Amendments No. 46 and No. 47 will be taken together.
Amendment to Standing Order 30. - Finance Bill 1965: Committee Stage (Resumed)
NEW SECTION.
Yes. I move amendment No. 46:
Before section 28, but in Part III, to insert a new section as follows:—
"For the purposes of estate duty the agricultural value of agricultural property shall henceforth be charged with duty at 55 per cent of the normal rate".
The object of amendments Nos. 46 and 47 is to introduce into the estate duty rate the provisions that already exist in relation to the estate duty code in England and also, so far as agricultural land is concerned, I believe in the North of Ireland. In England, there is a provision that in respect of agricultural property, estate duty shall be charged at 55 per cent of normal duty and a similar provision was subsequently introduced in respect of industrial property. I shall deal with England because I do not know what the position is in the North of Ireland. The effect of this provision in England as compared with the Republic is as follows: Taking estates between £10,000 and £12,500, the rate in the Republic is six per cent and the agricultural rate in England is 3.3 per cent; between £12,500 and £15,000, the rate here is eight per cent, while the British rate is 4.4 per cent; between £15,000 and £17,500, the rate in the Republic is ten per cent, while the British rate is 5.5 per cent; between £17,500 and £20,000, the rate here is 12 per cent, while the British rate is 6.6 per cent; and between £20,000 and £25,000, the rate in the Republic is 14 per cent, while the rate in England is 8.2 per cent. Going one step further, between £25,000 and £30,000, the rate in the Republic is 16 per cent, while the rate in England is 9.9 per cent. There are corresponding differences as between increases up the scale and it is only when one reaches the very high valued estates that a comparative equality is achieved.
The object of this amendment is to introduce here the same kind of built-in provision in relation to agricultural property and purely family business and business inheritance of that kind. There have been cogitations as to whether death duties should or should not be retained. We do not in this amendment propose to abolish all death duties but we do suggest that this provision, which is recognised in Great Britain, and I believe also in Northern Ireland, should be applied here. It is timely that we should face up to this situation. If the disparity which now exists between our scale and rate of estate duty continues, there is a great danger, I think a very real danger, that capital, which this country requires, may disappear and that people who compare comparative rates of estate duty may seek residence in the North of Ireland or in England and that the country may lose.
I think consideration should be given to a proposal of this kind. I might remind the House that immediately before the Second Reading debate, the Minister in his speech which I referred to earlier, sought praise for the fact that our rate of estate duty was lower than in England. Of course he was comparing what is our scale with what would be the ordinary unabated scale in England. He either was not advised or did not advert to the fact that in relation to agriculture and business in England, there is abatement to the extent of 55 per cent.
Certainly there is need at the moment to encourage people who have money to invest to come here. I hold no brief for the fact that they have money or riches, but I do think this country requires to attract a great number of people with a great deal of money. While there may be a reluctance in some parts of the House to abolish death duties entirely, we certainly should seek to reduce the load of death duties on agricultural land and on businesses that are run here. That is the object of these two amendments.
I should like to support these amendments by dealing with specific cases. Let us take, first of all, the case of a man with a farm valued at £8,000, who has on that farm £2,000 worth of stock. In addition, he has £1,000 worth of furniture, and perhaps a few pounds ready money in the bank for working capital. That is a total of £11,000. No one could suggest for one instance that he is a rich man. In my constituency and Deputy Norton's constituency, he would be a pretty small farmer.
The position here is that the estate of such a man will pay, subject to section 26 to which I will come back in a moment, £660 in estate duty. In Northern Ireland or Great Britain, exactly the same estate would pay £282, so this small estate is being asked to pay £378 more. There is a saving contained in section 26 that clearly the farm cannot be divided up. It cannot be left to three or four children. It must be left to the widow or to one child. I will give the Minister the benefit of the doubt and suppose it is left to the widow alone, because that is where the greatest saving would be, and there would be a lesser variation between our duty and the duty in Britain and Northern Ireland. Even after allowing for section 26, that man's estate is asked to pay here £228 more than it would be asked to pay in Great Britain or Northern Ireland.
Let us take a slightly larger estate. Let us take the case of a man with a farm valued at £10,000, who has on that farm £3,000 worth of livestock, £3,000 worth of machinery, furniture, working capital and odds and ends of any sort you like. The total value of the estate is £16,000. That is not a big estate. Certainly a farm valued at £10,000 would not be regarded as a big farm in Kildare. Where are we then? In this country that estate will bear duty of £1,600, less section 26. Again, giving the Minister the benefit of the doubt of the maximum, less £150, that is to say £1,450, in Britain, an estate with exactly the same value for land, livestock and bits and pieces, would have to pay only £1,150, that is, £300 less. In Northern Ireland, the same estate would have to pay only £920, or £530 less than down here.
All that arises because agricultural land is taken on a different basis of rate in Northern Ireland and Great Britain from here. It is so taken for one reason, and one reason only: to provide assistance for the unit of the family farm. It is to provide assistance for the family farm unit that that agricultural relief is given. It is now accepted and understood, as Deputy Corish mentioned earlier this afternoon, that land and farmhouses are not readily cashable. If we put a high duty on them, all we do is provide that they must be sold.
I think Deputies on every side of the House accept that one of the problems of agriculture in Ireland is that it is starved of working capital. Only the other day the Minister brought into the Oireachtas a Bill extending the provisions of the Agricultural Credit Acts. He made the case for that Bill that more working capital was needed for agriculture, that more money had to be ploughed into the working of agriculture. What is the sense in coming here one week and saying that, and coming in this week and saying that every time anyone connected with agriculture dies, something around 20 per cent more will be taken out of the estate as compared with Great Britain, and something around 30 per cent more will be taken as compared with Northern Ireland? Is it not a crazy performance to come in here one week looking for more money to plough into agriculture, and to come in the next week and say that the State will take that money out of agriculture any time anyone dies?
The reason for that is, as I have said, that in Great Britain—and it was followed up some years after in Northern Ireland—it was recognised and understood that something had to be done, having regard to the ways in which the values had gone up, to take account of the fact, and that otherwise every time the owner of a farm of the moderate size I have been talking about died, either one of two things would happen: the farm would have to be sold, or the successor to the farmer would be starved of working capital to carry on agriculture on that farm as we on all sides of the House would like to see it carried on.
The Minister may ask fairly enough why was this not adverted to before. In earlier years, before the value of land appreciated to the extent to which it has appreciated today, when the person died, the land went into a much lower category of rate, and it did not matter so much. It might be within the exempt category, or it might be in the category for which an artificial value could be taken because it was valued at less than £10,000. There is a provision for taking an artificial value when the whole estate does not exceed £10,000. I think I am right in saying that it is not merely the value of the land, but the value of the whole estate, that has to be less before the artificial value of the land can be calculated in a particular way by reference to the poor law valuation.
Unless the Minister contradicts my figures—I do not think he will because they are right—in the case of a farm worth £8,000 going to a widow, and with the appendages of stock and bits and pieces, including furniture, the duty here is £660. Deducting the widow's allowance, it is £510. The duty in Northern Ireland is £282. In Britain the duty is £282. How does the Minister justify the £228 differential? In the other case, where the value of the farm is £10,000 and the value of stock and bits and pieces £6,000, the duty is £1,450. In Britain it is £1,150 and in Northern Ireland £920.
Neither of those cases is one in which I am arguing for a rich man. In these modern days both are of very modest means indeed. In the case of the widow or of the child, under this section the differential will be greater, the saving less. It is clear that there will not be the ready money to meet this differential in duty to run the farm properly. The Minister may come back and say: "If I do not have this differential in relation to agricultural land, we shall find people coming in here buying up land for the purpose of saving duty."
The Minister abandoned that argument when he dropped the 25 per cent stamp duty on foreigners buying land. I forget the section under which it was dropped. The Minister was rather cross with us the other day when we asked why he was dropping it. His defence is that it is not necessary now that the 1965 Land Act is law. He said that the Land Commission would take care of the situation and ensure that nobody would buy more land than in the past. May I add that it is quite certain nobody can buy more land purely for the purpose of avoiding death duties? There is not any case to be made by the Minister for hitting the man of moderate means. We had that argument already. In this section the Minister is doing it and I suggest he should, therefore, accept the amendment.
From the arguments put forward one would imagine that the agricultural community are being hit very heavily by estate duties. Of course, that is not the case, as Deputy Sweetman well knows.
I certainly know that is not the case.
Roughly about £4 million is the yield from death duties.
It is £4,500,000.
The estimated yield from agricultural property as such is about £300,000, a very low percentage.
But a very high percentage relative to the case in question.
Let me go back. Deputy T.F. O'Higgins referred to the address I gave on death duties to what was described by the Irish Times as “a captive audience”. He sought to indicate that I claimed our death duties were more favourable than those in Britain in practically all cases. I told the House last week that I was not dealing with the proposition often argued that death duties should be abolished so that we would attract people with large estates to invest money here. What I was dealing with were the death duties payable on very large estates.
We stop at £100,000 when the rate is 40 per cent, whereas the British go up to 80 per cent on a much higher figure. I said that if there was any validity to the argument that more favourable conditions in this respect attract more investment, then it ought to work. This provision has been in operation only four years, since 1960, and I do not think, as I said on the other occasion, that that is long enough in which to test the validity of the suggestion that without death duties we would attract very large estates.
Again, I come back to the position of farmers here. In the first place, farmers pay a very small proportion of the total amount of money collected in estate duties. As well as that, they pay no income tax as such: they pay a small proportion of income tax from assessment on poor law valuation under Schedule A.
They pay rates here but they do not in Northern Ireland.
Here we provide about 62 per cent of the full rate of assessment on farm land. I am not sure of the exact figure, but that is the one I remember from the Budget debate, when I gave those facts. That is a substantial contribution to farmers' local taxation. They pay no income tax. There is a system of assessment of farm lands—what is described as artificial value. It is a multiplication of the PLV by 25. If it does not exceed £1,000, there is no estate duty payable.
The estate must not exceed £10,000. Is there not duplication?
The total estate must not exceed £1,000 net. This artificial value does not apply in the North. It is of some benefit to the farming community here. Now, in this amendment, we are trying to get them further benefits. I am not suggesting that they do not deserve it, but in the context of our finances we cannot afford it.
Each estate under £1,000 is free. Therefore, the artificial value does not enter into it at all.
The assessment in Northern Ireland is on the true value, not the artificial value. I have been trying to indicate that farmers are not doing badly. I wish they could do better but we must have regard to the obligations of the rest of the people to pay taxes. There have been arguments about death duties on superannuation benefits and on insurance policies and a special case was made about the value of shares attributable to business premises or machinery. Now we have the farmers being made the subject of a special case. We shall have so many special cases that the argument for the abolishing of death duties will have disappeared altogether.
To come to a recent appraisal—I was taking for the purpose of this amendment about 200 cases of estate duty. Of these, 67 were described as farmers. Of the 67 cases, duty was charged in 19 cases. Some of these 19 cases were assessed before the limit was raised to £5,000, but if that provision had been in operation, of these 19 cases, 11 would have been exempt from duty altogether. That was after 27th April. Of the eight remaining cases in which the existing exemption limit was exceeded, one case, apparently, was an unusual one and may be disregarded. It was a case of two farms being liable to duty.
It strikes me the entire 200 cases may be disregarded.
In the remaining seven cases, all the farms were in single ownership. In six of these cases, there were ample funds besides the farm to pay whatever duty was assessed. In the remaining case, the farm was sold by direction of the deceased in his will.
Where did the Minister get these cases?
They were a random selection by the Revenue Commissioners. Of the 200, 67 were farmers. Of these 67, 19 were assessable to duty and of the 19, 11 would not now be assessable by reason of the raising of the limit to £5,000, and of the remainder, six of the farms had ample liquid assets to pay whatever duty was required and in the remaining case, the farm was sold, but only by direction of the will of the deceased, so that gives an indication as to how hard hit the farming community is by reason of these death duties.
I suggest that we are treating farmers reasonably well. It is not fair just to take the rates of duty applicable and say the farmers in the North are so much better off than the farmers here. The farmers up there have to pay income tax in the ordinary way. The farmers here do not have to pay income tax. By and large, I suggest that you just cannot take this one instance out and say because in a certain instance the farmers in the Six Countries or in Great Britain do better, they are doing better all round. They are not doing better all round as far as taxation is concerned.
I will take the Minister up any day he likes on his figures. First of all, he came in here the other day and made a great song and dance of the Agricultural Credit Acts and the additional credit needed for agriculture. I have not got the quotation here but I would wager a small bet that he was boasting of increased capital employed in agriculture in the past ten years of the order of £3 million. The figure might be a little wrong either way. He told us a few minutes ago that £300,000 a year is taken up in estate duty. Ten times £300,000 is £3 million. So he gives out money in agricultural credit for the purpose of taking it back from agricultural land in estate duty. Farmers in Kildare, who are wideawake farmers, will be delighted to hear the Minister's explanation in respect of that.
This idea that because farmers do not pay income tax they are a wealthy community is tripe. I admit that circumstances have changed a little in the past few years and I am not, therefore, necessarily able to analyse the same two sets of figures today as I was a few years ago but it so happened that I was an executor of a will in this country where farm accounts were prepared and I was also an executor of my uncle who was domiciled in England and who had a dairy farm in Berkshire. There was a provision in respect of his land by virtue of which it had to be held in trust until his youngest child became 21 and I saw these English farm accounts year in and year out for a matter of four or five years until the youngest child did become 21. As I say, it is not yesterday—it is a few years back— but the comparison is just as good.
One year with another, the amount that had to be paid in rates on the farm here was equivalent to the amount that had to be paid in income tax on the profits of the farm in England and the net amount, if you like to call it that, remaining after payment of outgoings was virtually the same in one country as in the other. One year there would be a little one way, the next year there would be a little the other way, but it was virtually the same.
I was particularly interested in these figures from the point of view of this argument that has been put up by Ministers for Finance over the years that the farmers were getting an immense benefit because they were charged here to income tax only under Schedule B and Schedule B is determined on the fixed valuation. I am not arguing about what the amount of rates remission is. I am just telling the Minister factually that that happened and—I have not got a case for 1964-65—but in the years in which it did happen, the fact was that there was virtually no difference.
I do not know where the Minister got his 200 cases. I am not suggesting that the Minister went along to a pigeon-hole and took them out but I will challenge the Minister to get from the Agricultural Credit Corporation the amount that they have given out in agricultural credit for working land in Kildare every year for the past ten years and let him examine the number of cases in Kildare where there have been deaths in the past ten years and, on his own figures, he will find that £300,000 for ten years equals £3 million.
There is no case for this. It is the same as we were at before. The purpose of this is not to provide money from the rich for the poor. The purpose of this enactment that we are endeavouring to amend is to take money from the middle-class type of farmer. The middle-class type of farmer is the type that anyone who knows rural Ireland admits is short of agricultural credit. The effect of this will be that any time there is a death in a family, the farmer will be shorter of credit and having taken money out of that farm for the Minister for Finance, he will either have to sell or he will have to go back to the Minister for Finance and, in another form, through the Agricultural Credit Corporation, take the money out to make it up. That is bad national business.
Amendment put.
The Committee divided: Tá, 41; Níl 63.
Tá
- Barrett, Stephen D.
- Barry, Richard.
- Belton, Luke.
- Belton, Paddy.
- Burke, Joan T.
- Burton, Philip.
- Clinton, Mark A.
- Collins, Seán.
- Coogan, Fintan.
- Cosgrave, Liam.
- Costello, Declan.
- Creed, Donal.
- Crotty, Patrick J.
- Dillon, James M.
- Dockrell, Henry P.
- Dockrell, Maurice E.
- Dunne, Thomas.
- Esmonde, Sir Anthony C.
- Farrelly, Denis.
- Fitzpatrick, Thomas J. (Cavan).
- Gilhawley, Eugene.
- Governey, Desmond.
- Harte, Patrick D.
- Hogan, Patrick (South Tipperary).
- Hogan O'Higgins, Brigid.
- Jones, Denis F.
- Kenny, Henry.
- L'Estrange, Gerald.
- Lindsay, Patrick J.
- Lynch, Thaddeus.
- Lyons, Michael D.
- McLaughlin, Joseph.
- Murphy, William.
- O'Donnell, Patrick.
- O'Donnell, Tom.
- O'Hara, Thomas.
- O'Higgins, Michael J.
- O'Higgins, Thomas F. K.
- Reynolds, Patrick J.
- Ryan, Richie.
- Sweetman, Gerard.
Níl
- Allen, Lorcan.
- Andrews, David.
- Blaney, Neil T.
- Boland, Kevin.
- Booth, Lionel.
- Boylan, Terence.
- Brady, Philip.
- Brennan, Joseph.
- Brennan, Paudge.
- Breslin, Cormac.
- Briscoe, Ben.
- Burke, Patrick J.
- Calleary, Phelim A.
- Carter, Frank.
- Carty, Michael.
- Childers, Erskine.
- Clohessy, Patrick.
- Colley, George.
- Collins, James J.
- Corish, Brendan.
- Corry, Martin J.
- Cotter, Edward.
- Crinion, Brendan.
- Cronin, Jerry.
- Crowley, Flor.
- Crowley, Honor M.
- Cunningham, Liam.
- Dowling, Joe.
- Egan, Nicholas.
- Fanning, John.
- Faulkner, Pádraig.
- Fitzpatrick, Thomas J. (Dublin South-Central).
- Flanagan, Seán.
- Foley, Desmond.
- Gallagher, James.
- Geoghegan, John.
- Gibbons, James M.
- Gogan, Richard P.
- Hillery, Patrick J.
- Hilliard, Michael.
- Kenneally, William.
- Kennedy, James J.
- Kitt, Michael F.
- Kyne, Thomas A.
- Lalor, Patrick J.
- Lemass, Noel T.
- Lenihan, Brian.
- Lenihan, Patrick.
- Lynch, Celia.
- Lynch, Jack.
- McEllistrim, Thomas.
- Millar, Anthony G.
- Molloy, Robert.
- Mooney, Patrick.
- Nolan, Thomas.
- Norton, Patrick.
- Ó Briain, Donnchadh.
- Ó Ceallaigh, Seán.
- O'Connor, Timothy.
- Pattison, Séamus.
- Smith, Patrick.
- Tully, James.
- Wyse, Pearse.
Tellers: Tá, Deputies L'Estrange and T. Dunne; Níl, Deputies Carty and Geoghegan.
Amendment declared lost.
The decision on that amendment covers amendment No. 47.
Amendment No. 47 not moved.
SECTION 28.
I move amendment No. 48:
In subsection (1), page 22, lines 42 and 48, to delete "ninety" and to substitute "eighty".
This section is a section which has been introduced into the Finance Bill following a recommendation from the NIEC and it is designed to provide a reduction in the rate of stamp duty in respect of amalgamation of companies. It appears to be in accordance with the provisions of a British section contained in the British Finance Act 1927, section 55, but so far as——
Will the Deputy excuse me? Are you taking amendments Nos. 48 and 49?
Yes, I think so. If I am correct in viewing it in that light, it appears that the section does repeat a number of the defects which in experience have been shown to be associated with the British section. I have in these amendments endeavoured to refer to one or two defects. First of all, I direct attention by amendment No. 48 to the fact that the section before us, in its repeating of the English section, appears to have used the 90 per cent figure for issued share capital in correspondence with the English Companies Act of 1948, whereas, in fact, the provision in our Companies Act of 1963 by section 209 should be 80 per cent. The first amendment is to provide 80 per cent in place of the word "ninety" in section 28 (1) (b) in reference to the issued share capital.
The second amendment refers to what I am told has been by experience a known defect in the working of the English section, because here it is proposed that the percentage should be a percentage of the issued share capital in relation to amalgamations and so on, whereas what is frequently concerned with the proposal is a provision in relation to shares of a particular class. Frequently, an amalgamation is not concerned with the position of preference shareholders but would be concerned with the ordinary shareholders. In the operation of the English section, it becomes mandatory to arrange for the takeover or amalgamation of the required percentage of the entire issued capital, and that frequently has meant that this section has not become possible to operate.
There are other defects in the section which I have not attempted by amendment to cure. I do not know whether we should raise them now but we certainly can raise them on the section. There is, for instance, no provision in the English section for a bid for cash and no provision to deal with the acquisition of an undertaking for cash. It deals only with share exchange, and again that is repeated in this section. It may mean that a lot of worthwhile amalgamations and reconstructions of a company which are desirable may be limited and made more difficult. However, in discussing these two amendments, I am merely directing the attention of the House to two particular defects. On the section itself, I shall point out other things which I think should be dealt with.
In the first place, there is no defect whatever in the use of the percentage we propose in the section, that is, 90 per cent, as against the 80 per cent which is provided in the Companies Act for an entirely different purpose. In the Companies Act, section 204, there is provision for the acquisition of the minority shares in a company under these circumstances. Company A takes over company B and buys 80 per cent of the shares in company B for cash. This is a takeover, purchase or whatever you like to call it. Having effected that takeover by this purchase for value for cash of 80 per cent of company B, then they may compulsorily acquire the remaining 20 per cent. The remaining 20 per cent may be people who dissented from the takeover, people the beneficial ownership of whose shares were not readily traceable. That was effected by the 1959 interim Companies Act following a recommendation of the Committee on Company Law and was re-enacted in the 1963 Act.
The Companies Act?
Section 204 of the Companies Act, 1963. It was for that specific purpose, because a company having taken over another would not want a 20 per cent dissident group. There are other forms of amalgamations or reconstructions which this section is intended to facilitate, say, where company A and company B are in substantially the same ownership. Take Leinster House Limited. Leinster House Limited has not been going too well. We decide to set up Leinster House (1965) Limited. Ninety per cent of the owners of Leinster House Limited are in the new company as to the same percentage, 90 per cent. This is a transfer of shares, not a takeover for cash and it is for the purpose of facilitating such an amalgamation, such a reconstruction, that the relief from stamp duty is introduced in this Bill.
In this connection I should like to say that the 80 per cent has no reference whatever to the 90 per cent. The fact that Britain has 90 per cent in its Companies Act for the purpose of a takeover for cash was completely coincidental to the 90 per cent in the Finance Bill for the purposes of relief from stamp duty where there is not a takeover for cash but a reconstruction or amalgamation of the company. I am sure that, having heard that, if the sub-leader writer of the Irish Times of 25th June, 1965, were in a position to re-write the sub-leader tomorrow, he would admit that the gnomes of Merrion Street had not blundered here. Far from it.
Why 90 per cent instead of 80 per cent?
Ninety per cent means substantial ownership. It has no reference at all to the 80 per cent.
Even allowing that, why did the Minister pick on 90 per cent?
Because it represented what I regard as substantial ownership. There is no obligation on me to take the 80 per cent in the Companies Act.
I know that, but would 76 per cent not be nearer, being the amount necessary to pass a special resolution?
I do not accept that. This is for the purpose of the relief of stamp duty in relation to facilitating amalgamations, and specifically for the purpose of facilitating amalgamations in present circumstances when we are encouraging the rationalisation of firms in this way. Recommendations were made by a number of people, by a Dublin firm of solicitors who are used to dealing with such propositions. Representations were made to me directly by the Chairman of the Industrial Development Authority and there were other similar representations made. In another connection Deputy O'Higgins, apart altogether from the defects he alleged there were in the drafting of our amendment, said it was wrong that we should have completely "cogged" the British amendment. I am advised that the amendment introduced into British law in 1927——
Section 55.
——has stood the test of time.
It does not operate.
In my reply to the debate on the Second Reading, I indicated that section 28 as it now stands appeared to me to be rather long and that, if possible, I would have it shortened. However, the entire code of our law on stamp duties is rather complicated and to a certain extent I believe it must be so. It all derives form the intricate statute, the Stamp Act of 1891, which we adapted here in 1923. If this section had been enacted earlier than 1923, we would also have adapted it. The section I propose represents exactly what I was asked to do in circumstances that were set out, the facilitation of the amalgamation of companies and the reconstruction of companies in order to help them to become more competitive. It was also recommended that we frame the provisions on the lines of the British legislation.
With regard to the second part of Deputy O'Higgins's amendment, the purpose of the section, as I said, is to give relief from stamp duty in the case of the amalgamation of companies substantially in the same ownership. If the relief were extended to shares of a particular class, they could be a class which were not ordinary shares and, therefore, would not conform to the requirement of substantial ownership. Again, I say there is no defect in the drafting as such. In fact, the amendment which Deputy O'Higgins seeks to have included was deliberately omitted.
When recommendations were made to the Minister by various people, including the Chairman of the Industrial Development Authority, was 90 per cent the figure they mentioned or did they mention any figure?
Ninety per cent was the figure mentioned.
Were they aware of the Companies Act, 1963?
Indeed they were. I do not think anybody is more aware of the Companies Act, 1963, than the Chairman of the Industrial Development Authority.
I agree there.
Was this not tailored for one particular case?
No.
Does the section mean that a company has to be formed for the express purpose of taking over the company to be amalgamated, that the company must go through the performance of having a special resolution passed on what its intention is under this section, that that cumbersome procedure must be adopted in order to get the exemption here?
The Minister mentioned Leinster House (1965) Limited. There are many cases of companies that are shareholders of other companies. It may be desirable that there should be an amalgamation or reconstruction so that business can proceed properly. Under this section the fact that a company is a shareholder of the company excludes it from the benefit of this section. You have to have a new company formed for the specific purpose of the amalgamation envisaged before the exemption here is sought. I assert again that this is a lazy way of drafting. This is taking a section in the British Act of 1927 and putting it holus-bolus into this Finance Bill. It is certainly a coincidence that 90 per cent happens to be the takeover percentage in England and 80 per cent is ours. It is an extraordinary coincidence that 90 per cent was decided as the desirable percentage of issued share capital for the operation of this particular section when, in relation to the Companies Act, we have provided that 80 per cent is a sufficient demonstration of effective control of a company. That is certainly a coincidence and I assert that this is a case in which someone has blundered and that someone is now defending the blunder. I believe that is what is happening.
No. I reject that assertion completely.
I will make it again.
Amendment, by leave, withdrawn.
Amendment No. 49 not moved.
I move amendment No. 50:
To add to the section a new subsection as follows:
"( ) The provisions of this section shall extend and apply to the acquisition of an undertaking for cash."
I merely want to find out something. I said, quite honestly, on Second Reading that I did not quite understand the section. I am still in the same plight. If company A has all its share capital held by nine people and it decides to acquire all the share capital of company B, which also has all its share capital held by the same nine people—I use the word "same" deliberately to get away from the 80 or 90 per cent—so that company B will become a wholly-owned subsidiary of company A, and does that by paying the shareholders of company B the market value of the shares, does it qualify within this section or is that a case in which stamp duty on the market value must be paid at the ordinary one per cent ad valorem?
I think not, because that would represent a sale for cash. If there were an ordinary transfer of shares, it would be all right, but, once it is market value, which implies a sale for cash, it would not be relieved by the section.
The Minister is aware that, if there is a parent company in this country and a subsidiary in England, there are difficulties in the capital gains tax in dealing with it for cash and, if that is so, it means this section cannot apply in any case in which a parent company in Ireland is acquiring an English subsidiary.
That is something I could not talk about offhand.
I agree, but it seems to me to have that effect, and that seems to me a pity. I use the phrase "seems to me" because I am not at all as positive on this as I was on the death duty sections.
Is the amendment withdrawn?
If the Minister will not support me, I shall have to withdraw it.
Amendment, by leave, withdrawn.
Section 28 agreed to.
NEW SECTION.
I move amendment No. 51:
Before section 29, but in Part IV, to insert a new section as follows:—
"No stamp duties shall be chargeable on the conveyance or transfer of lands, tenements and hereditaments where the amount of the consideration for the sale does not exceed £5,000 and the purchaser is an Irish citizen."
This amendment is intended to relieve the position of people involved in the purchase of a house, small farm, or something of that kind. At the moment, under the stamp duty provisions, there is a tax imposed in respect of the conveyance or transfer of houses and lands which starts in this country at a purchase price of £700 and, at that level, there is a stamp duty payable of £7. In Northern Ireland, no stamp duty is payable and that applies right up the scale to a purchase price of £4,500. In Northern Ireland, no duty whatever is payable up to £4,500. Here, in the Republic, a stamp duty of £135 has to be paid. Stamp duty ranging from £7 up to £135 is payable on the purchase price of property in the Republic. In Northern Ireland, £4,500 is regarded as being so small that it should not be subject to duty. Under this amendment, I propose that we take a figure of £5,000 and say that, in relation to a purchase price not exceeding that figure, we should not impose a tax. If we continue taxation on small properties of that kind, it will mean that a tax of £150, which is a very considerable duty to pay, will be imposed on a property of £5,000 in value. The object of this amendment is to abolish that rate of taxation.
This is one of the things it would be a good thing to do, if it could be done, but this again is one of the things the doing of which would cost a substantial amount of money. That is the main reason I cannot accept this amendment. I might point out that the type of house that most frequently passes, the grant type house, is subject to only one per cent stamp duty and not three per cent as suggested by Deputy O'Higgins. Perhaps that one per cent is not adverted to in the chart he is reading.
Could the Minister say how much it costs?
About £500,000.
To repeal it? To remove it?
To implement it.
Amendment, by leave, withdrawn.
SECTION 29.
Question proposed: "That section 29 stand part of the Bill".
This is the section which extends over three more years exemption from corporation profits tax enjoyed by certain public utility companies, as in the case of the Agricultural Credit Corporation and others.
It would be better if the Minister gave it directly to the agricultural community in the way in which I suggested a minute ago.
Question put and agreed to.
Sections 30 and 31 agreed to.
SECTION 32.
Question proposed: "That section 32 stand part of the Bill".
What does this section do?
The purpose is to apply in relation to corporation profits tax certain provisions of Part IX of the Finance Act, 1963, as amended by Part IX of this Bill. The provisions in question are those imposing a charge to income tax on certain capital sums, for example, premiums which are, in effect, in consideration for a letting of buildings or land.
This is the release under 50 years?
Yes, that is it.
Question put and agreed to.
SECTION 33.
Question proposed: "That section 33 stand part of the Bill."
Would the Minister tell us why this section is necessary?
The purpose of the amendment is to make it clear that turnover tax is payable by clubs. Some few of these organisations sought to establish that because there were sales of ordinary goods, drinks, cigarettes and other things like that, to club members that they were not retail sales as such. The purpose of the amendment is to ensure that——
They were not before?
The intention was that they should be.
The way to hell is paved with good intentions. The fact is that they were not covered and the fact that they were not covered provides the necessity for the Minister to introduce this section. I do not quarrel with the section as such but I quarrel very violently with the explanatory memorandum which says that section 33 "confirms the position". It does not confirm the position.
It confirms the intention.
It confirms the intention. There is also the question of the manner in which certain clubs were telephoned before the Budget and asked to pay this and when they dug their toes in and said they were not liable there was an attempt to bludgeon them into paying before the Bill was introduced. It was perfectly clear, from the wording, that in this the Minister has not been retrospective. I only wish that the same enlightened approach had been adopted by him in other respects. This covers only cases from the 12th May, 1965. I do not quarrel with the section as such varying the law as from 12th May, 1965, but I certainly do quarrel with the way in which the Minister has expressed it in the so-called explanatory memorandum which, as we go along, seems to make things even less explanatory.
There was every reason to believe that clubs were, in fact, affected by reason of the provisions of section 47, subsection (4) of the 1964 Act because the subsection stated specifically that:
Moneys received from sales of goods sold by a club or other body of persons to any of its members shall be liable to tax to the same extent as if the sales were made to persons who are not members.
Apparently, notwithstanding these fairly specific words, there was some challenge——
Certainly.
It was not unreasonable to believe that they meant what I thought they said, that sales of goods by clubs to members were chargeable by tax. This removes any doubt.
I would not mind if the Minister had put that in the explanatory memorandum.
Does the Minister tell us that, while in his opinion the 1963 Act was strong enough to ensure that turnover tax would be paid by these clubs and other bodies, in fact, it was not paid?
It was paid, but it was challenged.
It was paid?
It was not paid in some cases.
Can the Minister assure us that all those liable did, in fact, pay?
I can assure the Minister that they did not. I know of a case where the wording of the Act was challenged and it was because of that that we have this section.
If the Minister and his predecessor were so sure about the section they should have taken up the challenge.
Of course, but the section was wrong.
What I am saying to Deputy Corish is that my reading of that now would seem to indicate that this type of sale was caught but apparently there was some doubt and a few people challenged the matter and, having challenged it, there might have been one or two cases which were not taxed.
Did any of those who challenged refuse to pay?
I believe they did.
Is the Minister not going to take it up? They should not be allowed to get away with it. A huckster shop would not be allowed to get away with it and I do not see why these people should be allowed to get away with it.
Question put and agreed to.
SECTION 34.
I move amendment No. 52:
To delete subsection (3).
A moment ago we were discussing the effect of turnover tax on clubs and this subsection is designed to make farmers and fishermen pay turnover tax on the goods they sell by retail. I think I should remind the House that under the Finance Act, 1963, which introduced the turnover tax which has led to much of the economic troubles which now face the country, there was an exemption specifically provided for farmers and fishermen who sold their own produce by retail. That exemption has continued but now there is introduced in subsection (3) a provision which will apply turnover tax to every farmer and fisherman who sells his own goods or his own products by retail, with a saving that the tax only applies to this produce in excess of £150 worth each month.
Under this section and concealed in it, there is, in fact, an extension of the turnover tax to fishermen in the west of Ireland who sell their own produce, a body of men who at times endanger their lives, to farmers who might feel elevated and might seek to derive benefit from Father McDyer's movement in the west of Ireland. Farmers who join any worthwhile co-operative effort to sell vegetables retail will now be taxed under this section. I would feel that this extension of the turnover tax to farmers and fishermen is a most unfair proposal. The object of this amendment is to delete this subsection and to restrict the turnover tax within the confines of the Act of 1963.
Involved in this amendment is opposition also to section 35 which is a consequential provision on this subsection. It is a consequential amendment of the Schedule to the Finance Act, 1962.
It is a lot of cabbage.
If £50 were added—it is an awful lot of potatoes, cabbages, and so on. If you added £50 to this turnover, would it not solve the problem?
In other words, it would not cover anyone.
Co-operatives, as such, were liable to turnover tax, so there is no point in appealing to Father McDyer and the people of Glencolumbkille in this context. Farmers and fishermen who had their own produce and sold it retail to shops that they owned were also liable. As I understand it, the intention was to give relief from turnover tax to farmers or fishermen who are effecting small periodic sales of their own produce. I remember when Dr. Ryan introduced that particular provision in the 1963 Act. My recollection is that he said it was for the purpose of giving farmers relief from the payment of turnover tax for periodic sales of certain surpluses off their land—maybe cabbage, potatoes, and so on—or fishermen who sell fish locally.
Very few fishermen would sell fish at the pier when they landed. There is hardly a hotelier in the south or west of Ireland, no matter what kind of reputation the fishing village may have for the quality or quantity of its fish, that can get fish in that way from the fishermen. They usually sell through An Bord Iascaigh Mhara, whether or not under contract I do not know. However, I know that it is practically impossible to get fish from fishermen in that way. But, if the occasion did arise where fishermen wanted to sell small quantities—for example, they might have five boxes of fish and only about one quarter of another box— they might sell a few fish where that amount would make up, say, one quarter of a box. However, if they had five boxes, you may be sure it would be sold in the ordinary way. This is to facilitate casual sales of these small quantities.
Similarly with farmers who might have a surplus of potatoes over and above what they would normally sell to the market and who would like to sell them locally: they would be given equal relief from payment of turnover tax. There was one case, however, in which certain difficulties arose. I said that farmers or fishermen who sold their produce through retail shops which they owned were and always had been liable——
"Owned": oh, yes.
Farmers selling their produce off the land are not liable but farmers who sell their produce through shops are liable.
To a shop——
——to a dealer who collects it from the farmer.
The shop is liable, then. Take a farmer with a substantial milk round. He does not sell through a shop but with his pony and cart around the town or his motor-driven van. In many cases, such farmers have established very substantial milk rounds. There have been complaints from genuine roundsmen that the farmer has the advantage over them in (1) that he does not have to pay turnover tax and (2) that he can sell the milk, even if he had to pay turnover tax, at a cheaper rate than they can because they, the roundsmen, have to buy from others farmers. It was a genuine complaint and I think I had to meet it.
The turnover tax was the general cause of complaint.
It was the main cause of complaint in this context. If a farmer or a fisherman has casual sales and if they do not exceed £150 in each of two successive months——
Per month.
——yes—then he will not be liable. In any event, the provision will not take effect before 1st August, assuming the Bill is passed, or until the 1st of the month following the month the Bill is passed. This is to meet a genuine case and I think it is a reasonable proposition.
The Minister is missing out the fact that if this is made law, it means that every farmer or every fisherman who sells is subject to inspection and the consequent annoyance which follows inspection. We had an experience a few weeks ago in one of the towns near where I live. A horde of inspectors descended on that town and went from shop to shop.
Probably prices legislation.
The turnover tax.
The turnover tax, yes, and they have been going from town to town. If that starts with the farmers, we know what will happen. I live in a seaside area where, because of early cropping, the farmers are able to sell crops which they grow quicker than they are generally sold in other parts of the country and they sell quite a lot of those crops off the farm. Some people come along and collect quite a stock in vans and drive off into the towns. They may be gathered by the shops themselves. However, most of the produce is in fact sold in small quantities to individuals, people who come to the seaside for a holiday, day trippers, and so on. It would not be an extraordinary sale which would produce £50 in a week for the goods and that would cover the cost of loading as well as everything else.
I also live near a fishing village where it is quite common to sell salmon. At the early time of the year, as the Minister probably knows, salmon is sold at a very high price. It would not be an extraordinary thing to find a few salmon sold for, say, £50. We have it on record where the first salmon this year was sold for very much more than £50. However, in the early part of the year, it is quite a common thing that a few salmon would possibly be sold and would be worth more than £50. It may be said that it would be exceptional. I saw a fisherman who caught 100 salmon in one haul: he did not get any more for the rest of the season.
That was not two successful months.
Somebody with a reasonably lucky season could catch a fair amount of salmon and in two successive months be caught by this provision. He might not get very much more for the rest of the season after that. However, the most serious effect is that it is subject to inspection. I can just visualise the annoyance if those people descend on the farmers and fishermen and start looking for records which are not kept.
No farmer keeps them.
I would support Deputy Tully if the figure were made £200.
That is not supporting Deputy Tully.
I want to help the Minister with regard to this.
Does the Minister think the fellow who sells potatoes down the country will keep records?
The First Schedule to the Finance Act, 1963, as it is at the moment reads:
Exempted Activities (Turnover Tax)
Sales by farmers and fishermen of their own produce otherwise than in connection with the carrying on of the business of a shop or similar retail business.
In other words, if a farmer runs a business, then he is liable because he is selling his produce in a shop. This amendment, and the next one, if it is passed, proposes exempting the sales by farmers and fishermen of their own produce other than retail sales. That means every retail sale by a farmer or fisherman, no matter what it is, is no longer an exempted activity. There is then Deputy Tully's point which I consider is a very sound one. Then the whole question arises: Can it be established that the retail sales in two successive months do not exceed £150? If they do not exceed £150 then the tax does not apply and so on. There is a whole wealth of discrimination and so on, which, the Minister may take it, is trying to light a penny candle from a star. You will not get accounts kept by farmers or fishermen. They just do not have them.
I would not like to ask a fisherman for a receipt.
He would not trust you or what use you would make of it. This will be a deterrent. It will not achieve anything and I do not see the object of it. I suggest the Minister should drop this subsection.
I have another problem. I do not understand what is meant by saying:
Where a farmer or fisherman sells his own produce or any part thereof by retail.
There is no definition of "retail," that I can see, in the Finance Act, 1963. Section 46 gives all the definitions and I cannot see any definition of "retail." I gather from what the Minister has said if I sell a stone of potatoes today and a stone of potatoes tomorrow to somebody who comes along, I am selling by retail. Nobody will eat a stone of potatoes himself at any one time. I do not see any difference between selling a stone of potatoes from my own farm today and another stone tomorrow and selling a bullock from my own farm today, another bullock from my own farm tomorrow and a third bullock the following week and doing that for the next month. Then the farmer is liable for tax because the three bullocks he sold would retail at more than £150.
There is a specific exemption for live animals.
Where? Would the Minister please tell me where it is?
It is in the First Schedule of the 1963 Finance Act.
Why make an exception of the unfortunate who sells the crops he grows?
What about the gooseberries?
What about the strawberries and the apples?
They are throwing them away.
Personally I do not think this is enforceable either. I would like to ask the Minister if he or his Department have any estimate of the number of people who would be affected or the amount of money involved in this? I am sure this was not drawn out of a hat, that there must have been some intelligent thought given to it. There must be some figure. Would the Minister take us into his confidence and tell us exactly what lies behind this? What number of people are involved and what amount of money is involved?
Are the exempted activities in the First Schedule to the Finance Act, 1963, exclusive?
What does the Deputy mean by exclusive?
The second and third category are rather similar.
The second and third are not similar. The second refers to:
Sales by farmers and fishermen of their own produce otherwise than in connection with the carrying on of the business of a shop or similar retail business.
The third category refers to:
Sales of live animals otherwise than in connection with the carrying on of the business of a shop or similar retail business.
When I say live animals are specifically mentioned there, they are exclusive of the type of goods referred to in the second category. I do not know what Deputy Norton is talking about when he asked me to take Deputies into my confidence. I thought I dealt with this in as intelligent a way as I could. You always seem to be suggesting that nobody in the House is as intelligent as you are. I have been as intelligent as I can.
Nothing was said to the Chair about intelligence. The Minister said "you".
Deputy Norton implied there was no intelligence behind the drafting of this subsection.
I did not. I assumed there was, but I said we had not been taken into the Minister's confidence. I asked the Minister to take us into his confidence.
There was a rather cynical tone about the Deputy's remarks. I want to say that I said in as intelligent a way as I could at the start that the purpose of the amendment was mainly to meet what I thought were genuine complaints from milk roundsmen who were finding themselves in competition with farmers who sold their milk in the ordinary way they would sell casual commodities. They were able to do quite a substantial amount of business on sales of milk in towns, and to a lesser extent in the city, to the grave disadvantage of men who depended for their livelihood on selling milk.
That is a lot of cod. Those of us who live in the country know that is not correct.
Is the Deputy suggesting that, if it does not happen in Meath, it cannot happen anywhere else?
It does not happen in Cork. The milk people bottle their milk. Does the Minister suggest farmers are going around with vans selling their milk in the towns and making £150 per month? Either the Minister, or somebody else who told him, must be drawing on his imagination. I could not see it happening and I am sure it does not happen in any part of the country. Surely, if it does, it would be much better to include a section dealing with milk? Why put it in this way, knowing it will cause quite a lot of annoyance? Whether the Minister likes it or not, this will certainly cause quite a lot of annoyance. I referred to the former Deputy Leneghan earlier. He made the Government feel his presence in an effort to have this particular section applied. It was not intended to include it. I am sure the Minister realises as well as I do what happened as a result of that. That Deputy is no longer here to defend the line he took at that time.
He was very convincing at that time.
He lost his seat.
He was so convincing he lost his seat. We now find the thing reversed completely. I am sure the Minister will be very hurt to find that his new found friends are treating his efforts in this way. I think the Minister should have another look at this because I am sure, having heard the arguments against it, he will find it is not quite as simple as it looks.
Before I forget this I should like to answer it because, as usually happens on Committee Stage, when one goes home, one remembers something that was said and one often feels like kicking oneself for not having answered it.
Now is your chance.
I have seen men going around Cork selling loose milk.
I cannot say they were farmers, but farmers do sell bottles of milk direct. I have seen people go around the country selling vegetables in the country towns and around the country generally. We weep bitter tears here for the poor man in the country village for whom nobody is doing anything. Now I am trying to do something to keep him in business.
He will carry on the business, whether this section is here or not. The Minister must realise that.
I do not understand this. There are some men doing a milk round and because they have complained to the Minister in relation to the load of tax they are paying, every farmer in Ireland and every fisherman will be blistered. That is what it comes to.
How many farmers in Ireland are selling stuff like that?
That is what I should like to know.
The Deputy said every farmer in Ireland will be blistered.
Deputy Norton asked a question and it has not been answered. He said that in order to understand this, he would like to know how many people will be involved and how much money will be raised from this. We have not been told. The Minister says it is because some milkmen have complained to him, not because they want to get off the turnover tax—although I am sure they would not mind getting off it—but because they were saying: "I have to pay and that fellow has not to pay; make him pay." It would be the simplest thing to bring in a section relieving milkmen.
That would be very simple.
What is the case to be made for fishermen? Is there somebody telling on the fishermen? Who is complaining about the fishermen? Surely we should know at this stage how many will be involved in this new taxation. Surely the Minister can give us that information? Deputy Norton has asked for it and I ask for it now.
I cannot give the answer now. I am bringing in this amendment in the interests of fair play.
Is the Minister not answering because, for example, everybody who sells more than £300 worth of grain for a period of three months will be caught now for turnover tax. That is a common thing in County Kildare, and one could go on.
Nobody will sell grain retail in that way.
I do not know what "retail" means. I think selling grain in that way means selling it off my farm. There is no definition of retail. Will the Minister define "retail" as meaning selling in a shop or, as I may point out to the Minister, as it is defined in the Schedule to the Act of 1963—the carrying on of a business or a shop or similar retail business. If it were to be like that, then this amendment would make sense. Then it would not mean there would be hordes of inspectors going into every farmer's buildings to discover whether or not he was selling grain.
Deputy Smith would come back again.
I shall leave that to the boys opposite to decide. They will cope with that situation. The plain fact of the matter is there is no definition of retail. Does it mean selling everything off my farm that is not exempted, such as live animals as the Minister told me, for example? Hay is sold on the farm. No farmer sells hay wholesale. What does that mean? What will it be when it is sold to another farmer who wants it? Barley is sold to one person, not to somebody else to sell, or to a shop.
Including the duty-free shop at Shannon Airport.
Who will dole out the barrel of barley in 16 different parcels of a stone each? It would be sold retail if it were done that way. Each sale the farmer makes for the purposes of the definition in this section is a retail sale and the Minister has to amend this, or perhaps, as he will not give us the amount, in this lies the cue, the answer to what the Minister wants to do—to force every farmer in the country to pay turnover tax.
I would again suggest as a way out to the Minister that we do not want the arms of the Revenue Commissioners to envelop the whole country. I would suggest a figure of £150, £200 or £250—a figure which would leave that area out. We must make the best legislation we can.
We do not want hordes of inspectors going in on Deputy Lenihan's farm.
Might I suggest to the Minister that this is not workable? When I said I presumed there was some intelligence behind this, the Minister took offence and thought I was being cynical. He has since suggested that there is, in fact, no point behind it.
I am not thinking in terms of income at all but in terms of fair play.
The Minister will tax.
Might I suggest to the Minister that if this is to help the milkmen, the suggestion Deputy Sweetman made to exclude all milkmen would seem the only method to deal fairly with it. This will not be enforceable and I do not think the Minister thinks it is, either.
Let that be my worry and the Revenue Commissioners' worry.
What about the chicken butcher? If the farmer sells his chickens, are they exempted under the livestock provision?
They are exempted anyway because they are live.
Supposing their necks are wrung before he takes them out?
How is the chicken butcher to compete with the farmer who sells his chickens off the farm? Will he not come into the same category as the milkman? Will the Minister come back next year and look for an exemption for chickens?
The Minister says he is doing this in the name of fair play. The original Act was not his child. Would the Minister consider it fair play to tax medicines for human beings?
That has nothing to do with the amendment.
The Minister says he is not interested in the income from it. Do we understand he does not anticipate income from it?
I do not anticipate much.
I suspect that there will be quite a lot of income.
About six people whom we might call auditors or inspectors will deal with this. They will not be rapping at the doors or jumping over the hedges.
They do not jump over the hedges; they lie in the hedges.
Will any extra inspectors be involved?
We have all the inspectors we want in Naas at present.
In view of the fact that we did not get any information from the Minister, I call for a vote.
Question put: "That the subsection stand."
The Committee divided: Tá, 59; Níl, 45.
Tá
- Allen, Lorcan.
- Andrews, David.
- Blaney, Neil T.
- Boland, Kevin.
- Booth, Lionel.
- Boylan, Terence.
- Brady, Philip.
- Brennan, Joseph.
- Brennan, Paudge.
- Breslin, Cormac.
- Briscoe, Ben.
- Burke, Patrick J.
- Calleary, Phelim A.
- Carter, Frank.
- Carty, Michael.
- Childers, Erskine.
- Clohessy, Patrick.
- Colley, George.
- Collins, James J.
- Corry, Martin J.
- Cotter, Edward.
- Crinion, Brendan.
- Cronin, Jerry.
- Crowley, Flor.
- Crowley, Honor M.
- Cunningham, Liam.
- Dowling, Joe.
- Egan, Nicholas.
- Fanning, John.
- Faulkner, Pádraig.
- Fitzpatrick, Thomas J.
- (Dublin South-Central).
- Flanagan, Seán.
- Foley, Desmond.
- Gallagher, James.
- Geoghegan, John.
- Gibbons, James M.
- Gogan, Richard P.
- Hillery, Patrick J.
- Hilliard, Michael.
- Kenneally, William.
- Kennedy, James J.
- Kitt, Michael F.
- Lalor, Patrick J.
- Lemass, Noel T.
- Lenihan, Brian.
- Lenihan, Patrick.
- Lynch, Celia.
- Lynch, Jack.
- McEllistrim, Thomas.
- Millar, Anthony G.
- Molloy, Robert.
- Mooney, Patrick.
- Moran, Michael.
- Nolan, Thomas.
- Ó Briain, Donnchadh.
- Ó Ceallaigh, Seán.
- O'Connor, Timothy.
- Smith, Patrick.
- Wyse, Pearse.
Níl
- Barrett, Stephen D.
- Barry, Richard.
- Belton, Luke.
- Clinton, Mark A.
- Collins, Seán.
- Coogan, Fintan.
- Corish, Brendan.
- Cosgrave, Liam.
- Costello, Declan.
- Creed, Donal.
- Crotty, Patrick J.
- Desmond, Eileen.
- Dillon, James M.
- Dockrell, Henry P.
- Dockrell, Maurice E.
- Dunne, Thomas.
- Esmonde, Sir Anthony C.
- Farrelly, Denis.
- Fitzpatrick, Thomas J. (Cavan).
- Gilhawley, Eugene.
- Governey, Desmond.
- Harte, Patrick D.
- Hogan, Patrick (South Tipperary).
- Belton, Paddy.
- Burke, Joan T.
- Burton, Philip.
- Hogan O'Higgins, Brigid.
- Jones, Denis F.
- Kyne, Thomas A.
- L'Estrange, Gerald.
- Lindsay, Patrick J.
- Lynch, Thaddeus.
- Lyons, Michael D.
- McLaughlin, Joseph.
- Murphy, William.
- Norton, Patrick.
- O'Donnell, Patrick.
- O'Donnell, Tom.
- O'Hara, Thomas.
- O'Higgins, Michael J.
- O'Higgins, Thomas F.K.
- Ryan, Richie.
- Sweetman, Gerard.
- Treacy, Seán.
- Tully, James.
Tellers: Tá, Deputies Carty and Geoghegan; Níl, Deputies L'Estrange and T. Dunne.
Question declared carried.
I hope the farmers and fishermen of the west of Ireland realise what the Fianna Fáil Party have done.
The fishermen will know it was Deputy Carty who slit their throats.
Section 35 agreed to.
SECTION 36.
Question proposed: "That section 36 stand part of the Bill."
Is this a new provision?
It is the new relief, a new means of appeal. The purpose of the section is to provide a right of appeal to the Special Commissioners in cases where persons accountable for turnover tax disagree with the Revenue Commissioners as to whether a particular activity is liable or exempt.
Have they an appeal to the circuit court as in cases of income tax?
It is not so stated here but I expect they have.
We need more than "expect". We need to be sure there is an appeal. An appeal only to the Special Commissioners is like going to the court of the devil, meaning no disrespect to the Special Commissioners. Is the Minister able to tell me?
I am almost certain there is. If the Deputy would give me a second or two——
Certainly, if the Minister wants to consult his brief. If there is not, will the Minister agree to introduce one?
Yes.
Question put and agreed to.
SECTION 37.
Question proposed: "That section 37 stand part of the Bill."
There is specific provision in section 37 for a right to appeal to the circuit court.
Does this apply also to the previous section?
Section 54 of the 1953 Act and section 36 of the present Bill.
Question put and agreed to.
SECTION 38.
Question proposed: "That section 38 stand part of the Bill."
What is the position with regard to taxation of builders' profits?
Chaos.
It is a long story. If a builder goes in on land and develops it and sells houses off the land, assuming he buys the fee simple of the land and sells houses as he builds them by way of lease, under existing law, even though he is carrying on that as a normal trade, he is not liable to income tax. He is liable only under Schedule A—tax related to the PLV of his land. He does not dispose of his interest, only of a lessor's interest, and the courts have held he is not liable to income tax in the ordinary way of trade. One attempt was made to prevent this. It was in the 1935 Act which provided that if the builder went in with the intention of building, he would then be caught. However, it was found impossible to prove intention and this part of the Bill is intended to get around all these difficulties and the other means of avoidance of tax. That is very briefly what the provision means.
It is pretty accurate, except for one thing. Certain people declared they had no intention when in fact that was untrue.
That is so. It was implicit in my reference to the word "intention".
Does this mean additional moneys for the Exchequer?
As it stands, it means a loss of a lot of money.
They were getting away with a certain amount of loot.
Would it affect land made available by local authorities to private builders?
No.
What is the meaning of the words "or indirectly" in paragraph (h) of subsection (3) on page 31, lines 48 to 52?
That would apply to a person who employs or gets somebody else to make a settlement on his behalf, whereas in fact he is the principal in the operation.
Is there an appeal against the decision of the Revenue Commissioners that there is not an indirect transaction?
There is an appeal.
Question put and agreed to.
SECTION 39.
I move amendment No. 53:
Before subsection (3) to insert a new subsection as follows:—
"() Notwithstanding the provisions of subsection (2) a business of dealing in or developing land shall not be deemed to be carried on where the person so disposing of the same had been in occupation thereof for the whole of the three years prior to such disposal as his only or main residence."
This, the Minister's amendment and Deputy Sweetman's amendment are all to the same effect. The object is to ensure that the provisions of these sections shall not apply where in fact there has been family residence in a house, where the person has lived in it and merely because when it is subsequently decided to sell that house there has been, whether it is fortuitous or otherwise, an increase in its market value, it does appear unreasonable that taxation provisions should apply.
I take it that the whole object and purpose of these sections is to deal with the tax evader, the man who dodges the liability for income tax which ordinary folk have to face up to. It is not intended, at least I assume it is not intended, to deal with the case where a person has as his residence a place which he bought for that purpose or which his family had for that purpose, which is frequently the case, and when by reason of a change in family plans or for some other reason it is decided to sell it and there is at that stage an increase in its market value which often may be only in keeping with the change in the times. I would feel that the section should not impose on that person a liability to tax. That is the object of my amendment and I think it is the sense also of the Minister's amendment and of Deputy Sweetman's amendment.
Yes; if the person has a house built for himself and goes in to occupy it as his exclusive and only dwelling, then it does not matter how long he stays in it, if he sells it again, he is not caught.
What does "exclusive occupation" mean? Are you not allowed to have your wife and family in the house?
If I used the word "exclusive," I used it wrongly.
It is used in the section.
It certainly includes his wife and family; in fact, anybody who ordinarily lives with him. He could have other dependants.
There is one case I know of, for instance, where a person is living now in what was originally a family residence and which is, in relation to his own particular family, now, a very large mansion and he has portion of it let. In due course, presumably, that person will sell that house. First of all, I am concerned that these sections should not apply to him at all because this was not a purchase for the purpose of development or of tax dodging. If the Minister agrees with me, some amendment should be provided to ensure that. Also, I am concerned with the use in the reconstruction section of the words "exclusive occupation". Does that mean that if there has been a letting or subletting of any portion of the house then these provisions will apply? Has a person to be in occupation of the entire of the house for either this period suggested here or some other period, and so on? Does the fact that portion of it may be let destroy whatever protection exclusive occupation is entitled to?
In the case of the person mentioned by Deputy O'Higgins, if he had got this house and put in a tenant and sold it even with this tenant in, it would not be caught.
It would not be caught?
No, he would not be caught.
Could I make a suggestion to the Minister? I have heard the lawyers on both sides.
There is no dispute.
In regard to section 39, in the very last subsection— (4) (b)—you have 100 answers there. If you exempt Case VI out of this legislation, you will be freeing your farm and your little, small developers, fellows who want to make a pound for themselves, because this is the great dragnet of the Revenue Commissioners. I put it to the Minister on Second Reading and I put it to him again that he will solve all his little problems if he does that and I would ask him to think about it.
We are discussing Part VII. Is it the suggestion that it should be deleted?
No—Case VI of Schedule D. There is Case I, which is the ordinary trade.
I want to come on to the amendment.
Is amendment 53 withdrawn and is amendment 54 agreed?
I want to say a word on this amendment. I thought we were discussing them all together.
We were discussing amendment No. 53.
No; all together.
Very well.
I want to make this case to the Minister. There is the case of a person who builds a small seaside bungalow, goes and uses it himself for the summer and maybe lets it for one month of the summer either to a friend or, perhaps, even to some of his family. If he goes to sell that, is he not going to be caught for capital gains tax on such a sale?
I think Deputy Cosgrave has an amendment to that effect, amendment 57.
It was that case that I was considering in amendment 55. I framed my amendment rather differently.
I should like to follow Deputy Lenihan on this because it appears quite clear to me that the Minister is not the slightest bit interested in these small exceptional cases that have been quoted from the opposite benches. I do not think he has any intention of taxing people in that capacity. What I gather is that the Minister is trying to make sure that anybody who really is making a business of this, even in a small way, must bear tax just as he would if he extended his operation and made it really a full scale business. I am with the Minister there entirely. I think people who do go over the borderline should get caught but I do agree with my colleague, Deputy Lenihan, here, that it is this intrusion of Case VI of Schedule D, the all-embracing section, which is giving rise to all this trouble and, like him, I would ask the Minister to look into the matter very carefully to see whether the reference to Case VI in subsection (4) (b) might be omitted altogether. If that is done, we will still catch the people the Minister wants to catch but we will not impose an injust burden on these small people who are just making a few quid possibly here and there.
There may be an isolated instance which could be so well organised as to make a very big amount of profit but I take it the House would not suggest that because it is an isolated instance, and well organised by a group or by a company, of property being developed and then sold in a way that might appear to be a once and for all transaction, that it should escape. I think the House would agree that that is not the kind of case that should escape but I had to make sure that I covered the case proposed by Deputy Lenihan and Deputy Booth and to bring in a measure of relief—I think it will apply more to section 41 than to this section —and to give that measure of relief to isolated transactions, whereby, even if a reasonably substantial profit is made, say about £1,000, that that would be specifically excluded.
That would be a tremendous improvement.
Progress reported; Committee to sit again.
The Dáil adjourned at 10.30 p.m. until 3 p.m. on Wednesday, 7th July, 1965.