasion and therefore we start off on common ground. I am afraid, however, that Deputy Sweetman's amendment will not achieve our object. After all, the person we are dealing with is a businessman or professional man who has given what is obviously a wrong return and I do not see how the Special Commissioners can do much about that. They are not in a position to examine his accounts any more minutely or efficiently than the inspector. They would not, I am quite sure, be able to do more than an inspector could do. A common case is, of course, that of a professional man. Professional men are very jealous about the confidential side of their businesses. When a professional man is asked how he professes to have such a small income compared with his colleagues living, perhaps, in the same square, doing the same practice, all he will say is: "That is my income and that is that."

The only way of dealing with a case like that, where there is a farmer concerned, is to ask him to give a return in respect of his farm and to examine that. I do not think Deputies need be afraid this provision will be applied generally. It will be applied naturally only where the return from the trade or profession is obviously too low.

Mr. Sweetman

Where is it in the section that it is to be applied in fraudulent cases only? If that is in the section, then there would not be much between the Minister and myself. I cannot find it.

Dr. Ryan

I am not sure about the drafting but I presume we could accuse a man of fraud.

Mr. Sweetman

You do, under this section.

Dr. Ryan

We suspect him but we cannot accuse him.

Mr. Sweetman

I think the Minister is wrong. Let me say—this may shorten it—if the section were such that it applied only to the type of case the Minister has mentioned, my amendment would not have been put down, but as I read the section—I may be wrong—notwithstanding the fact that the inspector of taxes is 100 per cent certain the returns of the man's trade or profession are correct, still, if the man has a piece of land, he must submit farm accounts and he will be assessed on the farm accounts, even though the inspector is certain the professional accounts are correct.

I am entirely with the Minister if he suspects there is fraud in the professional returns. Then he should certainly call for the accounts. There would not be any great difference between the Minister and myself on that basis—that if he suspects there is fraud, he is entitled to call for the accounts. What I object to is where the inspector is certain there is no fraud, he is still bound by this section to call for the accounts. If the Minister can show me I am wrong in my interpretation, then a great many people who are worried by this would not be so worried.

Dr. Ryan

When this point was put to me first—that this type of evasion was going on—I said I would agree to put a clause in the Finance Bill. We were concerned only with cases where there are suspicions but I have been told it is very difficult to draft it in any other way. I will undertake to have another look at it between now and Report Stage.

Mr. Sweetman

Are we on common ground that all we want is to stop evasions? Then we may also be on common ground that where it is clear to the inspector there is no evasion, that the taxpayer has satisfied him there is no evasion, the taxpayer should not be penalised.

Dr. Ryan

It is not intended to apply this, let us say, to rope in farmers and get the revenue from them. It is to apply only where there is suspicion.

Mr. Sweetman

And if there is no suspicion, it will not be applied?

Dr. Ryan

Yes.

Amendment, by leave, withdrawn.

Section 6 agreed to.

NEW SECTION.

Mr. Byrne

I move amendment No. 4:

Before section 7, to insert a new section as follows:

"Notwithstanding anything contained in any other enactment, as and from the passing of this Act, premises not exceeding £30 valuation, in which an owner-occupier normally resides shall be exempted from Schedule A tax on owner-occupation, and residential premises exceeding £30 valuation shall be similarly exempted on the owner-occupation element in the first £30 valuation, the exemption to apply to the residential portion only of the premises not exclusively occupied as a residence."

This amendment relates to a recommendation set out in paragraph 110 of the Second Report of the Income Tax Commission, the recommendation that Schedule A property tax on the notional income enjoyed by a householder from the ownership of his house should be exempted from Schedule A tax on owner occupation in respect of residential premises up to a valuation per house of £30.

Schedule A tax is an extraordinary form of taxation as levied on the owner-occupier, the person who lives and rears his family in his own home which very probably he is buying out on mortgage from a building society or an insurance company. That is the general pattern of our society. The presumption of the law is that an individual enjoys an income from his ownership of the house in which he resides with his family, and he is assessed to income tax under Schedule A on this national income accordingly.

The Income Tax Commission, in paragraph 110 of the Second Report, recommended the withdrawal of this tax on owner-occupiers in respect of houses with a valuation of up to £30. They further recommended that the first £30 of the valuation of a house with a valuation in excess of £30 should be exempted. Schedule A is a tax which heretofore has been levied on persons other than owner-occupiers. It has, for example, been levied on landlords of premises let for business purposes, but by a very cumbersome and roundabout procedure of law because persons who had business lettings were subject to tax on the full amount of their income under Schedule D having paid tax in the first instance arising from the ownership of their homes under Schedule A.

Now, in Part IX of this Bill, the Minister is implementing a recommendation of the Income Tax Commission in their Second Report applying taxation, on the net income, to all premises which are the subject of lettings, broadly speaking. I believe the Minister is right there because the extraordinary feature about Schedule A as we have had it up to now is that it was an effective burden on the residential occupier and also on the landlord of premises let for residential purposes. The Minister is removing that latter anomaly in part now, but he is failing to implement the second part of the Commission's recommendation that Schedule A, on owner-occupiers, should largely be abolished as set out in this amendment—for, of course, as the Minister must know, the person who is the householder has really no cash income out of the ownership of his own home. Quite the contrary, he is hard put to it in many cases to meet his mortgage repayments, to pay his rates and to keep the house in repair. That is why it is so farcical and absurd to say to such a person that he has a cash income out of that ownership and to assess it for income tax accordingly.

The Income Tax Commission unanimously recommended the concession which is enshrined in our amendment. The Royal Commission in Britain considered the matter but, offhand, I do not think they recommended the concession which we are asking for. Notwithstanding that, the Tory Chancellor of the Exchequer in Britain, under pressure from his own back-benchers, has expressed his agreement with the view that Schedule A tax on owner occupiers is an archaic tax on non-existent income.

Notional income is not a proper subject for taxation for the basic reason that it does not create a source of funds out of which to pay the tax which is supposed to arise from the notional income. It creates no fund to pay the tax. If we are to accept the proposition that durable assets like one's house should properly be subjected to taxation we should at least logically carry that viewpoint to a sensible conclusion and subject the tax to ownership of other durable assets which have a long life, such as one's car or any other long-lasting assets.

There is a very great case for this amendment on social grounds. It is desirable socially to encourage persons to own their own homes, to provide themselves with housing, thereby removing from the State and from the local authority a very considerable burden of responsibility. The Schedule A tax was a system of taxation devised in the very early days of income tax. It was the first of Pitt's income taxes at a time when real wealth was equated with ownership of land by the economists and theorists of those days when there was, in fact, very little considerable other real wealth in Britain apart from land. It was a system brought into effect at a time when most people did not own their own homes. That is why I say it is completely archaic and unsuited to our requirements.

Here I revert to a point I made on Section 1 of this Bill. If the Minister would say he is impressed by the arguments advanced by the Income Tax Commission but that, for financial reasons, owing to the stringency of funds, he is unable to accept their recommendation at present, I would respect such a ground for failing to accept the Commission's recommendation. However, instead, the Minister in the first White Paper on direct taxation categorically committed himself to a rejection of this concession; categorically rejected the Commission's recommendation on theoretical grounds, grounds which have no relation whatsoever to the social desirability of encouraging persons to acquire and own their own homes, grounds which have no relation whatsoever to the considerable burden which the average person takes on in acquiring his own home.

The average home-owner is a struggling person, hard-set to it to meet his outgoings on his house. Rates, nowadays, are an appalling impost on the home-owner. No matter what the Minister may say, they are, in effect, a form of taxation. There are many charges on local rates which could very well be the subject of direct or indirect taxation by the State rather than by the local authority. Added to that position, we now come along and say to the man who has no cash income from his home: "We presume you have a cash income and we shall assess you for income tax accordingly." The Minister told us some time ago that the yield of Schedule A tax from owner-occupiers was I think in the region of £300,000 so that he might be inclined to argue that acceptance of this amendment would involve a decrease in revenue of £300,000. Of course, that is not the case at all for the reason that insofar as Schedule A tax is assessed on owners of business premises the Minister is losing on the swings what he gains on the round-abouts. He collects Schedule A and an equivalent amount under Schedule D tax levied on business profits. If Schedule A is not applied to business premises they will lose nothing and gain nothing because they will pay more tax under Schedule D. The home-owner is the only person effectively paying that tax. The full costs of administering that tax must be very considerable because it is a cumbersome and unwieldy tax. The full cost should be regarded as a burden on the net yield of the tax and that is, under the new provisions brought in in Part 9, on the only remaining section of the community who will effectively be paying Schedule A, namely, householders.

The costs of administering Schedule A tax must be very high indeed. The Minister admitted a year or two ago, in reply to a Parliamentary question, that he was unable to say precisely what those costs were; that, by reason of the organisation of the tax offices, it was not possible to say what it cost to collect Schedule A as distinct from the other forms of taxation. That is a very undesirable state of affairs. In this country, we should not have any major tax, the cost of administration of which we are unaware of.

The Minister quoted to me that, taking all income tax as a whole, the cost of collection was no more than 3.8 per cent of the revenue collected. If the Minister is labouring under the illusion that it costs only four per cent of the yield of effective Schedule A tax to administer that tax, it is time he informed himself adequately as to what the real cost is. In the Dublin General District for Schedule A, there are over 40 clerks engaged in raising Schedule A assessments, many of which are effectively cancelled out by the Schedule D inspector. Some of those clerks are doing no more than entering assessments in the assessment books and advising the Schedule D people of them so that they can effectively cancel them out. That is the sort of nonsensical bureaucratic set-up that has been pilloried by such persons as Professor Parkinson and others.

There is a cast-iron case in favour of this amendment, a case which this year is stronger than ever by reason of what the Minister is doing in Part 9 of the Bill. Here he is applying to all lettings the rules heretofore applied only to business lettings. The effect of that will be that landlords will pay Schedule A tax and have it cancelled out under Schedule D. The recommendations of the Income Tax Commission in their Second Report in this connection were surely intended to be taken jointly. To separate the two recommendations on let property and owner-occupied property is surely taking them out of their context. The Minister told us that the yield of the new tax being assessed on let property will be in the region of £500,000—far more than would be the loss in revenue by acceptance of this amendment which is confined to self-holders.

Mr. Sweetman

The amendment we have put down follows the pattern set in paragraph 838 of the Seventh Report, which in turn reviews the Second Report of the Commission. Whatever about arguments in earlier years in relation to Schedule A on owner-occupied houses, it seems to me that such arguments now, in the light of the provisions lately included in Part IX of the Bill, cannot have any validity. I should like the Minister to give us a figure of the amount that would be involved by the exemption of owner-occupied houses alone, now that houses that are let are taken into account under Schedule D in the same way as business rents have always been taken into account.

In relation to a tax matter, I hesitate to express a view different from that of Deputy Byrne, who is probably much more right than I am. However, perhaps the Minister could enlighten us? I understood in the Budget of 1962 the British Chancellor, Mr. Selwyn Lloyd, indicated that Schedule A tax would be abolished for owner-occupied houses in England as from 5th April this year, and that the present Chancellor this year has in fact implemented that recommendation of his predecessor. I know I cannot hold the Minister responsible for what is done in another country, but I think that is the position, and if only for the purpose of deciding in this case of friendly rivalry between Deputy Byrne and myself, I should like to know the answer.

Whether it be so or not, it is undoubtedly true that the view is expressed on the other side, and must now be expressed here, that when let houses are being taxed under Schedule D, the abolition of Schedule A tax for houses that are rented would not cause any diminution in the tax yield. There is an overwhelming case when the person himself occupies the house. In effect, you are taxing something for which the man gets no money coming in with which to pay. That is wrong. I can understand Schedule A, although I may not be happy about it, when it is a measure in respect of all buildings. It is not any more. It is the sole anachronism of an owner-occupier assessment. That, I suggest, is wrong and is something that should be rectified.

The introduction of an amendment of that sort at this stage may not be feasible. I agree with Deputy Byrne that we should first know the amount of tax that would be involved in the new circumstances. If that cannot be met at the moment, there should be an expressed view that it is to be considered at a later date.

Dr. Ryan

I was never impressed, and I am not impressed now, with the arguments of the Commission on this matter. I have never seen any reason why Schedule A tax should be abolished. The cost of this amendment would be about £300,000.

Mr. Sweetman

Even after Part IX?

Dr. Ryan

Net costs. I cannot give Deputy Sweetman the figure of what it would cost to relieve only Schedule A occupiers.

Mr. Sweetman

Is that not what I am asking for?

Dr. Ryan

I suppose it would be the same figure. I have expressed my opinion on this matter more than once. I do not know if there is much use going back over it. The amendment is a bit illogical because Deputy Byrne's argument is that there is no justice whatever in exacting this tax. If that is so, he should not have exempted from his amendment Schedule A tax over £30 valuation.

Mr. Sweetman

The Commission did that.

Dr. Ryan

It was illogical, I am afraid. Deputy Sweetman is right in saying that the British Chancellor referred to this matter in 1962 and said he would deal with it in 1963. He did deal with it in 1963 as he promised. In this country, it must first be admitted that we are doing a lot for people getting or building houses and quite a lot of money is being spent on grants and subsidised loans and people who go into new houses are, as Deputies know, exempt from rates to some extent for eight or nine years.

Mr. Tully

Would the Minister say what he means by subsidised loans?

Dr. Ryan

Loans at a low rate of interest.

Mr. Donegan

For private houses?

Dr. Ryan

Not for private houses. The argument I have always thought best is that a person who buys his own home and has left a house where he was paying rent is going to be much better off because if it is a new house, he is likely to get a grant to build it and if he borrows money to buy it, he gets relief of income tax on the interest he pays on that loan. If he was paying rent, he got no relief on that.

Mr. Byrne

He would probably have a lot more money in his pocket if he had a corporation house.

Dr. Ryan

Even if you take two people with no money and one rents a house and the other buys a house, you will find the person who buys the house is very much better off, apart from the Schedule A tax. I do not see very much argument in favour of this amendment. I have always resisted it not entirely from the point of view of the Exchequer but because I could never see any justice behind the amendment and I could never follow the argument put up by Deputies who, I am sure, believe what they say, that there is an injustice being done by collecting this tax from owner-occupiers.

Mr. Sweetman

I wonder if it is possible on this amendment to consider something that I admit would have been better considered under Section 6. I appreciate that Section 6 in fact deals with Schedule D tax on most or, perhaps, all occasions but I want the Minister to consider the effect of Section 6 and whether he could not give relief in some shape or form under this amendment or otherwise in respect of a matter which does not seem to be taken into account in the section with which we are dealing.

As far as I can see, Rule 5 of Schedule B will not permit the assessment of an actual year's profits. As I understand it, under the section with which we are dealing there will be an anomaly. There will not be any relief in the accounts for work such as land reclamation, farm buildings, silos and buildings necessary for the improvement of farm productivity. They are being assessed, I understand, under Schedule A. Therefore, I admit I am trying to bring them by a backdoor into this section. To that extent, I think I am relevant on this amendment.

If the Minister goes on with the provisions of Section 6 as they are, it will have the effect of taxing a genuine case by disallowing any expenditure on land reclamation, erection of farm buildings such as cow-byres, barns or silos. Yet, as far as I can see, the Minister is going to do that in the context in which he is taxing them, not on the actual year but on the preceding year. It does not seem right. This amendment, if accepted, would help to some extent but that is not the main reason for it. The amendment is there and I am taking advantage of it to raise a matter which I think I should have raised more appropriately on Section 6.

Mr. Byrne

The Minister has demolished with considerable naiveté as illogical arguments which take up half a chapter of the Second Report of the Income Tax Commission put forward by bodies such as the Federation of Irish Industries; Association of Chambers of Commerce of Ireland; the Federated Union of Employers; the Institute of Chartered Accountants; the Workers Union of Ireland; the Civil Service Alliance; the Irish Conference of Professional and Service Associations; and Mr. T. Donovan, retired Special Commissioner.

The Institute of Chartered Accountants said as reported at page 40:

The incidence of Schedule A income tax is complicated and inequitable. ... The loss of tax from owner-occupiers of property would, to a large extent, be made good by the receipt of tax on the excess of net rents over Schedule A valuations of furnished and unfurnished lettings.

The Association of Chambers of Commerce wrote to the Commission as follows:

The majority of assessments which arise under Schedule A are for small amounts, mostly in respect of owner-occupied houses. It is considered that on social grounds Schedule A should not be assessed on this type of holding. Every encouragement should be given to extend the range of property owners in the country, and the most suitable means of achieving this is to facilitate in every way possible the owner-occupier system. It seems probable that the discontinuance of Schedule A tax on this type of property would not involve any ultimate loss to the Exchequer as the savings achieved in assessment and collection expenses would almost certainly exceed the present yield of tax from this class of holding.

There is the nub of the argument to which the Minister has not referred at all, the excessively high cost of collecting this unwieldy tax, the absurd position of one set of clerks raising assessments under Schedule A which are effectively cancelled out by the Schedule D inspector. There is no use in labouring the matter: if the Minister will not see that point, we must despair of this reform while he remains Minister. The next Minister for Finance, Deputy Sweetman, is committing himself to this reform.

Amendment, by leave, withdrawn.

Section 7 agreed to.

SECTION 8.

Question proposed: "That Section 8 stand part of the Bill."

Mr. Sweetman

Am I correct in thinking that Section 8 is the equivalent here of the section in Great Britain restricting the payment of tax to the net UK rate?

Dr. Ryan

It is the same principle, I believe. We have, of course, the problem here, as the Deputy is aware, of allowing exports free of income tax, and that causes the trouble here usually.

Question put and agreed to.

SECTION 9.

Question proposed: "That Section 9 stand part of the Bill."

Mr. Sweetman

What is the point of this section?

Minister for Justice (Mr. Haughey)

The idea is that at the moment when persons make payments from which they deduct tax, they are obliged to account for that tax to the Revenue Commissioners. The existing machinery is simply that the Revenue Commissioners demand the payment and the person is obliged to make the payment. There is no process of formal assessment and the idea now is that actual assessments will be raised in regard to this so that the amounts payable will be available to be added on to losses where the necessity to give allowances for losses arises.

Mr. Sweetman

It must be taken with Section 10?

Mr. Haughey: Yes; sections 9 and 10 achieve this between them.

Mr. Sweetman

Would I be right in saying they are the implementation of paragraph 25 of the second White Paper?

Mr. Haughey

The Deputy could well be.

Mr. Sweetman

We would like to know. What I really want to know is not in relation to the White Paper. That does not matter so much. What does matter is paragraph 121 of the Seventh Report of the Commission on Income Taxation.

Mr. Haughey

Yes, that is where it is covered.

Mr. Sweetman

Does it give everything that is recommended in paragraph 121?

Mr. Haughey

Yes.

Question put and agreed to.

SECTION 10.

Mr. Haughey

I move amendment No. 5:

In subsection (2), page 13, line 32, to delete "69" and substitute "70".

This is a drafting amendment.

Amendment agreed to.

Section 10, as amended, agreed to.

NEW SECTION.

Mr. Byrne

I move amendment No. 6:

Before section 11, to insert a new section as follows:

"In connection with any assessment to income tax where a person proves that he has incurred expense on himself or on any dependant arising out of disability or illness which is serious and likely to be permanent there shall be deducted from the income to be assessed the vouched expenses so incurred in excess of £50 per annum per person and up to a maximum of £300 per annum per person."

This is an amendment which springs directly from the Seventh Report of the Income Tax Commission. It is a very confined, restrictive and conservative amendment, the purpose of which is to implement recommendation 12 in the Seventh Report. The recommendation says:

That a taxpayer who incurs expense on himself, or on any dependant, arising out of disability or illness which is serious and likely to be permanent should be allowed the vouched expenses in excess of £50 p.a. per person and up to a maximum of £300 per person.

They are very conservative terms which are enshrined 100 per cent in this amendment. The amendment does not depart in the slightest from the Commission's recommendations, though a very strong case could be made for more generous terms than were recommended by the Commission, but deliberately, and in order to put the matter to a test with the Minister, we have confined ourselves to the terms of the Commission's recommendation. In the second White Paper, the Government commented on the recommendation in rather imprecise terms. At paragraph 39 of the second White Paper, they said:

The possibility will be examined of framing a scheme which would be administratively practicable and at the same time would effectively confine relief to cases of the kind contemplated in the recommendation.

This is an opportunity for the Minister to tell us what are the administrative difficulties in implementing this very modest and conservative concession for persons who are chronically sick. Medical expenditure can usually be very readily proved. The amendment confines the concession sought to vouched expenditure and only vouched expenditure in excess of £50 per annum per sick person. The illness for which we are seeking the concession must be one of a grave nature, a disability or illness which is serious and likely to be permanent. If a person has a physical disability as a result of which his income is reduced considerably, equity demands that those expenses should not be taxed.

I would perhaps anticipate an argument of the Minister in reply to this. Last year, on a somewhat similar amendment, though one framed in broader terms, the Minister expressed his sympathy with the principles but said we should await the report of the Select Committee on the Health Services, that health services were a more appropriate means of providing State assistance for the person who has to undergo heavy medical expenses. Our social philosophy should at all times be to foster self-reliance. It is extremely unlikely that in contributory health scheme, if introduced by the present Minister for Health—in this connection, we must have regard to the inordinate time the Select Committee is taking in its deliberations— chronic illness will be fully covered. The chronically ill are unable to insure themselves with the voluntary health insurance people. We should extend to the chronically ill parity of treatment with those who can insure themselves with the Voluntary Health Insurance Body.

Serious illness affects very gravely an individual's capacity to pay tax and a basic principle upon which we should draft our tax laws is that tax should be related to the capacity to pay it. The person who is seriously ill, whose child, widow, mother, or other dependant is seriously and permanently ill has his tax-paying capacity reduced. This is an age of very high medical expenses, expenses which are increasing rapidly every month. There is a very strong case in equity for this amendment. Its implementation would be unlikely to cost very much. Last year when the Minister expressed sympathy with an amendment on these lines we, on this side of the House, were not reinforced in the case we made by the Seventh Report of the Income Tax Commission but, since then, the Seventh Report has been published and this amendment is based in toto on the recommendation in that Report.

Mr. A. Barry

This is a simple and a Christian proposition. Any tax should consider the ability of the shoulders to bear it. That ability is, unfortunately, reduced by an act of God. Illness is much more than a misfortune to the body. It can cripple a household. This is a Christian proposal and the relief asked for should be given. The amount is very severely limited by the terms of the amendment. The Minister should consider accepting it.

Mr. Haughey

This amendment, as Deputy Byrne has pointed out, is in direct accord with what was recommended by the commission. The Deputy has also mentioned the second White Paper dealing with this recommendation and indicated that the possibility of such a provision being introduced would be examined to see whether it should be administratively practicable. The difficulty is, of course, to ensure that any such relief would be confined to the cases which the Deputies obviously have in mind and which were in the mind of the commission. This matter has, in fact, been under consideration by the Revenue Commissioners. The administrative aspects of it have been considered by them. Because of a variety of circumstances of which Deputies are aware, the Revenue Commissioners have not, unfortunately, been able to complete their examination of exactly what is involved administratively and, for that reason, I would suggest to the Deputies that the amendment might be left over until the Report Stage. By then this examination will be completed.

I said there are difficulties. The main difficulties arise from the fact that the term "medical expenses" is a very wide one. Deputies will realise, too, that the limits stipulated in the amendment would be subjected to pressure at both ends probably. It could be argued that it was unfair to allow medical expenses of £50 in one case and disallow £40 in another case. At the other end of the scale, it could be argued that it was unfair to allow £300 in one case and disallow £350 in another. These are the difficulties which would be involved in accepting the amendment.

I said the term "medical expenses" is a wide one. I shall give a few examples to illustrate what I mean. There has been a claim for an annual allowance for aged and infirm people with small incomes who are compelled to employ attendants to look after them. There was a case, too, where a claim was submitted for the cost of a car to transport a disabled person. On one occasion there was a claim for the wages of a nurse looking after sick people. I mention these as illustrative of the difficulties involved. If all sorts of medical expenses of that kind were to be allowed, the cost of such a concession would be prohibitive.

I want to emphasise again that I am not dealing with the amendment on its merits. I am merely indicating some of the difficulties which would be involved in accepting it. I suggest the amendment might be left over until the Report Stage when the result of the examination the Revenue Commissioners are making should be available.

Mr. Sweetman

While I have no hesitation in leaving this amendment over until the Report Stage, frankly there is one difficulty in its implementation, a difficulty I want to overcome. I want to be quite sure that the implementation of this very desirable provision would be done in such a way that it could not possibly injure the Voluntary Health Insurance Scheme. One of the things of which we can be particularly proud is the fact that it was the Government of which I had the honour to be a member that introduced that scheme. It has saved many people from very great hardship and I hope it will be possible to extend its scope still further. Inevitably there are cases which could not be taken into account in a voluntary health insurance scheme. There is the case of serious disability which is likely to be permanent but which the individual only discovers at a time when he is not covered by insurance. There is, of course, a precedent in existence for this scheme, in Australia or New Zealand—I cannot remember which for the moment—and it was found to be administratively possible there. I do not see why something could not be found to make it administratively possible here.

However, we have been pressing this for some years and, having regard to the fact that we have been pressing it for years without any success, it is not much to ask that we wait until next Tuesday, and I shall withdraw the amendment accordingly.

Mr. Corish

I do not think the Minister would have the administrative difficulty he seems to think he would have. I think what he meant was that the definition of "medical expenses" would cause very big difficulty, but I do not think the administration of the scheme would be too difficult, so long as the various definitions were cleared up.

Mr. Haughey

The limits would cause some trouble.

Mr. Corish

I appreciate that. It is heartening that all sides of the House are in favour of an abatement of income tax in the matter of medical expenses. Even though it is encouraging that the Minister says we should wait until Report Stage next Tuesday, when the examination by the Revenue Commissioners will be completed, I should like to say I do not think Deputy Dillon or Deputy Sweetman or any Deputy expects a perfect scheme, a scheme which will satisfy everyone.

Mr. Sweetman

Nothing is perfect in this world.

Mr. Corish

In view of the fact that everyone is agreed on it, it is important that the principle should be introduced into this Finance Bill. The Minister spoke about the difficulties that could be envisaged such as a man being ordered by his doctor to go to the Bahamas or to Majorca. Would that be considered as medical expenses? If the amendment could be confined, for a start, to medicines, medical treatment, doctors' fees, that would be a tremendous start. After all, we do not have to wait five or six years for another Finance Bill. We get them with monotonous regularity every year, for good or evil. If there are imperfections, and if too much is allowable, that can be corrected in 12 months. There is an opportunity every single year to make any changes necessary. I urge the Minister that he should on Report Stage—as promised by the Minister for Justice—consider the implementation of such a scheme. I should prefer to see the principle introduced now in some modest way, rather than that we should wait for another year.

Amendment, by leave, withdrawn.

Section 11 agreed to.

SECTION 12

Question proposed: "That Section 12 stand part of the Bill."

Mr. Barron

Under the 1952 Finance Act, persons over 65 years had £600 counted as unearned income and they got 25 per cent reduction. Because of the fall in the value of money and in the purchasing power of money I wonder would it be possible to raise that £600 to £800? That is one important point I should like to put before the Minister.

The second point is that under the section a means test is introduced for the first time. Previously, the income of a son or daughter was not taken into account, but now, if it is over £120, the person will lose £60 as a result of this section. I would ask the Minister to reconsider this matter. No old person wishes to divest himself of property or assets and, in a short time, since people cannot live for ever, the Government will get a very nice nest-egg. I would ask the Minister to see what could be done in regard to those two matters before Report Stage.

Dr. Ryan

The £600 mentioned by the Deputy does not come under this section. The Deputy mentioned a person over 65 years whose income up to £600 could be regarded as unearned. We are not dealing with that matter here. I do not know if much of a case could be made for it, but it can be examined. It is not mentioned in this Bill and, therefore, I am afraid I cannot deal with it at the present time.

The Deputy was correct in saying that up to this if sons or daughters were looking after old persons who could be regarded as dependants, their income was not taken into account. The Commission on Income Taxation recommended that they should be treated in the same way as other dependants. Of course, this is a restrictive change, but we have adopted that recommendation, and in future they will be treated as dependants in every way, including limit of income.

Question put and agreed to.

NEW SECTION

Mr. Sweetman

I move amendment No. 7:

Before section 13 to insert a new section as follows:

"Subsection (1) of section 22 of the Finance Act, 1920, as amended by subsequent enactments, is hereby further amended by the substitution of `a deduction of one hundred and twenty pounds' for `a deduction of sixty pounds.' "

This amendment speaks for itself. At present under the income tax code, the allowance for a dependent relative is that £60 of the taxpayer's income is disregarded when assessment is being made of his income. The proposition suggested here is that the dependent relative allowance should be the same as the child allowance. That was recommended by paragraph 66 of the Commission's Report in the following terms:

We recommend that the dependency allowance should be in the same amount as the child allowance; and that the same system of graduation of the allowance according to the dependant's income should apply in each case.

We have been discussing graduation on previous sections. I admit frankly that I was so infuriated when I read the second White Paper and the moralising contained in paragraph 34, page 12, that I made up my mind there and then, that regardless of what the Finance Bill included, I would put down this amendment. The Government made this comment on the recommendation by the Commission:

The moral and legal obligations of parents towards their children as compared with other dependants merit recognition in the income tax system.

When one considers that the word "children" there means children under 16 years, or children over 16 years and under 21 years who are at an educational establishment, the moralising in that statement by the Government is just nonsensical. I was going to use a much more offensive term.

Let me read one letter which I got in relation to this from a man in Dublin:

I have a daughter of 25 years old, certified as mentally subnormal. She has always resided with me and is not in receipt of any income. For some extraordinary reason, the sum of £60 has always been considered as adequate for her complete maintenance.

Of course, I accept that these allowances are not meant to meet the full cost of maintenance, but how anybody can suggest in such a case that there is a moral or legal obligation on anyone greater than the obligation of that parent towards that child, over 21 years of age, and not a child under the Income Tax Act, completely beats me.

How can anyone expect, for example, that we should accept or should believe that a son has not got just as adequate a moral or legal obligation to ensure that his widowed mother—who has not got the income to maintain herself—should be able to eke out the end of her days in reasonable comfort? Surely there is just as great a moral and legal obligation on a child to maintain a widowed mother in those circumstances? Surely there is just as great a moral obligation on the taxpayer to maintain someone who is unable to maintain himself, who is close to the taxpayer in kith and kin, and who is perhaps unbalanced to such a degree that he is not able to do anything for himself? It seems to me that the case for the extension of the dependent relative allowance to the same position as that of the child is one that is quite overwhelming and while, as Deputy Byrne said earlier, there may on occasions be difficulty in remedying immediately what is an undoubted injustice, at the same time, there is no case and there could not be any case for the—to many people— objectionable and offensive statement included in paragraph 34 of the second White Paper.

Dr. Ryan

I do not know why the Deputy should object to the opinion of the Government in that particular instance, that there is a greater moral responsibility on parents to look after the child than there is to look after the dependent relative. I do not think the Deputy could dispute that if he were asked to express an opinion on the duty of parents towards the child and towards the dependent relative, he could say otherwise than is in that White Paper. There is another point that dependent relatives often have some income and as the Deputy is probably aware—I do not want to involve him in this, but I am aware anyway—the Revenue Commissioners have a great deal of trouble in dealing with this question of dependent relatives. There are undoubtedly many genuine cases where a person who is paying income tax should support the dependent relative for whom he claims an allowance, but there are many cases where the obligation is doubtful and it is an extremely costly provision in the income tax code, this provision for allowances for dependent relatives. The amendment would cost the Exchequer a great deal of money and I do not think it could be justified generally.

Mr. Sweetman

Has the Minister any idea of the amount?

Dr. Ryan

About £700,000. It is a great pity indeed that we could not have some means of distinguishing what we might regard as really deserving cases but Deputies will agree that it would be very difficult for the Revenue Commissioners to make that distinction. I would certainly favour a greater allowance for deserving cases if it could be done in that way.

Mr. Sweetman

I will produce an amendment on the Report Stage and it will be——

Dr. Ryan

It is easy to put down the amendment but to administer it is another matter.

Mr. Sweetman

Yes, and administer it. First of all, there is the widowed mother. You cannot produce a fake claim in that case. A widowed mother is one of the hardship cases beyond question and in covering that type of case, there cannot be any difficulty in administration whatever. Secondly, I will give the Minister another case, the case I have just read out, a child of a taxpayer—using "child" in the legal sense and not in the income tax sense, that is, a son or daughter over the age of 16 years—who is certified by a doctor as being completely unable, by reason of a mental or physical disability, to support himself or herself. Those two cases could not be argued against and could easily be administered. I will give the Minister the opportunity of considering that on Report Stage.

Amendment, by leave, withdrawn.

SECTION 13.

Question proposed: "That Section 13 stand part of the Bill."

Mr. Sweetman

This is the section which I missed earlier.

Dr. Ryan

It gives the taxpayer six years——

Mr. Sweetman

In which there is a mistake.

Dr. Ryan

——to correct an error.

Mr. Sweetman

That is all right.

Question put and agreed to.

SECTION 14.

Question proposed: "That Section 14 stand part of the Bill."

Mr. Sweetman

As I understand it, this is one of the anti-evasion sections and provides that not merely the taxpayer but anyone else who knowingly helps him to evade will be penalised.

Dr. Ryan

That is right.

Mr. Sweetman

We support such a provision wholeheartedly.

Question put and agreed to.

SECTION 15.

Question proposed: "That Section 15 stand part of the Bill."

Mr. Sweetman

I am not very happy about this section, which provides for an extension of the time for certain summary proceedings but it is extending it a very long way from six months to three years. Let me say at once that I accept the point of view that it would be virtually impossible for the Revenue Commissioners ever to be able to catch up on the default or the fraud, and I think this is only dealing with fraud, within six months. Therefore, I accept that it must be extended somewhat but I am worried that the extension to three years will mean that a person will be prosecuted for fraud so long after the event is alleged to have taken place that it will be virtually impossible for him adequately to defend himself.

This comes ultimately from the part of the Seventh Report running from paragraph 301 up to paragraph 305. I am not quite clear that this section was envisaged by the Commissioners when framing this report. The justification for it is, of course, paragraph 305 of the Seventh Report but I am not clear that the Seventh Report does say that and I should like the Minister to give the exact reference in the report which forms the basis for this section as introduced.

Dr. Ryan

It is not in the report.

Mr. Sweetman

Is it not extending it too far to say that a person will be asked to stand trial for fraud three years after the alleged offence? Three years is a long time and it is very difficult to remember exactly what happened. I agree six months is too short but would the Minister compromise at two years?

Dr. Ryan

We will consider it.

Question put and agreed to.

SECTION 16.

Mr. Sweetman

I move amendment No. 8:

To add to the section a new subsection as follows:

"(3) Nothing in this section shall oblige a solicitor to disclose, contrary to professional privilege, any information concerning the affairs of any client of his or to produce any book or account from which any information concerning any client can be obtained"

Again, I want to ensure in relation to anti-evasion sections that the evader is properly caught within the net. At the same time, I want to be quite clear that in cases where there is professional privilege, nothing is done that could defeat that privilege. It seems to me there is a possibility of Section 16 as framed at present being utilised by the Revenue Commissioners for the purpose of requiring solicitors to do something which would be a breach of the privilege they owe to their clients.

I want to stress to the Minister that in relation to privilege it is not the privilege of the solicitor but of the client that is at stake. The solicitor is not in any way concerned except as the custodian of the rights of his client. On the basis of the section as it stands, a situation could arise where the Revenue Commissioners could utilise the provision to require a solicitor to deliver his client's accounts and could take copies of the client's accounts, not for the purpose of verifying the solicitor's returns, which would be a proper thing to do, but to take copies from the client's account for the purpose of thereafter raising an assessment on the client concerned.

That obviously would be a gross breach of privilege and would cut across the whole theory and practice, which is essential in any democracy, that when a person consults his lawyer about a situation in which he finds himself, it will be completely and absolutely confidential, guarded as closely as the closest State secret. It seems to me this section would permit the Revenue Commissioners to seek for breach of that privilege and, through inspection of the accounts or papers of a solicitor, obtain information not for the purpose of checking the solicitor's own profit return for assessment but for the purpose of checking those of his client. Nobody could possibly stand over such a practice.

Dr. Ryan

I do not see how any Deputy could have fears in respect of solicitors in a case like this. This lays down that the Revenue Commissioners may demand information with regard to the person's accounts and so on. It is obvious that if a solicitor were asked to give information—it is most unlikely that he will be asked—he would very promptly refuse to give it.

He could say he is privileged. On the other hand, there would, I think, be a danger in putting in the amendment because if a person feared he was going to be asked about a certain item in his accounts, he might send that document to his solicitor and ask him to have it looked into. There is an obvious danger there.

Mr. Sweetman

Can we have an administrative undertaking from the Minister that the section will not be used in any circumstances for disclosure of anything that is privileged? I would accept such an undertaking.

Dr. Ryan

I would ask the Deputy to observe that this can be administered only by the Revenue Commissioners and not by an inspector.

Mr. Sweetman

That is why I am prepared to accept an undertaking.

Dr. Ryan

The Revenue Commissioners would have to give an order to an inspector to prosecute a solicitor, if he claimed privilege. It is not likely they will do that. I do not know that I could give the Deputy the undertaking.

Mr. Sweetman

With that on the records of the House, there will be an almighty row if anybody ever attempts it.

Amendment, by leave, withdrawn.

Section 16 agreed to.

SECTION 17.

Question proposed: "That Section 17 stand part of the Bill."

Mr. Sweetman

This is the section which obliges banks to make returns to the Revenue Commissioners of interest figures where they exceed £15 a year. The disclosure of interest is, of course, only one part of the story. It seems to me that the manner in which the Minister has gone about this section is all wrong. I agree, as I have said already on many occasions, that it is right and proper every appropriate step would be taken to prevent evasion, but I am very apprehensive that the effect of this section may well be a distinct shrinking of the base of our whole credit.

I want to refer the Minister to column 1321 of the Dáil Debates for 19th June, 1963, Volume 203, No. 9, which reports an interchange between the Minister and Deputy Donegan:

Mr. Donegan: The Minister did not mention to-day the question of the bank deposits. I should like to inquire from him what has been the flow out of deposits since his statement that information about bank deposits would be available to the Revenue Commissioners.

Dr. Ryan: They are £24 million higher than they were this time last year.

I have searched every statistical return that I possibly could and I have failed to find anything justifying that statement of the Minister. I should be glad if the Minister would refer me to the official statistics which justify him in making that interruption. Let me, for the record, give the figures as I understand them and as I have been able to extract them from the Quarterly Report of the Central Bank. The last figures available to us at the time that statement was made to Deputies—16th April, 1963—showed that the total deposits at that time were £246,448,000. The comparison with the previous year showed an increase not of £24 million but of £15 million because the figure the year previously had been £231,741,000. That was the information as we knew it at the time. The information, of course, as the Minister knew it was different because the Minister had the information available to him, and gave it to me on the day following, for 21st May, 1963. That showed that in the month from 16th April to 21st May, deposits in the State dropped by over £5,300,000. They dropped from £246,448,000 to £241,131,000. These figures are extracted from the Quarterly Reports of the Central Bank and from questions which I put to the Minister on 11th June, 1963, and 20th June, 1963.

In the somewhat acid controversy the Minister and I had on the Money Resolution today, he suggested I never put down questions to him. There is a question. It shows he was not telling the truth to the House when he said, in effect: "On any statistics I can find, they were £24 million higher than they were this time last year" because the exact figure is £10 million and there is a difference between £10 million and £24 million.

Dr. Ryan

There is, but I want to check up on that.

Mr. Sweetman

It is the Minister's job to check up on these. I am telling him that this is one of the cases in which I knew he was not telling the truth. That is why I put down the question.

Dr. Ryan

I certainly believed I told the truth. The figures were handed to me at the time.

Mr. Sweetman

I have not said the Minister is a liar: that is different. I am saying it is not a truthful answer. The correct answer from the Central Bank's quarterly statements is that on 17th April, 1962, the total deposits were £233,650,000 and on 16th May, 1962, they were £231,741,000. On 16th April, 1963, the figures were £246,448,000 and on 21st May, 1963, £241,131,000. I suggest that the Minister did not understand the significance of the figure he got because these are the figures taken from the Central Bank's Report and from the replies he gave me himself on Questions Nos. 104 and 2 respectively on 11th June and 20th June of this year.

The Minister will have plenty of opportunity between this and next week to verify my figures. Those are the deposit figures. I want to mention them for the purpose of correcting the Minister, for the purpose of showing that when the Minister interrupted Deputy Donegan he was entirely wrong and that, in fact, the view expressed by the members of this Party that this section is a ham-handed way of going about the prevention of evasion is correct. While perhaps preventing evasion, this section will also have a substantial effect on shrinking credit. If credit does, in fact, shrink because of the reduction of £5,300,000 in deposits in that month this year when there was no public issue to draw off deposits, that shrinkage can be laid at the door of the Minister for Finance.

Mr. Donegan

I want to reiterate what I said in my contribution on the Budget debate when I made quite clear, as Deputy Sweetman has just done, that it is the decided view of this Party that this is a ham-handed section and that it will endanger many of our financial operations through the commercial banks, in particular the issue of overdraft accommodation to ordinary commercial business. In my contribution, I was interrupted by the Minister for Justice as well as by the Minister for Finance.

Mr. Sweetman

We do not mind the Minister for Justice——

Mr. Donegan

One statement by the Minister for Justice was that the banks could lend 500 per cent of their deposits which is quite untrue. He probably might have been talking about turnover. The real truth is that the financial relations of this State would be affected if such were true. The banks cannot do such a thing. They must lend considerably less than their deposits. Their advances must be considerably less and as far as I know at the moment stand at less than 50 per cent of their deposits but their advances depend entirely on their deposits.

The Minister knows that while new businesses can avail, by giving debentures, of various State sources of capital, such as advances from the Industrial Credit Company, old-established businesses, to which we owe not only the future but also the past, are in the position of having given debentures to commercial banks and they cannot do so. Whenever you go to any financial institution, a second charge is never as good as a first charge.

As I see it, if you affect the deposits made by the citizens of this country in the commercial banks then you affect the commercial banks' ability to lend, particularly to old-established businesses and the old-established businesses for whom they hold a first debenture on all their assets. I feel this is something that could affect old-established businesses in the distributive trade. It will affect also many old-established businesses in the manufacturing trade.

Because of the size of our stock market, it is difficult for a company here to become a public company. Even a good small company in the manufacturing trade finds it difficult to become a public company. The only source of capital available to the old private limited liability company is overdraft accommodation by way of debenture from the commercial banks. If we affect the deposits, we affect the ability of the commercial banks to lend, and we are doing a bad day's work.

The Minister quoted at me figures which have been refuted by Deputy Sweetman. We must also look to the future. Anybody with a nice little nest-egg will now hesitate before putting it in a deposit account in the commercial banks. There are other places to put it. It can be put across the water, or it can be sent up to Belfast. The result will be that the old-established private limited liability companies will feel the draught. They will not get the overdraft accommodation they require. That will not be the wish of the bank directors, but they will have to do their duty by their shareholders and depositors in preserving a fair balance between the amount of overdraft accommodation and advances given and the amount of deposits they hold.

There is no answer to that. Even if the Minister were correct in the figures he quoted at me, if you stop a person with a small nest-egg from putting it into the commercial banks, admittedly at a low rate of interest, you are going to affect old established firms who have given good employment for many years. These are the people to whom we can look for expansion and further employment in the future, perhaps more so than to some of the new firms we hope to establish.

I would ask the Minister to look at this again. It strikes at the very root of modern banking the fact that a person can have absolute security in his dealings with his bank manager. How many junior bank clerks have been dismissed because they did not keep their vow of secrecy? I hold quite a number. Now that whole institution is to be exploded by this depth-charge. While there may be a few individuals who have large deposits of hot money which will be uncovered retrospectively by this section, I believe it will have very little effect as far as revenue is concerned.

Mr. Dillon

This is the classic instance of pulling down the house in order to dislodge one mouse from the floorboards. There is nothing more exasperating to the average taxpayer than the knowledge that certain individuals successfully avoid payment of tax. I suppose if there is one thing on which all sides of the House are agreed it is the desirability of requiring every citizen to pay his fair share of the taxes due under the law. In so far as people successfully avoid doing that and deposit the proceeds of their fraudulent avoidance in banks, nobody has any sympathy with them. But sane systems of Government have regard to the size of an evil in determining the appropriate legislative remedy for it.

The fact is that, if the Revenue do not collect all income as it accrues and the beneficiary of that income deposits the money in an Irish bank, if the Revenue authorities do not get it under the income tax code, in God's good time, succession duty and death duties will give them their share. There exists, I believe, in this country a very high degree of confidence between the average citizen and his banker. We are almost unique in the world in having a particular type of deposit which is little known outside this country. That is the time deposit of the small and medium depositor. I do not think there is any country in the world with as high a percentage of savings amongst its population in the form of bank deposits as Ireland. I do not want to follow the economists through the labyrinthine mystifications erected by bankers about the various types of deposits. We all know that every loan by a bank creates a deposit, but we are not talking about deposits in that sense. We are talking about deposits in the peculiarly Irish sense of persons depositing sums of money on deposit to earn interest in the joint stock banks of this country. There is not a branch of one of the joint stock banks in any provincial town in Ireland which has not been made the custodian of very substantial deposits of that kind.

It is perfectly true, as Deputy Donegan says, that such deposits form a not inconsiderable part of the credit base of the bank system here. When you bear in mind the extent to which the Government at present are availing of bank credit for their own purposes, it is right for this House to have close regard to any measure which will narrow the credit base of the joint stock banks as a whole. I do not believe that Section 17 of this Bill will materially affect the existing volume of time deposits in the Irish banks. The retrospective character of the section makes it of no avail to transfer a deposit which was lying in an Irish bank six or 12 months ago. The relevant information as to interest paid on that deposit can be demanded, even though the deposit itself has been removed since this Bill was first published or since the Minister made his Budget speech. The pernicious effect of Section 17, I believe, will be not so much to sweep deposits out of the Irish banks, although it will have some such result, as to bring about a situation in which, in the years ahead, a very considerable volume of deposits that would have found their way into Irish banks will go to London or abroad.

When we were in office, a situation arose in Great Britain in which rates began to skyrocket. We were acutely concerned at the time to keep interest rates here as low as possible but we felt our circumstances were entirely different from those of Britain and that entirely different fiscal procedures were appropriate to us. We pointed out to the joint stock banks here that we did not believe it was necessary or desirable that the Irish bank rate should follow precisely the British rate and that where the British bank rate was undergoing violent fluctuations, we could follow a more measured course and even if the gap between the bank rate here and the bank rate in London widened two or more points, we could face that with relative equanimity until we saw what the general world rate of money was likely to be in the protracted future.

The case was made to us most eloquently by the joint stock banks that that would result in a rapid effluxion of deposits from this country. We pointed out that, owing to the character of deposits here, that was extremely unlikely and that although some gap then existed that tendency had not shown any serious manifestation. The joint stock banks replied in two sentences. In one they said that for relatively small deposits, the mobility was low and they admitted that a temporary differential between the bank rate here and in Britain might not affect them but in regard to large deposits of £20,000 upwards, even a slight temporary discrepancy between the two rates would induce a change of domicile. They added that apart from the deposits existing in the banks which might become mobile only so far as they were over £20,000 the great danger was that future deposits would not come into the banks here but would go where interest rates were higher. It might disrupt a most valuable and significant part of the whole credit basis on which the commercial banks here operate if you created a tendency towards transferring deposits which had never existed before here.

We studied these representations carefully and eventually concluded that probably the joint stock banks had a case in regard to the major deposits and, finally, a scheme was worked out whereby the joint stock banks could follow closely the British bank rate in respect of large deposits but would move more cautiously in respect of what I choose to describe as tied deposits of relatively small value. At first glance, this appears to be an argument against that which I am making but my case is that there is a great tendency which is peculiar to this country for relatively small deposits to be immobile. It takes a great inducement to break a pattern that has continued for generations that you should make your deposit at the local bank. That pattern has been founded on the conviction that business transacted between you and the bank manager was absolutely sacrosanct and that nobody would know what you had, not even your nearest and dearest and unless you authorised the bank manager specifically, no inquiring pensions officer or government official would get any information from the bank without your express authority.

We are all familiar with cases where old age pension applicants have been asked to authorise the bank manager to state their deposit and refuse to do so. The pensions officer, therefore, deems them to have so much and he puts it up to them to demonstrate that, in fact, their deposits are less. We are now concerned with a small group of individuals who, we believe, over the past ten or 15 years have declared their income to be less than it is and provided the Revenue Commissioners with material on which to open an inquisition going back, I think, for 20 years. We are authorising the Revenue Commissioners to go to an individual's banker and ask: "Have you paid this man interest on any deposit?" If the bank has they are to declare that interest and the Revenue Commissioners will then have an opportunity of going to the individual taxpayer and saying: "You have £10,000, £15,000 or £20,000 in the bank. Where did you get it? We have looked at your tax returns over the past 20 years and we cannot find that you have shown income which would yield any surplus making it conceivably possible for you to accumulate such a deposit. If this means you have concealed income you can pay what is due to the Revenue Commissioners and no penalty will be exacted if you do it within 12 months."

I do not know how many such cases there are—it cannot be many—but in order to catch them by this device we are creating a situation by which no person hereafter would feel that his transactions with his bank have the same sacrosanct character and secrecy they enjoyed heretofore. But if a depositor in future makes a deposit in Manchester, Glasgow, Birmingham or London he is as safe as a house. The man who has accumulated a substantial deposit through consistent fraud on the Revenue Commissioners administering the income tax code is not the kind who will fear to make his deposit wherever he believes it to be safe from investigation and these deposits will disappear. I anticipate that a large number of people here who have no apprehension on the score of income tax concealment will feel that the power of inquisition opens up an entirely new vista in relations between customer and banker in this country. I believe the effect of the section over the years will be to start a system of transferring Irish deposits to these banks and I think that is a bad system.

It is a bad scheme from the point of view of this country and the very matter which it is designed to remedy is not at all of such a magnitude as to justify so radical a departure from well-established and sound practice. In so far as they may exist at all, the Revenue Commissioners must some day get their share of these deposits which the Minister believes to exist because, sooner or later, they must be made answerable for succession duty or death duty. It may be that there are a few unscrupulous practitioners who have succeeded in avoiding the payment of their proper taxes and who may hope to conceal permanently from the Revenue Commissioners the true assessment of their incomes but there are so many devices that can be employed by a skilled accountant to avoid revelation of this practice that I believe that the number who will be caught by the compulsory revelation by the banks will represent a very slight proportion of the tax evaders who exist.

This section will result in the promotion of the practice of sending Irish deposits abroad and will cause grave abridgment of the traditional confidence that exists between the banker and his client in every rural town in Ireland. I cannot but wonder where the Minister got this idea or why he accepted it. It must have occurred to the minds of half a dozen Ministers for Finance in the past as a rough and ready device for exposing to scrutiny persons who might have a difficulty in explaining illegitimate deposits in banks. I believe that every Minister who considered it rejected it on the grounds of the evil it would engender as against the possible advantages to the Exchequer.

One gathers from the Budget Statement submitted to us by the Minister that he is scraping every barrel and absorbing every Exchequer balance and descending to the astonishing proposal of a retrospective corporation profits tax in order to offset the deficit which apparently he did not foresee until he came up against the framing of his Budget this year. In the panic of this extremity, this kind of device to gather in what cannot be a very substantial item in this year has been resorted to. This is a nonrecurrent item. You can do this once but never again. If you have one thousand deposits of substance of this nature in the bank, you have 1,000 individuals who can be got at and made to pay their lawful debts to the Revenue Commissioners, but once that has been done, it will never arise again because everybody has been given notice that if such deposits are to be made, they must be made abroad.

As Deputy Donegan has said, this is a ham-handed way of trying to deal with an evil that has existed and that will continue to exist, that is, the evil of the individual who does not pay his fair share of taxation. There are some of us whose incomes are of such a character that we cannot avoid payment of taxation. Those of us in that position naturally feel more deeply than others about the unprincipled evasion of tax by some of our neighbours. However, I have had long experience of watching my neighbours and I have seen quite a number of them firm in the belief that they had successfully blindfolded the Revenue Commissioners. But down through the years, I have seen a substantial number of these people called to account for their actions and having to make substantial retrospective payments of taxation.

I do not know if the Revenue Commissioners have lost confidence in their own capacity for vigilance and efficiency. If they have, they are the only people in Ireland who are guilty of this underestimation of their skill. I have always admired the detached and rigid procedures of the Revenue Commissioners. They have always appeared to me to be a body concerned with the carrying out of their statutory duties without fear or favour. In my experience, they have treated anyone who approached them honestly in matters of income tax with scrupulous fairness and leaned over backwards to ensure that such people would enjoy every benefit to which they were entitled under the law. I have also observed that where people sought to put their fingers in the Revenue Commissioners' eyes, they have rarely come unscathed from the encounter.

I do not believe that a section which destroys the relationship which has always existed between bankers and the citizens is necessary to reinforce the powers of the Revenue Commissioners to ensure that there will be a full collection of the taxes due. I do not believe the added power in Section 17 will enable the Revenue Commissioners to ensure that there is an absolute avoidance of fraud on the part of individual taxpayers. What we are possibly doing, for the purpose of having one opportunity of collecting arrears of income tax once from one group of persons who have successfully accumulated illicit deposits through underpayment of tax in the past, is to raise a question mark in the mind of every individual in this country as to whether his bankbook is as confidential a document as he always believed it to be.

I am fully conscious that in these matters we are expected to regard every institution in Ireland as old-fashioned. I think that conception is fundamentally false. The social pattern we have built in this country is of value. It consists of a vast variety of threads woven into a coherent tapestry of social life. One of those threads is the confidence slowly created between country people and their bankers. I remember when I was young an old woman dying in the country and the parish priest and I were charged to go out and estimate her assets. We found £2,500 secreted in jugs in holes in the wall behind a stone. There was quite a substantial sum under the mattress. That was the old way. It had in it all the evils and doubts that arose at a time of inheritance. It had in it all the dangers inherent in the retention of large sums of currency in a remote country house where elderly people where liable to assault and even murder by persons tempted to try to rob them.

Slowly I have seen in my lifetime that practice of retaining currency in your own keeping pass away as people came to understand the facility of the post office savings bank or of the branch of the local bank. Hereafter, not only the fraudulent depositor who has deposited money on which he has not paid his fair share of taxes but a great many other apprehensive people in rural Ireland who now have friends and relatives in England and to whom England is a very much more proximate place than it used to be will have a far higher measure of confidence in the secrecy of a British bank deposit. That is a bad thing.

How many of us here in the House remember in the relatively recent past the number of people in rural Ireland who had much more confidence in a deposit in the British post office than they had in our own? I can well remember in my own personal experience numbers of elderly people coming in to me with a British post office book and asking would they be wise to leave their money where it was because: "you never know what would happen to it if you brought it home to Ireland". My answer was to assure them that the effect of bringing it home was that it could be put to productive use here while giving them a good return. What answer should I make now to an old person who comes to me hereafter and asks: "Is my deposit safer in a British post office than in an Irish post office?" What shall I say to the old person who asks me: "Is my money safer in an Irish bank than in a British bank?" All I can say is that Section 17 does not apply to deposits in a British bank or a British post office but it applies to every deposit in an Irish bank.

The Minister is making a very silly mistake. We all get a kind of vicious satisfaction at a few chancers being caught and being obliged to pay arrears of income tax. Fifty per cent of them would get caught in God's good time through the existing vigilance of the Revenue Commissioners. The other 50 per cent would have the satisfaction of looking down from Heaven as their duties were paid by their heirs and successors or, perhaps I should say, maybe 2 per cent would get away with it for all time. It is to catch that 2 per cent we are going to require every bank manager in Ireland to open his books for Government inspection on a basis never before committed in this country. Surely this is a classical instance of tearing down the house in order to dislodge one mangy mouse in the wainscoting?

Mr. Corish

I must confess straight away I am not very conversant with the niceties of the banking system and, apart from other things, with which I shall deal later on, I am attracted to this section because the Minister gives us an assurance that he can get this year an extra £600,000. I do not regard that as a mouse in the rafters and I do not regard this section as one where one knocks down the house to get at the mouse.

All of us appreciate the confidential nature of business between the banks and their various clients. We appreciate the relationship there is between these two sections and know it will continue. As far as this section is concerned, I do not believe there will be any discontinuance of the confidential nature of the relations between the bankers and their staffs. They deal with members of the public but equally so do the Revenue Commissioners and the Revenue Commissioners, as far as I have always known them, have done their business in an extremely confidential manner. The disclosure of the information sought in this is not information which will be published, which will be bandied around or made known to anybody outside the banks and the Revenue Commissioners. I must say, although I do not suppose it needs to be said, I would trust the Revenue Commissioners to keep this information in as confidential a manner as the bank staffs would.

I still do not know which of the two points that have been made is regarded as the more important one. Is it the confidential nature of the relationship that exists between depositors and the bank or is it the reluctance of some of these people to pay where it is fully established that they are subject to the payment of income tax on the interest earned by deposits in the bank? Either they are liable or they are not liable to pay income tax on the money that their deposits have earned.

I certainly believe that the depositor's business should be kept as confidential as it can be or as it may be but we must also appreciate that other sections of the community are subject to the same sort of scrutiny in regard to their deposits and their income. If a person applies for a non-contributory old age pension and if it is suspected that he or she has money in the bank or in the post office, the investigating officer can seek power to discover what money, if any, lies in a bank or in a post office in the name of the applicant for the old age pension. It is true to say that if an applicant refuses to give that permission, then his application is not considered by the Department of Social Welfare.

Similarly in respect of an application for a non-contributory widow's and orphan's pension, and similarly in respect of the person who applies for unemployment assistance or, as it is commonly called, the dole. Unless the social welfare officer is satisfied the applicant has no money in the bank or post office, or secreted in any other place, and unless he is given the opportunity of discovering whether or not he has money in one or other of these places, the application for unemployment assistance, or the dole, is stopped.

I am all for the preservation of secrecy as far as one can go, as far as the State, acting on behalf of the community, can go. Those who pay income tax under PAYE are subjected to the most minute scrutiny. I do not object to that. I do not raise any objection here tonight but, under the PAYE system, an employer is bound under pain of penalty to return every pound, shilling and penny the employee earns. It goes even further than that. Not alone is he required to return the actual wages for the 40-hour or 47-hour week but he is also required to furnish the Revenue Commissioners with all the details of all the amounts earned by that employee by way of overtime, or bonus, or by way of perquisites enjoyed by the worker from time to time. There are many investigations in this country to which one could appear to take objection because they seem to violate the private affairs of individuals. All of us know the means test. All of us know the investigation that is engaged in in an application for a medical card or home assistance, or in respect of any of these things that come from the State, and especially from the Department of Social Welfare.

A Deputy today talked about the moral obligation to pay income tax. I do not think there should be any question as to the morals of paying income tax. I do not care who says anything to the contrary; as far as my teaching goes, tax on income, and the rate of tax, is determined by the Government. It is enacted into law and, once it is the law of this land, there is a moral obligation, quite apart from a legal obligation, on people to pay at the rate determined by this House on the particular article or commodity on which the tax is imposed.

I do not know what the effect of this section will be with regard to the withdrawal of deposits. Mention of a withdrawal of deposits sounds to me like something almost in the nature of blackmail. Are we to put up with a situation in which, if people are asked to pay a tax on income, they will take their money out of the country and plant it somewhere else? I think there should be another law to prevent that. If people who have deposits in the banks get interest amounting to such a figure that they are liable for income tax, all steps should be taken to collect that tax.

There were references today generally to income tax evasion. I think we all must be satisfied that there is evasion. I agree it is not widespread. I agree there may be the fiddles that have been attributed to business, to industry and to the professions; I am convinced there is a certain amount of evasion and, as far as my Party are concerned, we will support all reasonable measures to ensure that evasion will be reduced to a minimum. We are not unconscious of the fact that there are many cash transactions engaged in of which there is no account whatsoever, cash transactions that will never be traced, cash transactions deposited in the banks.

I would support up to the hilt the proposition that, if one has a certain income and, after due allowances are made, a part of that income is subject to tax, then that tax must be paid. There has been a vast increase in the numbers paying income tax under the PAYE system. Prior to that there were, I suppose, people who, either through ignorance or for some other reason, were not paying their due share of tax. The numbers under PAYE have vastly increased and the amount of tax collected in recent years has likewise vastly increased. I do not know whether the Minister has considered any other method of collecting a tax on interest earned by deposits. Could this tax not be taken off at source?

Mr. Sweetman

That was one way we suggested.

Mr. Corish

If it is possible to deduct the tax at source on the salaries and wages of workers, surely it should be possible for the banks to deduct the tax due on the interest earned and remit it to the Revenue Commissioners.

Mr. S. Flanagan

The Deputy will not be very popular with the banks. It will mean more work.

Mr. Corish

If one of the objections is a possible violation of the element of secrecy, then surely this is a way in which tax could be collected without any breach being committed? I should like the Minister to say how he reckons he will get an extra £600,000 this year under the methods he proposes to employ to lessen evasion. Whether that is a notional figure I do not know. It would be difficult for him, I suppose, to give any exact figure but it would be interesting to know whether this figure of £600,000 is the figure for this year. I assume he expects that this will diminish in following years when the machinery for collection has tightened up.

Dr. Browne

The proposal generally in this Bill is to increase the amount of indirect taxation. The opposition to it in that regard is, I think, perfectly legitimate. I see no reason at all why the collection of tax by the Revenue Commissioners should be in any way restricted and, if this proposal will facilitate them in collecting unpaid taxes, then the provision is a legitimate one. I was surprised, indeed slightly shocked, to find that Deputy Dillon seems to regard tax evasion as a relatively minor peccadillo indulged in by a few people. I think the number who indulge in it is very considerable indeed. The Minister put the figure at £600,000. That is a very considerable figure in a small community such as ours. The important thing is that if these people do not pay that £600,000, someone else will pay it, and I know well that the someone else who will pay it is not the wealthier section.

Many devices are used to evade taxation of one kind or another but no one, so far as I am aware, has devised a system of evasion whereby the white collar worker and the manual worker, can get out of paying, even under the provisions of PAYE, and certainly the provisions of indirect taxation already existing on indispensable consumer goods of one kind or another, and in the form in which it will be payable on all goods following the imposition of the new tax. There is no way by which those people can evade paying that taxation. It is bad enough that they should have to pay whatever it is proposed to ask them to pay in the form of indirect taxation in order to make up whatever the Minister requires to keep the services going, and to extend them to the limited extent proposed, without asking them, on top of that, to pay a £600,000 bonus in order not to interfere with the delicate structure suggested by Deputy Dillon, that is, the relationship between the bank and client. The great attraction of direct taxation is that money is taxed only in accordance with the individual's ability to pay that taxation, according to a regulated scale. He is paying tax which he must and should pay, and he is not asked to pay a tax he cannot afford. For that reason, I cannot, for the life of me see, why anyone should be facilitated in evading what we all recognise is a legitimate taxation payment.

I am surprised that Deputy Dillon should be so concerned about this idea of an inquisition into means. This is a means test. I have opposed a means test on other occasions, particularly in regard to the health services, not because it is an inquiry into how much money one has, but because it results in two different standards in the services. If we believe in direct taxation, we must accept an inquiry into means, and that must be made as efficient as possible. It is a system of taxation which it is difficult to make efficient.

I would not be surprised if the Minister's figure is not a conservative one. It is a big figure anyway. If we are told there is a possibility of tax evasion then I think no matter of principle is involved in asking that inquiries by the Revenue Commissioners should be permitted when they feel they should make such inquiries. As Deputy Dillon pointed out in a tribute to them, they are absolutely scrupulous, and they attempt to deal as fairly as they can with people with taxation payment problems. They will not abuse their power. It would be most unlike them to do so.

In the health services, detailed inquiries are made in regard to the operation of the differential rent system and the payment of non-contributory old age pensions. In many cases, there is a most prying type of inquisition in regard to the income of the whole family, in order to assess the means of an individual, and in the determination of eligibility for these services. The employer is asked to check on the income returned by the employee, and he is asked to return the income of the individual members of the family, whether they have got a bonus, whether they have done overtime or got a rise recently, whether the pensioner has a pension, say, from a British source, and if he has got an increase, he must declare it and his eligibility will be reconsidered. That is the position. I think it regrettable, but there it is. For the vast majority of people, there seems to be little reservation at all in the powers available to the various public assistance and health authorities to restrict their inquiries into assessing the means of individual workers.

I do not see that there is any real reason why we should feel particularly concerned about the group who will be affected by the introduction of this section. I do not agree with Deputy Dillon that the money will be found anyway, that the £600,000 will turn up. Obviously, it would be very slovenly tax collection to wait for someone to make a slip in his will, or to think that in some other haphazard accidental way, the money will become available to the State. We all know that many accountants spend a lot of their time evading the legitimate distribution of income left on death and the many devices which are used to see that money never gets to the State or to the Revenue Commissioners.

Anyone who has nothing to conceal has absolutely nothing to worry about. The Revenue Commissioners will be able to act fairly and with great discrimination and care. They will investigate only doubtful cases, and they will collect money from the person who is concealing the fact that he has that money.

As to the position of the Revenue Commissioners vis-à-vis banks, again, the tribute Deputy Dillon paid to the Revenue Commissioners is the answer to the suggestion that there might be any breach of confidence. We all know that dealings between bank and client, and Revenue Commissioners and client, are equally sacrosanct. They are equally as inviolable as the secret of the Confessional. There is no question at all that you in any way mitigate the strength of that relationship between the banker and the client because you give this body, which is above all interference, the Revenue Commissioners, this power which they clearly want if they are to get this money which is outstanding, which is owed to the State and which if they do not get it, some old age pensioner, some widower, somebody somewhere, will have to pay in the form of an additional farthing or halfpenny, which he cannot afford on an essential commodity. For that reason, I do not see why we should vote against this.

Mr. Leneghan

It is well known that I rarely agree with Deputy Dr. Browne but certainly on this occasion I heartily agree with everything he said. Evidently, having listened to Deputy Dillon's speech, this Party are prepared to change their name. I hope they will call themselves by the right name, this time, the gombeenmen's Party. It is a shocking state of affairs to hear somebody here defending the wealthy people against the poor. That is what Deputy Dillon and his ilk have been doing. In 1939, there were a great many people who did not even have a decent bicycle but today these same people possess Jaguar or Mercedes cars or some other type of expensive car. I am sure they did not get them from the St. Vincent de Paul Society. I should like to know where they did get the money to buy them as I am sure they must have paid for them in some way.

I am glad that at last the Minister is prepared to take steps to find out where they did get the money and to have them make restitution for the sins of their past. It is time that was done. These people have been getting away with murder and when Deputies say that money will be withdrawn from the banks, they are not telling the truth. Probably 90 per cent of the people always believed that the Government knew what they had in the banks, but with all their juggling, they were able to avoid income tax. Being in the accountancy line, I know what I am talking about. I know people who according to their records put in new counters every year and get away with it on the score of replacements or renewals, but as bad as the native timber is, it could not rot that fast. It is sheer blackguardism and if these people paid their just taxes, other taxes would not need to be imposed in the way they have to be imposed.

I do not think this is going to involve anything like £600,000. If there is a proper investigation, I would not be surprised if the figure was not at least £6 million. Any support I can give for this will be willingly given because I would like to see the fellow who charged £5 for a 7/6 pair of rubber boots getting caught; I would like to see the gentleman who got 10/-for a twopenny jar of vaseline, as many of them did, paying his debt to the State, and the people who charged £1 for two ounces of tobacco and nearly drove poor men to desperation around the time of the war years, being caught. Every sane Deputy who has the good of the ordinary people at heart should support this measure.

These are the same people who only a fortnight ago were able to come to me with all kinds of bribes, which I refused. They came in 84 cars to intimidate me. Where did they get the cars if they paid the State? There is a massive evasion of income tax and everybody knows that. The only person who cannot evade it is the unfortunate who is paid a salary or wage. He has no way out and he cannot invent a wife or a crowd of children as he could if he were over with John Bull, because he is too well known. The big business man, or the small or medium business man, can fiddle his accounts, paint his counter and call it a new counter, although it cost him only a pot of cheap paint or perhaps it was only varnished, and he gets away with it. Instead of buying an ordinary car, he buys some kind of gadget and puts down all kinds of expenses against it, allegedly for running his goods around the country although he knows that everybody comes into his shop. I am glad the Minister has made an effort to catch up with these gombeenmen because they have been robbing the country for years.

You have this famous question of bank drafts. He does not pay by cheque but he gets a bank draft and away it goes; there is not a word about it and it does not appear on his returns. When the Minister is dealing with this, I hope that instead of going back to 1961 or 1962, he will go back to 2nd September, 1939. That is the time to start and if he does that, he will certainly be able to reduce taxation next year. Why should there be a privileged elite? When a person applies for the dole or any other State aid, his means are investigated and he has to sign all kinds of documents so that his means may be investigated but if he is a big fellow in a Jaguar car, probably wearing narrow trousers or some other daft thing, he is privileged and must not be investigated. If that is Irish politics, it is time that any man with any commonsense or decency got out fast. The country has been infested with tax dodgers since 1939 and I want to congratulate the Minister on the steps he is taking to catch up with these people. I hope he will come here next year with steps which will be twice as effective to catch all those who have been evading tax since 1939.

Dr. Ryan

I think it was Deputy Dillon who said that every Minister for Finance had considered this and rejected it and that I was the first Minister to grasp it as a last straw to raise revenue. As a matter of fact, the Income Tax Commission recommended it and that is what brought it to my notice for the first time and I recommended to the Government that it should be brought into operation. It is not true to say that we will get nothing from this after the first year. It will be bigger in the first year but there will be something in succeeding years. I agree that there are not many evaders, that there are relatively few compared with all the depositors, but those who are objecting to this provision are minimising the effect of the tax by saying there are very few. If there are very few, the objection to the tax should not be as stated by the same speakers. If there are very few, only they will have a grievance. Therefore, I do not think, on the whole, it will create any great upset in our banking arrangements in this country.

I got reports, after the announcement was first made. I could not see it made any appreciable effect on deposits in this country. It must be remembered that people who invest their moneys in other ways, apart from those who put their money into the bank, pay income tax if they are liable to income tax—for instance, if they put it into a Government loan and so on.

As regards the estimates which Deputy Corish asked about, it is the estimate given to me by the Revenue Commissioners. Naturally, I have to depend on them for estimates of all yields of taxes. They are usually very reliable. I do not know how they made it but I accept it as probably very near the mark. I do not know what they would be likely to amount to in the years after that. Deputies from Fine Gael said they are as anxious to stop any evasion of tax as I am. I do not know why they should have any anxiety about the effect of this tax. I do not think it will have any ill-effect and I think it is a tax we could proceed with.

Question put and agreed to.

SECTION 18

Question proposed: "That Section 18 stand part of the Bill."

Mr. Sweetman

This is the section which extends the period of assessment in the case of a deceased person?

Mr. Haughey

That is right.

Mr. Sweetman

For how long does it extend?

Mr. Haughey

Three years from date of death, if grant is extracted in that year, and in other cases, two years from the date of extraction.

Question put and agreed to.

SECTION 19.

Mr. Haughey

I move amendment No. 9:

In page 16, lines 39 and 40, to delete "subsection (6) of section 12 of".

Section 19, as it stands, operates in favour of companies licensed under subsection (6) of section 12 of the Insurance Act, 1936. That subsection, however, relates only to the licensing of companies to carry on life business. It is intended that the benefit of the proposed amendment of section 7 of the Finance Act, 1935, should extend to companies carrying on any class of insurance business whether the business was commenced before or after the coming into operation of the Insurance Act, 1936.

Amendment agreed to.

Question proposed: "That Section 19, as amended, stand part of the Bill."

Mr. Sweetman

Section 19 is the only section in the Finance Bill upon which I can honestly congratulate the Minister. I suggested it to him myself.

Mr. Haughey

I shall have the congratulations conveyed to the Minister.

Mr. Donegan

I hope reciprocal congratulations for the suggestion will come back.

Mr. Sweetman

It is something that is right and proper and that was missed for many years.

Question put and agreed to.

Section 20 and 21 agreed to.

SECTION 22.

Mr. Haughey

I move amendment No. 10:

In subsection (2), page 18, line 25, to delete "sum" and substitute "sums".

It is a drafting amendment——

Mr. Sweetman

——of vast consequence. I think I am right in saying that sections 21 to 28 are all sections that deal with the principle of making one taxpayer one charge and nothing else.

Mr. Haughey

That is correct.

Mr. Sweetman

If I get that assurance on the record, I have no comment to make on the other sections. If there is anything else in it, then it is a different story.

Mr. Haughey

Subject to the minor qualification that surtax is brought into line with income tax.

Mr. Sweetman

And that you have the choice of which year you are assessed on.

Mr. Haughey

Advancing the date of payment of surtax.

Mr. Sweetman

You are paying in this year, on 1st January next, one year's surtax based either on last year or on this year.

Amendment agreed to.

Section 22, as amended, agreed to.

Section 23 to 28, inclusive, agreed to.

NEW SECTION.

Mr. Sweetman

I move amendment No. 11:

Before section 29, but in Part I, to insert a new section as follows:

"Section 10 of the Finance (Miscellaneous Provisions) Act, 1956 (No. 47 of 1956) is hereby amended as follows:—

`the definition of "goods" shall include day old chicks produced within the State.'."

I shall let Deputy Clinton deal with most of this but I just want to put certain facts on the record. The purpose of this amendment is to permit those engaged in the industry of producing day-old chicks and exporting them to get relief from tax for that exportation. The law in relation to tax relief for exports stems from the Finance (Miscellaneous Provisions) Act, 1956. That was the first time any attempt was made to provide a tax incentive for exports—indeed, an incentive for exports of any sort.

When the criticism made by the Minister's Party, when that was brought in, was shown to be utterly hollow, the basis of the tax reliefs for exports was changed in the Finance Act, 1957, but the same principle remained. In the Finance Act, 1958, however, section 56 brought within its scope export relief in respect of three other items that had not previously been considered. One was fish produced on a fish farm; the second was cultivated mushrooms; and the third, books which were exported in certain circumstances. I am not concerned at all with the third.

It seems to me that there is an unanswerable case, from the little I know about this matter, that day-old chicks should not be considered in exactly the same category as fish produced on a fish farm or cultivated mushrooms. If the business of producing day-old chicks attracts liability not under Schedule B, to occupation of the land, but Schedule D, to an assessment of the profits that arise, it seems to me an industry that should be given tax relief just as the fish and the cultivated mushrooms were given relief by section 56 of the Finance Act, 1958.

Mr. Clinton

The whole purpose of the 1956 Act, as I know it, was to encourage existing industries to increase exports, to encourage industries which had not started to export to engage in exports and to bring about the establishment of new export industries. Here we have an industry that obviously should be included, an industry that has now reached fairly considerable dimensions. It is an industry which gives badly needed employment on a widespread basis throughout rural Ireland.

Similar industries have been included already. Some time ago, I asked the Minister for Finance about the possibility of having the hatching and export of day-old chicks included for exemption purposes. I got the impression that the Minister was favourably disposed towards such a proposal but could do nothing about it until he got an opportunity such as that presented by this Bill. I believe he may be prepared to accept this amendment.

In the first quarter of the present year, day-old chicks to the value of £100,000 were exported. In the same quarter only £75,000 worth of mushrooms were exported. As we know, mushrooms have been exempted. At the time I raised this matter, it had a certain urgency, because there was a real danger that we would lose the industry. In fact, subsequently one of the biggest people in the business established an industry in the north of Ireland. By delaying in giving this concession, we have lost part of this industry. The position can still be rectified, I believe, and the industry can be further encouraged and expanded, if, even at this late stage, we give the exemption that other similar industries have enjoyed for some considerable time.

Mr. Donegan

Deputy Sweetman hit the nail on the head when he said that this was an industry which attracted Schedule D tax. The average price per egg purchased from the farmer is about 5½d. The price of a day-old chick when produced is about 3/6d. I am not suggesting that gap is as simple as the figures would indicate, because you do not get a chicken from every egg. It does not, however, take two eggs to make one chicken. You may take it the cost of manufacture here is, in fact, greater than the cost of the raw material produced. You cannot regard this as a live export. It is a manufactured item, which has far more relation to manufacture than the normal birth of a bird and its export later. A small assembly industry here is entitled to this remission of tax on its exports. If you had a new cheese factory, which purchased its milk from a farmer, so long as it paid Schedule D tax, as it would, that factory would be entitled to remission of tax. Therefore, this operation falls within the ambit of the 1956 Act, and the changes in legislation sought by this amendment should be brought about.

Mr. Haughey

For the Minister for Finance, I am not prepared to accept this amendment. I agree with the Deputies that the change was made in 1958, whereby mushrooms and the products of fish farms were brought within the scope of this relief, but if the relief were to be further extended now to cover day-old chicks as suggested, it would represent a completely new departure. It would be a clear incursion into the field of agriculture proper.

As Deputies know, these reliefs were originally introduced in order to encourage almost exclusively manufacturing industry, to encourage industrialists engaged in manufacturing industry to go abroad and seek new markets. The whole purpose of the reliefs was, by offering the tax incentive, to encourage managements to become more efficient and better able to compete in export markets and to seek out these new markets. That does not apply to the same extent to agricultural products. The market for agricultural products is fairly well determined by the process of supply and demand in our principal markets. It is not really possible for agriculturists to go out and expand our exports in the same way as industrialists. There is that important difference in principle between manufacturing industry and agriculture. If this incursion were once to be made into agricultural products, it would be impossible to restrict it simply to day-old chicks. There would be no case for not extending it to all sorts of other agricultural products.

Mr. S. Collins

Is that not the attitude that is stultifying agricultural development?

Mr. Haughey

It would represent a completely new departure and one which was never envisaged in the original idea which brought about the introduction of such reliefs.

Mr. Sweetman

Could the Minister address the House on the difference between a day-old chick and cultivated mushrooms in relation to this relief? The case the Minister made might be a case before 1958, but now mushrooms are in. What is the difference between a mushroom and a chick?

Mr. Haughey

One comes out of an egg and the other comes out of the ground.

Mr. Donegan

If it comes out of the ground, does that not damn your case?

Mr. Haughey

There is a distinction —a fine one, I admit—between something cultivated under artificial, semimanufacturing conditions and something which is a completely natural product as chickens are.

Mr. Clinton

The Minister is drawing a distinction that nobody but himself can see.

Mr. Sweetman

He does not even see it himself.

Mr. Clinton

The 1956 Act now applies to tomatoes, an agricultural crop; mushrooms, an agricultural crop——

Mr. Haughey

It does not apply to tomatoes.

Mr. Clinton

It does.

Mr. Haughey

Not as such; possibly if they are processed.

Mr. Clinton

I am not suggesting it is eggs, as such, either. Here we have hatcheries doing nothing except hatching and exporting day-old chicks. Surely that is a valuable process.

Mr. Haughey

But it is a natural process.

Mr. Donegan

If you switch off the current, you find you will have no chicks.

Mr. Haughey

Most of them use calor gas.

Mr. Clinton

Can the Minister say where manufacturing comes into the growing of mushrooms?

Mr. Haughey

Growing of mushrooms is an entirely artificial process. They are not even grown in the ground. It is a completely artificial system, as Deputy Clinton knows.

Mr. S. Collins

Is not the spawn from which the mushroom is grown natural?

Mr. Haughey

The mycelium is not. The commercial mushroom grower buys the mycelium from which he grows mushrooms.

Mr. S. Collins

And he gets horse manure in the farmyard which is a vital part of the process.

Mr. Haughey

The main thing is the central heating in which it is grown indoors.

Mr. S. Collins

It is the fermentation of the manure.

Mr. Haughey

You do not even need horse manure.

Mr. Clinton

The Minister's point is that there is something artificial in the production of mushrooms and that everything associated with a day-old chick is natural. That might be so if they were produced under the hen as used be done but they are now treated as an industrial process. They are brought to hatcheries, put into large incubators, packed carefully in boxes, kept for a certain time and so on. Quite an amount of employment is given and it seems totally illogical that we have an industry which we shall lose. It is an industry brought into this country on condition that it cannot sell a day-old chick in this part of the country. All it has to do is to go to Northern Ireland, establish its industry and it can sell all the chicks it likes in this part of Ireland.

Mr. Cunningham

Not at all.

Mr. Clinton

Yes, and there is no smuggling. You are free to bring in all the chicks you like from the north.

Mr. P. O'Donnell

That is true.

Mr. Clinton

You have the Irish market at your disposal.

Mr. Cunningham

That is not so. I know it is not.

Mr. Clinton

I challenge the Deputy to tell me why it is not so. Because of this provision, we have portion of the industry moving to Northern Ireland in order to have the advantage of the Irish market when it is refused this concession and has no other concession here. Is the Minister aware that a large broiler industry has been promised exemption, if it establishes an industry here? Where is the distinction? There seems to be no case for the exclusion of hatcheries. I cannot see it or see how any Deputy can argue against it.

Mr. Sweetman

We are dealing with the income tax Acts and the appropriate test should be not whether the hen came before the egg or any matter of natural history. The appropriate basis for determination under the income tax Acts is whether it is something which is assessable on the normal occupation of land under Schedule B—in which case it is an agricultural pursuit—or whether it is something assessable as an industry on the land, in which case it is assessable under Schedule D. It seems, in dealing with income tax Acts, that sort of distinction would be clear and logical where a person had to pay tax on profits assessed under Schedule D.

Mr. Haughey

That would include ordinary mercantile transactions taxed under Schedule D.

Mr. Sweetman

They are included. The export tax relief has been extended beyond merely manufacturers to distributors who sell abroad.

Mr. Haughey

But "only in place of".

Mr. Sweetman

Agreed, and "only in place of" should be here in the same way. So long as the root cause of the product bears assessment, as this does, under Schedule D, that should be the test for the income tax Acts. The Minister and I could argue for ever on the difference between the mushroom and the chick without going into matters introduced by other Deputies but we are not arguing on a natural history basis and it seems that what should be visualised in this provision is that wherever there is a basic assessment under Schedule D on the goods produced, that assessment should get export tax relief. Where there is not such a basic assessment under Schedule D and only an assessment on the occupation of land itself, it is the man who should be caught.

Mr. Haughey

I think we could not possibly accept the assessability as the test. There are many businesses which have no element of manufacture in them, which are purely trading concerns that are assessable under Schedule D. If we were to adopt Schedule D assessment as the test, they would qualify for export relief.

Mr. Sweetman

But only in so far as these taxable concerns take something that is produced here and export it.

Mr. Haughey

Let us take an industry which takes no Irish-produced goods.

Mr. Sweetman

They are different. These are Irish-produced.

Mr. Haughey

It answers the test of Schedule D assessability.

Mr. Sweetman

Not in respect of Irish-produced goods.

Mr. Haughey

Even on that basis, the test falls down because, for instance, there are nurseries and market gardens which are assessed under Schedule D and they would be qualified for relief.

Mr. Sweetman

I think they should be, once you extend the scope already there.

Mr. Haughey

That is arguing on policy. I thought the Deputy was dealing purely with the technical application of this relief and selecting assessability under Schedule D as a test. In my opinion, if we did that, it would let in things which none of us would want to let in——

Mr. Sweetman

Such as?

Mr. Haughey

Market gardens and purely commercial trading concerns and various other businesses assessed under Schedule D. A professional man is assessed under Schedule D on earnings which presumably would have some element of export in some of them. Deputy Sweetman, as a solicitor, could have business in London and theoretically that could be regarded as export earnings and as he is assessed under Schedule D, he would be entitled to relief on that. We would get into a ridiculous situation if we accepted assessability under Schedule D as a test.

Mr. Sweetman

It has never been accorded to services—only to goods produced. In respect of goods produced, Schedule D assessability should be the test.

Mr. Haughey

Even then I think it would let in various businesses which we should not let in. Let us get back to the fundamental purpose of this relief.

The fundamental purpose of the relief is to act as an incentive to Irish manufacturing industry to get into world markets and to build up our exports of the products of manufacturing industry. I do not think that even Deputy Sweetman's Government, when introducing this Act, contemplated that it would be extended to cover agricultural produce as such. If we accepted this amendment, it would do that and confer a benefit on a certain type of business without any regard to the original incentive purposes at which the relief was aimed.

Mr. Sweetman

I must disagree very violently with the Minister on this matter. When the relief was introduced in 1956, it dealt entirely, as the Minister for Justice has rightly stated, with manufacturers for export, but the scope of the relief was widened very considerably in the Finance Act of 1960, and particularly by Section 27 of that Act. In that Act, the export relief was widened to include not merely the manufacturer but any person who dealt with the product at any stage up to the time it was exported, always taking the major precaution to ensure that the same goods could not get the relief twice.

I must confess that until this day-old chick case was brought to my notice, I was always under the impression that when the 1960 Act was brought into force, it had the effect of giving the relief to agricultural goods, of the sort not produced from the mere occupation of the land assessable under Schedule B. It would be quite wrong that such agricultural goods should be included. The Minister for Justice and I are agreed on that. But when one goes outside that, it seems clear that when section 27 of the Act of 1960 was introduced, there was an obligation on the Minister to exempt from tax in the same way as any other exports goods that were liable for assessment under Schedule D and produced here, always taking precautions to ensure that the same goods only qualified for relief in respect of one person. I admit that I thought that was the position under the 1960 Act and I was amazed to discover it was not so. It is an anomaly that should be remedied, not merely in respect of this provision but in respect of the very things the Minister for Justice has just mentioned.

Whether we get foreign currency in by the production of a transistor radio or by the sale of tomatoes does not matter a hoot to the economy of the country. It is the export trade that matters and the principle with regard to manufactured goods and other exports should be the same. The principle should only be restricted in the exclusion of actual agricultural produce per se which is taxed in a very favourable and special way under Schedule B.

Mr. Donegan

The Minister for Justice used certain phrases to describe the difference between this operation and the sort of operation he would regard as eligible. He said it was for industrialists engaged in manufacturing industry who are in a position to go abroad and seek out new markets. He does not seem to know anything about the day-old chick industry. It is an industry. The amount of effort that must be put into production is tremendous and so was the amount of effort put into the formation of a sales organisation and to bring these people here.

Mr. Haughey

They come here because the country is disease-free.

Mr. Donegan

They come here because they believe they can get the type of price at which they can produce the raw material. That represents 8d or 9d in the price of an article for which they get 3/6d. The actual profit is 8d or 9d out of 3/6d.

Mr. Haughey

The attraction here is that the country is disease-free and that they can export to any country.

Mr. Donegan

That is not so. There was a considerable effort made by these people to sell abroad.

Mr. Haughey

They can sell from this country because we are disease-free.

Mr. Donegan

If that is so, could they not go to the north of Ireland and sell from there?

Mr. Haughey

They could.

Mr. Donegan

And are you not pushing them out by not giving them the export remission of tax?

Mr. Clinton

I am glad the Minister for Finance is back because I felt that when I raised this question earlier, he was favourably disposed towards it. I think he realises the value of this industry and that it could be expanded. It was due to the foresight of the Department of Agriculture and their poultry experts that they went to America and secured exceptionally valuable breeding stock. If we are to take the full advantage and get the fullest benefit from having that stock in the country, we must do everything possible to encourage people to export the produce of that stock.

The Minister for Justice was at some pains to make distinctions but I am aware of a firm that is at present exporting flake oatmeal to New York. In that case, the farmer gets about 60 per cent of the export value of the meal. In this case, he gets about 7d or 8d out of 3/6d. There is something all wrong in this and I think a case has not been made for excluding this valuable industry which has exported £100,000 worth of goods in the first three months of this year.

The Minister for Justice is right in saying that one of the things that attracted this industry here is that we are disease-free but part of the industry has already moved to the north of Ireland because there is the same attraction there with regard to disease and they have access to the Irish market from there which they did not have from here. We are going to lose all the industry if they do not get this concession.

Question put.

The Committee divided: Tá 47; Níl 64.

Tá

• Barrett, Stephen D.
• Barron, Joseph.
• Barry, Anthony.
• Barry, Richard.
• Belton, Paddy.
• Browne, Michael.
• Burke, James J.
• Burton, Philip.
• Byrne, Patrick.
• Clinton, Mark A.
• Collins, Seán.
• Connor, Patrick.
• Coogan, Fintan.
• Corish, Brendan.
• Cosgrave, Liam.
• Costello, Declan D.
• Costello, John A.
• Crotty, Patrick J.
• Dillon, James M.
• Dockrell, Henry P.
• Dockrell, Maurice E.
• Donegan, Patrick S.
• Dunne, Thomas.
• Esmonde, Sir Anthony C.
• Farrelly, Denis.
• Flanagan, Oliver J.
• Gilhawley, Eugene.
• Governey, Desmond.
• Harte, Patrick D.
• Hogan O'Higgins, Brigid.
• Jones, Denis F.
• Kenny, Henry.
• Lynch, Thaddeus.
• MacEoin, Seán.
• McGilligan, Patrick.
• McLaughlin, Joseph.
• Murphy, William.
• O'Donnell, Patrick.
• O'Donnell, Thomas G.
• O'Higgins, Michael J.
• O'Keeffe, James.
• O'Reilly, Patrick.
• Reynolds, Patrick J.
• Rooney, Eamonn.
• Ryan, Richie.
• Sweetman, Gerard.
• Treacy, Seán.

Níl.

• Allen, Lorcan.
• Bartley, Gerald.
• Blaney, Neil T.
• Boland, Kevin.
• Booth, Lionel.
• Brady, Philip A.
• Brady, Seán.
• Brennan, Joseph.
• Brennan, Paudge.
• Breslin, Cormac.
• Briscoe, Robert.
• Burke, Patrick J.
• Calleary, Phelim A.
• Childers, Erskine.
• Clohessy, Patrick.
• Colley, George.
• Collins, James J.
• Crinion, Brendan.
• Crowley, Honor M.
• Cummins, Patrick J.
• Cunningham, Liam.
• Davern, Mick.
• de Valera, Vivion.
• Dolan, Séamus.
• Dooley, Patrick.
• Egan, Kieran P.
• Egan, Nicholas.
• Fanning, John.
• Faulkner, Padraig.
• Flanagan, Seán.
• Gallagher, James.
• Galvin, John.
• Geoghegan, John.
• Gibbons, James M.
• Gilbride, Eugene.
• Gogan, Richard P.
• Haughey, Charles.
• Hillery, Patrick.
• Hilliard, Michael.
• Kennedy, Michael J.
• Kitt, Michael F.
• Lalor, Patrick J.
• Lemass, Noel T.
• Lemass, Seán.
• Leneghan, Joseph R.
• Lenihan, Brian.
• Lynch, Celia.
• Lynch, Jack.
• McEllistrim, Thomas.
• Meaney, Con.
• Medlar, Martin.
• Millar, Anthony G.
• Moher, John W.
• Mooney, Patrick.
• Moran, Michael.
• Ó Briain, Donnchadh.
• Ó Ceallaigh, Seán.
• O'Connor, Timothy.
• O'Malley, Donogh.
• Ormonde, John.
• Ryan, James.
• Sherwin, Frank.
• Smith, Patrick.
• Timmons, Eugene.

Tellers:—Tá: Deputies Crotty and Clinton; Níl: Deputies J. Brennan and Geoghegan.

Question declared lost.

Section 29 agreed to.

SECTION 30.

Question proposed: "That Section 30 stand part of the Bill."

Mr. Sweetman

Can the Minister tell me where lager beer is defined?

Dr. Ryan

I believe it is not defined.

Mr. Sweetman

If it is not defined, then what does this section mean?

Dr. Ryan

It will be identified as lager.

Mr. Sweetman

But how? I am quite serious in this. I am not being facetious. With regard to beer, there is a very long description taking a specific gravity of so many worts. No doubt the Minister knows what a wort is in connection with beer and, if he does, then he knows more than I do, but there is a clear and specific definition in relation to ordinary beer for duty purposes. It turns up every time there is any question of amending the beer duty. I want to know what the difference is between beer and lager. Is any pasteurised beer a lager beer?

Mr. Donegan

No. It is quite separate.

Mr. Sweetman

How does the Deputy know?

Mr. Donegan

Deputy Sweetman has raised a very important point. It is, in fact, quite simple to define a lager beer. Lager beer is made from a bottom yeast, that is, a yeast which goes to the bottom of the brew. Natural beer is made from a yeast which goes to the top of the brew; it is known as a top yeast. It has nothing to do with pasteurisation or filtering. A definition is quite simple and it should be included in this Bill.

Dr. Ryan

Both the traders and the Revenue Commissioners came to the conclusion that it was not necessary to put in a definition because it can be identified for sale as lager beer. Anyway, we are not taking the duty off or putting a new duty on. The only difference is that there is a little more time for payment.

Mr. Sweetman

Is that because it has to mature longer?

Dr. Ryan

It has to be kept longer.

Mr. Donegan

Is it not true that the practice now is to mature the natural beer in the brewery rather than in the bottle in the wholesaler's or retailer's store? From that point of view, natural beers are now being stored longer in the brewery, with the exception of stout perhaps. A situation will develop, has already developed in fact, in the case of certain natural beers.

Dr. Ryan

The Deputy is right. The tendency is to keep all beers in the brewery. It is possible we will have to deal with other beers later on but now we are dealing only with lager.

Question put and agreed to.

Section 31 agreed to.

SECTION 32.

Question proposed: "That Section 32 stand part of the Bill".

Mr. Sweetman

I presume this is to make the penalty more realistic so that there will not be a fixed penalty of £500 subsequently reduced to £10?

Dr. Ryan

The effect of this section is to reduce the penalty from £500 to £100.

Mr. Sweetman

Why? It is most unlike the normal practice of the Revenue Commissioners to see penalties decreasing.

Dr. Ryan

This is as a result of a court decision some time ago. If it were £500, it would have to be tried by a jury.

Mr. Corish

Is there much revenue from this?

Dr. Ryan

Not much.

Mr. Sweetman

It is a deterrent more than anything else.

Question put and agreed to.

SECTION 33.

Question proposed: "That Section 33 stand part of the Bill."

Mr. Sweetman

I should like to congratulate the Minister on this section. There are people, notably masters of hounds, who keep a great many dogs and it is much better that they should pay a round figure of £10 rather than be put in the position of being tempted to defraud.

Mr. Corish

Does the Minister lose any money by this?

Dr. Ryan

No.

Mr. Corish

What is the use in doing it then?

Mr. Sweetman

To save postmistresses writing out 80 forms.

Dr. Ryan

It is more convenient.

Question put and agreed to.

SECTION 34.

Question proposed: "That Section 34 stand part of the Bill."

Mr. Sweetman

Is the Minister satisfied that Section 34 is constitutional?

Dr. Ryan

Yes. That is the idea.

Mr. Sweetman

Time will tell.

Question put and agreed to.

SECTION 35.

Question proposed: "That Section 35 stand part of the Bill."

Mr. Sweetman

Before this section passes, it should be solemnly named the "MacEntee Section", as the Tánaiste was so anxious to take three matches out of a box of matches to provide for the turnover tax.

Dr. Ryan

One is enough.

Question put and agreed to.

SECTION 36.

Question proposed: "That Section 36 stand part of the Bill."

Mr. Sweetman

Is this bringing matters more into reality?

Mr. Corish

The Minister probably stated in his Budget speech how much he expects to lose on this——

Mr. Sweetman

Nothing.

Dr. Ryan

There is not any revenue in this section which permits the bank to release up to £1,000 deposited by a person who is now dead. Up to now, there was a limit of £500.

Question put and agreed to.

SECTION 37.

An Ceann Comhairle

There are two amendments to this section.

Mr. Sweetman

I should be happy to have them both discussed together. I move amendment No. 12:

To delete the words "1st day of January 1962" wherever they occur and substitute therefore "sixth day of April 1963".

This is the section which applies the new rates of corporation profits tax. At this stage, we are not concerned with those rates, or with that increase. We are concerned merely, at this stage, with the retrospective effect of the section as it stands. On many occasions since he introduced his Budget, the Minister has endeavoured to argue that section 37 is not retrospective. Of course, I disagree with him entirely in that respect. I have said before that I do not think he will get one reputable accountant or legal opinion in the country to agree with him.

It has transferred from being a matter of my opinion to being a matter of the opinion of a member of the Government, As reported at column 1633 of the Official Report of 25th June, the Tánaiste made it clear that he accepts that the tax imposed by section 37 is a retrospective tax. I shall read the full quotation so that there will be no suggestion that I am misrepresenting him. The report reads:

Mr. MacEntee: Is corporation profits tax to be increased? That tax has been increased in this Finance Bill already. Can it be increased further?

Mr. Dillon: Retrospectively.

Mr. MacEntee: If the Deputy was aware of the circumstances, he would realise that if this money is to be obtained in this year, corporation profits tax must be retrospective and it is with this year we are concerned.

I am glad to note that in relation to the interpretation of this section the Tánaiste has joined with us in asserting categorically that section 37 is retrospective and that he has, with all his usual talk about the collective responsibility of the Government, reneged on his colleague, denounced the Minister for Finance, and said it is a retrospective tax but, he says, it has to be introduced to get money this year.

I want to suggest to the House that if you have a retrospective tax of any kind it strikes at the whole concept of security, and the democratic system as we know it. If there is to be retrospective taxation coming back on them after they have made their plans in accordance with the law as it exists at any time, no one can possibly make any plans for the future with any sense of security. The effect of this section is to throw back the increase in taxation to 1st January, 1962. The effect of subsection (5)—and I shall be moving an amendment to have it deleted—is that additional taxation can be levied on any company where corporation profits tax has already been assessed, agreed with Revenue, and paid.

As I say, if we had any doubt about the section being retrospective, the statement made by the Tánaiste, and the application of subsection (5) by which assessments and payments can be reopened, would dispose of that doubt. I said on an earlier section, and I want to repeat now, that it would be simple for Deputies to take the easy line of saying that corporation profits tax will not affect votes in the ordinary sense, that it is not likely to have any popular appeal in the sense of swaying the electorate. On the contrary, the electorate could perhaps be more easily swayed the other way.

A little consideration will show that it is with the reserves of those companies, whether they are popular or not, that we get the wherewithal to increase productivity, to increase production, to go ahead with schemes, to modernise, to expand employment, and to ensure that exports also are expanding. If the reserves held by companies for that work are to be attacked in this way, retrospectively, then I feel there will be a definite holding back by companies in Ireland in regard to decisions on schemes of expansion or modernisation.

The section covers the period going back to 1st January, 1962. I know the Minister will say that when corporation profits tax was dealt with in 1932 the same date was taken. That may have been so, but it is certainly retrospective now and was retrospective then. It means, for example, that although a company's accounts for the year ending 31st January, 1962, were made up, passed on to the relevant inspector of taxes, assessed and paid in March or April, 1962, they are to be reopened again. The similar accounts that were made for the year to 31st January, 1963, have also been cleared, perhaps before this current year began on 6th April last. Notwithstanding that, those accounts are to be reopened.

In fact, I have made a list of the companies quoted on the Dublin Stock Exchange and I have found that of the very small number of companies quoted there, 16 end their accounting period in January, one ends it in February, 13 end it in March, and that for those three months, some 30 companies will be caught not merely by a retrospective tax for one year but by a tax that is retrospective over two accounting periods. I regret to say that I omitted to mention on the reverse of the page five further names of companies ending their accounting period in March so that it would appear that there are 35 companies caught.

From time to time, the Minister has suggested in relation to this and other aspects of his Budget that all the objection to it has been stimulated, controlled, urged on and provided by Fine Gael. Of course, that is nonsense. The other day I read a speech by the chairman of one public company who is very far from being a supporter of Fine Gael. In fact, he is generally accepted as being quite the reverse. In his statement, he said this:

Earlier in this report I have mentioned the retrospective corporation profits tax and this is probably one of the most disturbing actions ever taken by the Department of Finance.

Let me correct him and say that it is not the Department of Finance; it is the Minister for Finance.

In fact it is much nearer the pattern we expect to find in the countries with a controlled economy rather than in a country which claims freedom.

—I assume, east of the Iron Curtain is what he means by that—

How can you possibly plan your business or look after the interests of your shareholders if, having closed your accounts and paid out your dividends, you are presented with a Government Order to go back to your previous year's trading and extract a further sum of money for which no provision has been made? Our shareholders should be aware that the retrospective increased corporation profits tax is, in fact, a capital levy—a levy on your capital which we are holding in trust.

—this of course was his speech to the shareholders—

The only difference between the Cripps capital levy in Great Britain and this one is that Cripps levied on the recorded capital of each individual. This levy is only upon those courageous persons who have had the courage to put their money into Irish industry. I know of no measure more likely to frighten Irish investors and restrict confidence than this one.

That speech was made by the chairman of Unidare. Now I come to the Chamber of Commerce Journal which has been published since the Budget. It states:

The Budget proposals carried three shocks: the increase in the rate to 15 per cent thus putting us on a par with the British company tax rates against the trend established since 1939, the elimination of the margin of £2,500 for the additional five per cent—

Which of course has since been changed and has been brought down to 2½ per cent.

—which again illustrates the inability of the Revenue Commissioners to think simply, —

May I correct them and say the inability of the Minister for Finance to think simply?

—and worst of all, the retrospective enforcement to the 1st January, 1962, of the whole increase.

They go on to say:

Let us, however, look hard at the retrospective effect of the corporation profits tax proposals. They add up to a clear levy on capital, not income, since last year's undistributed profits are part of this year's capital used to run a business. It is perhaps a clever way of doing it provided one has no care for retaining the confidence of business men that there are rules which will be observed.

They go on again:

At this point we can nail the speciousness of the argument that this proposed legislation is not retrospective. The suggestion is made that since accounts for the 1963-1964 fiscal year can end at any time after the 5th April, 1962, the tax affecting them must always be retrospective. Even the Budget framers—

I would have said "framer" in the singular—

—who went back to January 1st, 1962, must have missed this point. But it is perfectly clear that corporation profits tax is and has always been a tax on a company's accounting year, not on the fiscal year, and the correct legal interpretation will be found to be that it is retrospective if it applies to any period of time prior to the 6th April of the fiscal year. The Minister and his advisers can be openly challenged to produce good legal advice giving a contrary opinion.

I have already said that I defy the Minister to produce any single reputable accountant in Dublin to say that this proposal in Section 37 is not retrospective.

Mr. Wynne, the President of the Association of Chambers of Commerce, speaking at the annual meeting had this comment to make:

Further, as you all know, many companies in respect of the year commencing 1st January, 1962, will by now have made their arrangements in regard to dividend payments and forward planning in accordance with the moneys at their disposal, having provided for these payments. Now with this retrospective tax they will not have at their disposal such moneys for any projects they might wish to pursue as some of their reserves will now, in fact, be drawn away in payment of retrospective assessment for CPT. This, as you all know, will not contribute in any way to furthering the Programme for Economic Expansion which we are all encouraged to pursue in a very positive manner.

Some years ago, there was in Britain in relation to corporation profits a differentiation in the system of taxing distributed as against undistributed profits. Their problem in Britain through the years, and the problem that has caused them acute economic anxiety, has been over-investment in relation to resources. Our problem here always has been under-investment, not the same at all. It seems to me that there is an overwhelming case in recent years for company taxation to be considered in relation to the distribution of profits rather than to the profits retained in the business. In our circumstances here, it is inevitably the profits that are retained in business which provide the capital for expansion and for further production and necessarily therefore the capital is further employed.

It would be bad that these results would be taken, solely, for annual purposes but, bad and all as that might be, there might be some case for doing it even at a high rate in respect of distributive profits and a very high rate for one year for the year looking forward. There cannot be a case for the Minister for Finance to come in and to say to a company, after it has made all its plans perhaps to put up a new wing to its factory and has seen exactly where it will stand for the financing of the project: "Notwithstanding the fact that you did all that, I am now going to make a levy on the money you had for that purpose." That cannot work for the furtherance of confidence in the business community. That cannot work as an encouragement to people to plan ahead, to go into greater production, to expand employment, to expand exports. It will inevitably be the position that not merely will there be a shock this year but the whole future planning by business will be hit. We shall find that Section 37 as it is framed at present, because of its retrospective effect, strikes at the root of the confidence a business community must have if it is to do its job in a free enterprise economy.

Dr. Ryan

Any increase in income tax or corporation profits tax is collected in this present financial year, if brought in in the Budget—corporation profits tax in reference to profits for the calendar year preceding and income tax in reference to the last accounting year before the Budget. That has been the practice and there is no departure from that practice in this Budget. Therefore, I have nothing more to say as far as Deputy Sweetman's contentions are concerned.

Mr. Governey

I should like to support this amendment. I want to draw the Minister's attention to a matter I already mentioned on the Budget debate. Apart from the fact that the figure has been brought up to £2,500, the Minister is bringing in a retrospective tax which I doubt is constitutional.

Take a company which has closed its books, paid its dividends and planned for the future. If a Minister can now come forward and introduce a corporation profits tax retrospective for one year, how do we know that in the future, even though firms have planned ahead, they will not be told: "We are introducing a tax for years previous even to a year in question."

It has been the policy of every member of this House to encourage industries in this country. The Government have been giving grants to companies to start here and to give employment. What is the Minister thinking of when he introduces this tax in the light of our own companies and any company in the country trying to make plans for the future, trying to expand and who have budgeted their reserves for expansion and improvement? What will be the position when the Minister for Finance can come along and tell them after they have closed their books: "We want a certain amount of tax from you"— be it hundreds or thousands of pounds? Surely any company is entitled to plan ahead? I can well understand that the Minister and the members of the Government do not realise the effects of this because seemingly the Government themselves do not plan ahead. That is my main objection to this. It is not an encouragement to any company in the country to plan ahead or to make reserves for the future.

Time and time again, we have been asked to expand our industries, to modernise them, to put capital into plant and machinery, to bring our industries up to the standard we would expect of any industry. Most of our industries have heeded that warning. For years back, actually, there has been a development amongst our Irish industrialists and people who have come in here to plough back capital, to increase productivity and to try to give employment to our people. Now, the Minister for Finance comes along and, after these companies who could actually have drawn more from their reserves but who tried to plough money back into their business and to expand, says: "We are going to impose a retrospective profits tax on you."

I object to the tax being retrospective for 12 months. However, the danger I see is that, having got away with this, will the Minister or any future Minister come along and try to go back even further? In other words, no Irish industrialists or any industrialists in this country will know for the future where they stand if Budgets are framed in this manner and if retrospective tax is to be collected.

Mr. Cosgrave

It is hardly necessary to reiterate the arguments advanced against this tax. I think Deputies on all sides of the House view the proposal with very considerable misgivings. Different commissions have examined this matter. In the Departmental report published under the title Economic Development, it is expressly stated that one of the matters essential for economic expansion is a reduction in taxation. So far as I am aware, there is only one precedent for retrospective taxation of this kind and that was, I think, in the Budget of 1932. Other than that, it has never been the practice to make taxation of this character retrospective. I think most Deputies will agree that a single precedent of that character is a bad one.

I understand that the arguments against this tax have already been expressed freely by Deputies, but only last week the chairman, not merely of one prominent company but two, expressed very strong views against it. Anyone who read those remarks was struck by them because of their vigour and clarity and the forthright manner in which they were expressed. It is no harm to remark that the person who made them could not be described in the past as being critical of the present Government. Certainly, I never knew him to be regarded as an opponent of the Government. I refer to the speech made by Mr. C.O. Stanley, chairman of Unidare and chairman of Pye (Ireland) Limited, at the annual general meeting of these companies.

In the course of his remarks at the annual meeting of Unidare, as reported in the Irish Independent and other newspapers of July 5th, 1963, he stated in conclusion:

I know of no measure more likely to frighten Irish investors and restrict confidence than this one.

That is from a person who has been for a number of years actively associated with industrial development. He participates directly in it. He is not a person who might be regarded as critical of the present Government. He has no political axe to grind, one way or the other. In fact, I suppose it would be correct to say that, if he holds any views, he would be friendly disposed towards them. He is an industrialist speaking as an industrialist. He expressed the very strongest opposition to this tax because of its effect on confidence in industrial development.

The views that Mr. Stanley expressed are the views which any industrialist in this country would express. He has expressed views common to all industrialists. The only reason I quoted him is that his remarks happen to have been made at a meeting held since this tax was introduced in the Finance Bill and since the recent Budget. Other company meetings may be held subsequently, and I have no doubt that chairmen and directors will express similar views. I can well imagine the criticism which would be expressed by the Taoiseach if he were on this side of the House. From his experience as Minister for Industry and Commerce and being directly responsible for industrial development, he would express the criticism that has been voiced by Mr. Stanley and that will subsequently be voiced by other directors. In fact, the tax has been described by Mr. Stanley as a capital levy. He has equated it to the capital levy introduced after the war by Sir Stafford Cripps when Chancellor in Britain. That capital levy was very stringently criticised and objected to by industrialists in Britain. It was regarded as a once-and-for-all operation. There is no indication that the same can be said of this operation. In any event, the only previous precedent for this was one case over 30 years ago.

I believe at present the one thing industry wants is some sort of guarantee that conditions will be reasonably stable. Nobody can foresee what marketing conditions will be or what economic or political changes will occur in Europe or elsewhere. These are matters entirely outside the concern of an individual Government. They depend on a variety of factors not within the control either of the Government here or possibly of a number of Governments. At any rate, they are factors that no one can be precise or definite about. But, so far as the tax impositions imposed by our own Finance Acts or Budgets are concerned, industrialists are at least entitled to have that certainty and clarity which is essential for ordinary planning on a reasonable basis. It is for these reasons I believe there is very strong and justified opposition to this proposal and it is for these reasons also that we propose this section should be deleted.

Mr. Booth

I would agree with Deputy Cosgrave that there is very substantial opposition to this proposal. One cannot expect any great enthusiasm from any part of the community which suddenly finds itself subjected to increased taxation. As a member of that part of the community myself, I must say quite obviously I am not enthusiastic about the imposition of this tax at all. I do not want to give any false hopes to the Opposition in this regard, because this is a matter where we have to face facts as realistically as we can.

I find myself in much the same position as the Opposition in one way, in that, if I could think of another way in which the revenue could be raised, I would be very happy to advise the Minister. Unfortunately, I have not been able to think up any other way at all. In view of the Government's decision in the White Paper, I cannot see that an increase in corporation profits tax could possibly have been avoided without showing the Government were not in earnest in what they said in that publication. Although it was very often ignored by those commenting on the White Paper, it was stated there quite clearly that the Government expected there would be some caution as regards increase in income by way of dividends. It was not simply a call for restraint in wages; it was a call for restraint on dividend allocations as well. It has been found very difficult to restrict dividends or to differentiate between profits distributed and profits not distributed. Consequently, the Government are faced with a situation in which the only way that distribution can be limited is by taking away some of the profit and using it for State purposes.

I cannot agree with the Minister for a moment that this proposal is not retrospective. Quite clearly, it is retrospective. Again, I must be honest. I am concerned about any question of retrospective legislation and I have gone on record on that before—I do not like it at all—but I am faced with the hard economic fact that this money quite clearly has to be raised if the rate of expansion is to be maintained. This is not a question of a temporary financial emergency for the Government but a case where the Government are committed to a programme of expansion requiring a steady rise in income from revenue.

We must face the fact that it is retrospective taxation. I hoped we would have some statement from the Minister that this was not something he would consider normal. It would be quite impossible for him to give an absolute undertaking that such a course would never be followed again but it would help the confidence of the business community tremendously if it was felt the Minister took this course with considerable regret in the hope that it would not be necessary to do so again in the foreseeable future.

This Bill differs from the 1941 Finance Act which also dealt with corporation profits tax and which did refer to accounting periods ending after 1st January that year. Deputy Cosgrave is right in saying this Bill and the Finance Act of 1932 are the only measures referring to accounting years ending after 1st January of the preceding calendar year. I do not agree that this is a capital levy or essentially a raid on company reserves. Some companies may have to draw temporarily on their reserves to meet the tax for 1962 but I do not imagine any company would regard that borrowing of its reserves as more than borrowing. What will probably happen is that there will be restriction of distribution during this fiscal year which is surely what the Government wanted. If the Government are seeking some restraint on the part of one section of the community they should seek and get similar restraint from others.

This increase in corporation profits tax, I feel, will not seriously impede the modernisation, re-equipment or expansion of industry but it must affect at least one year's dividend. With this retrospective division there may be a certain and sharp drop in dividends for one year. I say there may be. I should like to draw attention to the fact that there has been no sign of panic on the stock exchange. Steady business is being done in the purchase of Irish industrial shares with no sudden drop in prices and the investing public is fairly hardheaded. It may feel that Irish industrial shares are still worth having at prices ruling before the Budget. We can get a pretty fair indication that the restriction of dividends will not be catastrophic and will be regarded as temporary. I think it is wrong to say, as was said by one company chairman, that this legislation will frighten investors. The investors have had this proposal before them for some time and it has not frightened them yet.

The last point I want to put before the Minister concerns me personally in relation to my own business but it will be of interest to all business people to know what will be the procedure for collecting amounts of corporation profits tax which will now be payable under section 37. Will that extra tax now discovered in arrear be payable immediately or will some concession be made so that companies may take time to find the necessary funds for an unexpected liability? I hope there will be considerable flexibility. Otherwise companies may be persuaded to take panic action they will subsequently regret. Obviously, the money must be collected within the fiscal year but the Revenue Commissioners could make a generous extension of time for payment. Companies whose accounts have not yet been closed will not have to meet this situation but a large number of companies will be affected and their profits will have been at least partly distributed in dividends. I hope in such cases considerable time will be allowed for payment of these arrears.

In general, I am convinced that this is retrospective taxation which I greatly regret should have to be introduced in any way against any section. I hope it will not be repeated. I appreciate the necessity for it in this case if the rate of national production is not to be reduced. I still hope we shall get an assurance from the Minister that this will not happen again in the foreseeable future.

Mr. A. Barry

The enormous resources of the English language have just been demonstrated. I did not envy Deputy Booth's task, which was very difficult. Using simple words and phrases is probably making the best use of the language here. It is far better to admit what this is and not pretend it is something else. It is retrospective taxation, as the Deputy says and as the Minister denies.

A curious light has been thrown either on Deputy Booth's mind or on the Government's mind when he says this is an attempt by the Government to even up the implications of the White Paper. I should like to hear more about that. It is a remarkable statement and I am glad that the Government are treading that path. I wish they would do it openly and not leave it to Deputy Booth to disclose. He said a curious thing about a company having closed its books and distributed its profits or increased its reserves or spent money on planning and then finding it had got to go back to the closed ledger to get more money for the Minister. He said they will only take it "temporarily" from reserves. I do not know what he means. If the Minister takes it, it is gone for good. If Deputy Booth stands up again, I have no doubt he will have an explanation that would convince me that the English language was the greatest vehicle of misrepresentation since the Tower of Babel was built.

Mr. Booth

What I meant was that the reserves would be replaced out of subsequent profits.

Mr. A. Barry

You do not get anything back from that Minister over there.

Mr. Cosgrave

This proposal is being defended on the grounds that the White Paper is a reasonable approach and applies not merely to State employees but to private companies and those employed in them. That argument is fallacious as it can apply only to those State employees in respect of whom it can be made effective. It is not unreasonable to say that in so far as private employment is concerned, it does not apply except in so far as agreement can be reached between the trade unions and the responsible organisations representing the employers.

So far as the State is concerned, it applies to civil servants, possibly to the Garda and the Army, possibly to Posts and Telegraphs, but not to two certain categories of State or semi-State servants. I take two well defined cases. If CIE employees or ESB workers pursue their claims sufficiently vigorously and emphatically, has it not been our experience in the past that no matter what the Government may say or what proposals they may send to the Dáil for legislation, the real test is whether the organisations representing these workers are sufficiently powerful to render ineffective the operation of the undertakings they are engaged in. That is the reason I believe the White Paper is ineffective. It applies only to private employers or State companies which are effectively within the ambit of the Ministers or the Government.

If we take the two cases I have spoken of, CIE workers or ESB employees, we must realise that they can render the undertakings which they operate completely ineffective and, in face of that fact, it renders the White Paper immediately ineffective. We have seen the Government leaning over backwards in this matter. It may make a temporary demonstration of strength or seek to take effective action by legislation or ministerial order but ultimately the operation of that organisation will depend on the approach of the people concerned, depending on the degree of efficiency or on the public need affected by it. If it is a national organisation such as transport, or power or light, then, as a last resort, some agreement must ultimately be arrived at. For that reason, it is far better to approach the matter in a rational and reasonable way, recognising the difficulties and endeavouring to smooth out the problems that exist and to smooth out the differences between both sides, in the knowledge that ultimately this must be done not merely because of the direct participants but because of the national interest.

For that reason, I believe that the arguments contained in the White Paper are ineffective as far as any effective organisation is concerned. This proposal has been condemned by industrialists. This is not a temporary measure such as that introduced in the late forties by Sir Stafford Cripps as a member of the then Labour Government in Great Britain. It is a once and for all effort on a known and fixed basis. This applies in particular to those of high confidence who have demonstrated that confidence by investing their savings in Irish industry.

I believe the Minister should reconsider this matter both in the national interest and because of the industrial development involved in it. This is not a matter that has any political significance. The number of votes concerned is small. It cannot be compared with the turnover tax or a tax on bread and butter or on foodstuffs. This is a question of principle and confidence so far as those who invested in Irish industry are concerned and the Government should reconsider the matter between now and the Report Stage.

Mr. Colley

There is undoubtedly some element of retrospection in this tax. I, like most Deputies, do not like the idea of retrospective taxation. However, I am convinced that in the present circumstances the element of retrospection is justified and that the Government are obliged to impose it if they are to keep faith in regard to the statements made by the Government in the past in the White Paper Closing the Gap.

If I understand Deputy Cosgrave correctly, he is arguing that this should not be applied because it is not possible effectively to restrain wages and salaries in certain categories. If I am correct in that, I think Deputy Cosgrave has missed the whole point of this matter. He spoke of the necessity of seeking agreement in certain matters, the necessity of reaching a solution of the whole problem of increases in wages and salaries by way of conciliation and agreement. He understands that problem as well as anybody else in the House but it must be obvious to him that it is unreasonable and idle to expect workers, wage earners and salary earners, to accept the idea implicit in the White Paper, if the Government are not prepared to take steps to restrain dividends and profits.

Mr. Corish

Did anybody ever hear such nonsense?

Mr. Colley

From the mutterings I hear on my left, I gather the Labour Party do not favour this argument. It will be very interesting to hear what the Labour Party has to say on this.

Mr. Corish

The Labour Party do not believe this is the time to discuss the White Paper Closing the Gap. They are against the corporation profits tax amendment and they will vote for the section. If you want to talk about control of prices——

Mr. Colley

The whole argument in the White Paper was that we should temporarily, in the interest of the economy as a whole, restrain wages, salaries and earnings. That word "earnings" was used in the White Paper and was conveniently ignored on the other side of the House. The Government did say at the time that this was intended to apply to all earnings, including dividends, and it is extremely relevant to the section and the amendment we are discussing. Deputy Cosgrave in the course of his arguments shows clearly that he understands what the problem is. Indeed, the Leader of the Fine Gael Party used his formidable eloquence in the debate on the White Paper to condemn it on the grounds that it did not make any provision for restraining dividends and profits.

The attitude of the Fine Gael Party in this matter reminds me of the woman who served a glass of milk to a man and he complained there was a mouse in it. She took out the mouse and gave it back to him and he objected to taking it. She said: "You are a most contrary man. Milk with a mouse will not please you and milk without a mouse will not please you." That is typical of the Fine Gael Party's attitude. When it suits the case that they want to make, they tell us we are not doing anything to restrain earnings and dividends. When we restrain earnings and dividends, they tell us we are going to ruin the economy. There seems to be some doubt in some quarters as to whether the White Paper has anything to do with this and if I may delay the House a little longer I should like to quote paragraph 15:

Profits, industrial and other, form a much smaller proportion of national income than do wages and salaries. Higher profit distributions not associated with higher production or sales have, however, even if on a smaller scale, the same consequences as higher incomes not related to output. There is a special obligation on industrial managements to set, in this respect, an example to the community.

In paragraph 18 it is stated:

As a counterpart to this, however, an obligation rests on all sections of the community not to jeopardise economic progress by pressing for higher incomes, whether in the form of profits or pay, until national production is able to support it.

I think we have some idea of the extent to which that call was ineffective in regard to profits. Deputy Cosgrave complained about the ineffectiveness of this approach. We are all aware that it is not possible in practice, normally anyway, to get companies to restrain their profits and dividends and if the Government take steps to enforce that I for one am wholly behind them and I would expect that anyone who accepts the basis of the idea set out in the White Paper would also wholly support it.

Mr. Sweetman

I never heard so much drivel in my life as we have heard from Deputy Booth and Deputy Colley. I do not believe for a second that they could be as stupid as they make themselves out to be. This proposal here has nothing to do with distributed profits. That is what is wrong with it. This proposal attacks undistributed profits kept there for the creation of further expansion, for the creation of further employment, for the expansion of productivity. As I said a minute ago, if the Government wanted to deal with this on a basis of pure profits if distributed excessively, there was a readymade scheme to their hand of differentiating between the rate of tax paid on distributed profits and the rate of tax paid on undistributed profits. Deputy Booth and Deputy Colley are trying, as Deputy A. Barry said, to use their command of the English language to trump up for themselves an excuse that they cannot in their hearts and souls believe.

An Leas-Cheann Comhairle

May I point out that Sections 1 to 39 must be disposed of by 10.30 p.m.?

Mr. Sweetman

Yes.

Dr. Ryan

May I say a word? Deputy Sweetman in standing up to attack Deputy Booth and Deputy Colley made an even more foolish speech and we shall leave it at that

Mr. T.F. O'Higgins

More foolish? Then the Minister concedes they made foolish speeches.

Dr. Ryan

I said that he said it. Companies have to pay to the Revenue Commissioners a certain amount of money and whether it is out of distributed or undistributed profits it does not matter to them and it does not matter to us. All that talk about distributed and undistributed profits is just nonsense. Deputy Booth wanted to know when this will come into force. When the Finance Bill is passed an assessment will be made and it cannot be effected until two months after the assessment. That gives the Deputy some idea of the time.

Mr. Booth

Two months?

Dr. Ryan

It will be more than two months. Deputy Booth would like the assurance that it will not occur again in the foreseeable future. I wish to quote from my Budget speech when I was dealing with this tax:

This action, taken in the special circumstances of the current year, is a limited departure from the policy in regard to direct taxation which has otherwise been consistently followed in recent years, namely, the reduction of direct taxation in order to encourage earning and saving.

I would ask Deputies to read that and perhaps it will be some consolation to them.

Mr. Corish

I do not know how the White Paper that is commonly called the "pay pause" got into this argument at all but probably it has been used to demonstrate how the Government, by increasing corporation profits tax, are balancing the seasaw as against the restraint they imposed on wages and on salaries. The effect, as far as I can see, is that the White Paper and the Government directives prevent at least Government employees and semi-Government employees from receiving increases in wages and salaries. They have demonstrated that effectively in the last few weeks in that they refuse to give a salary increase to certain of the ESB employees. Therefore, we have wage control. I intend to vote for that section if it goes to a division but I do not accept that this is a gesture by the Government to control either prices or profits. The only effective way to do that is by the legislation that the Government themselves adopt.

Mr. Colley

Is it not restraining profits?

Mr. Corish

Not necessarily. It does not necessarily mean to say that profits will be restrained. They cannot be if there is no price control. This section gets £3 million. I am voting for it but I do not accept the arguments of the two Deputies from the Fianna Fáil Party that this will effectively curb prices or profits.

Mr. Booth

It will curb dividends.

Mr. Corish

What if increased prices are charged?

Mr. Donegan

Deputy Booth and Deputy Colley tried to bring their arguments into line with the White Paper. Deputy Booth is a Fianna Fáil Deputy first and a business man second and at least some of the things he said in the course of his speech are of great interest and they bring forth his other occupation, his business life. He said in relation to this matter that if they had to do it immediately it might give rise to panic action. Deputy Sweetman assures us—he went to the trouble of looking the matter up—that a total of 35 companies are in the position of having closed their books, probably declared their dividend and, in so doing, have taken into account all the corporation profits tax they thought they would have to pay, and the amount left for capital expenditure. Now, the amount of corporation profits tax they thought they would have to pay has been increased by 50 per cent. If I knew of any more effective way of raiding the till I would like to give the Fianna Fáil Party the benefit of my knowledge, but I do not think there is any other more effective way.

Rather than adverting to the pay pause, as Deputy Corish mentioned, or to the White Paper, I believe the average business man, on behalf of whom Deputy Colley and Deputy Booth were trying to make their little effort, will make another comparison. That comparison will be the speech of the Taoiseach reported in the Irish Independent of 13th June, a major policy speech. It was in that speech he mentioned moving to the left. Is this measure then not a movement away from the political selves Deputy Booth and Deputy Colley would like to portray and into private enterprise economy? Is this now Fianna Fáil policy, because this is the sort of comparison that will be made by the business people of this country? It will not be a comparison with the White Paper, the pay pause, or anything else. I believe that this is where Fianna Fáil have gone wrong and that is why it is necessary for members of the business community, like Deputy Booth and Deputy Colley, to get up here and try to salve their consciences. But their effort is vain.

(Interruptions.)

I referred to theIrish Independent of 13th June. Deputy Seán Flanagan can get a copy of that in the Library. In it he will get the whole context of the speech. It is also reported in the Irish Press, if the Deputy would refer to that. The situation is apparently that the Taoiseach is looking for this apertura a sinistra, this opening to the Left. We believe there should be a private enterprise economy. We do not believe in raiding, and we do not believe that 35 public companies should now be told, having closed their books, declared their dividends and calculated their liability for corporation profits tax, that there is an additional 50 per cent retrospective increase in that tax. Business concerns will now make the comparison with the Irish Independent of 13th June and with the statement by the Taoiseach that State expenditure is the lifeblood of the economy.

Question—"That the words proposed to be deleted stand"—put.

The Committee divi ded: Tá, 69; Níl, 49.

Tá

• Allen, Lorcan.
• Bartley, Gerald.
• Blaney, Neil T.
• Boland, Kevin.
• Booth, Lionel.
• Brady, Philip A.
• Brady, Seán.
• Brennan, Joseph.
• Brennan, Paudge.
• Breslin, Cormac.
• Briscoe, Robert.
• Burke, Patrick J.
• Calleary, Phelim A.
• Carter, Frank.
• Carty, Michael.
• Childers, Erskine.
• Clohessy, Patrick.
• Colley, George.
• Collins, James J.
• Corish, Brendan.
• Crinion, Brendan.
• Crowley, Honor M.
• Cummins, Patrick J.
• Cunningham, Liam.
• Davern, Mick.
• de Valera, Vivion.
• Dolan, Séamus.
• Dooley, Patrick.
• Egan, Kieran P.
• Egan, Nicholas.
• Fanning, John.
• Faulkner, Padraig.
• Flanagan, Seán.
• Gallagher, James.
• Galvin, John.
• Geoghegan, John.
• Gibbons, James M.
• Gilbride, Eugene.
• Gogan, Richard P.
• Haughey, Charles.
• Hillery, Patrick.
• Hilliard, Michael.
• Kennedy, Michael J.
• Kitt, Michael F.
• Lalor, Patrick J.
• Lemass, Noel T.
• Lemass, Seán.
• Leneghan, Joseph R.
• Lenihan, Brian.
• Lynch, Celia.
• Lynch, Jack.
• McEllistrim, Thomas.
• MacEntee, Seán.
• Meaney, Con.
• Medlar, Martin.
• Millar, Anthony G.
• Moher, John W.
• Mooney, Patrick.
• Moran, Michael.
• Ó Briain, Donnchadh.
• Ó Ceallaigh, Seán.
• O'Connor, Timothy.
• O'Malley, Donogh.
• Ormonde, John.
• Pattison, Séamus.
• Ryan, James.
• Smith, Patrick.
• Timmons, Eugene.
• Treacy, Seán.

Níl.

• Barrett, Stephen D.
• Barron, Joseph.
• Barry, Anthony.
• Barry, Richard.
• Belton, Paddy.
• Browne, Michael.
• Burke, James J.
• Burton, Philip.
• Byrne, Patrick.
• Carroll, Jim.
• Clinton, Mark A.
• Collins, Seán.
• Farrelly, Denis.
• Flanagan, Oliver J.
• Gilhawley, Eugene.
• Governey, Desmond.
• Harte, Patrick D.
• Hogan, Patrick (South Tipperary).
• Hogan O'Higgins, Brigid.
• Jones, Denis F.
• Kenny, Henry.
• Lynch, Thaddeus.
• MacEoin, Seán.
• McGilligan, Patrick.
• McLaughlin, Joseph.
• Connor, Patrick.
• Coogan, Fintan.
• Cosgrave, Liam.
• Costello, Declan D.
• Costello, John A.
• Crotty, Patrick J.
• Dillon, James M.
• Dockrell, Henry P.
• Dockrell, Maurice E.
• Donegan, Patrick S.
• Dunne, Thomas.
• Esmonde, Sir Anthony C.
• Murphy, William.
• O'Donnell, Patrick.
• O'Donnell, Thomas G.
• O'Higgins, Michael J.
• O'Higgins, Thomas F. K.
• O'Keeffe, James.
• O'Reilly, Patrick.
• Reynolds, Patrick J.
• Rooney, Eamonn.
• Ryan, Richie.
• Sheridan, Joseph
• Sweetman, Gerard.

Tellers:—Tá, Deputies J. Brennan and Geoghegan; Níl, Deputies Clinton and Crotty.

Question declared carried.

Amendment No. 13 not moved.

Section 37 agreed to.

Sections 38 and 39 agreed to.

Progress reported; Committee to sit again.

The Dáil adjourned at 10.40 p.m. until 10.30 a.m. on Wednesday, 10th July, 1963.