I move amendment No. 6:
Before section 8, but in Part I, to insert a new section as follows:—
"Rule 9 of the Rules applicable to Schedule E contained in the Income Tax Act, 1918, is hereby amended by the substitution of ‘reasonably to incure expenditure for the appropriate performance' for ‘to expend money wholly, exclusively and necessarily in the performance'."
This amendment is designed to provide a measure of relief for salary and wage earners. Before making my case for the amendment, I want to draw the attention of the Minister and of the House to the context in which this amendment has been framed. Wage earners and salary earners are the most important single section of the tax-paying community. Numerically, they amount to about 90 per cent of the total number of taxpayers. Over the past several years, the total tax collected from wage and salary earners has increased very substantially indeed, particularly since the introduction of PAYE.
As I mentioned here on section 1 last week, there is an old maxim of the law to the effect that equity is a stranger to income tax. I have suggested that the Minister's predecessor was too readily prepared to live with that situation. We have a tax code— again, as I mentioned last week— which was never designed for our circumstances and for our times, a tax code which was first introduced to this country in 1853, having originally been drafted away back in the first decade of the last century by the then British Prime Minister, Sir William Pitt. In so far as there are anomalies, inequities and injustices in that tax code which relate to wage and salary earners, it is even more desirable in this case, in simple justice, to rectify these anomalies and inequities because of the inequitable extent to which we are leaning on wage and salary earners for direct tax revenue.
This amendment appears to be somewhat technical. It is an amendment of Rule No. 9 of the Rules applicable to wage and salary earners— Schedule E Rules—as laid down in the British Act of 1918 which is still in force in this country. I shall read the Rule: it is quite brief. It is:
If the holder of an office or employment of profit is necessarily obliged to incur and defray out of the emoluments thereof the expenses of travelling in the performance of the duties of the office or employment, or of keeping or maintaining a horse to enable him to perform the same, or otherwise to expend money wholly, exclusively, and necessarily in the performance of the said duties, there may be deducted from the emoluments to be assessed the expenses so necessarily incurred and defrayed.
From the reference to keeping or maintaining a horse, it may be surmised that the Rule is of very long standing. In fact, it is intact in the 1918 Act as it was in the British Act of 1853.
That brings to mind a picture of the Minister coming into Dáil Éireann riding his horse or being driven by his coachman behind a pair of spanking bays. It is as antiquated as that, as are, indeed, other Rules in the tax code. I have said here, time without number, that such Rules are quite unsuited to these times and to our conditions. That Rule is a very restricted rule. It has the effect of depriving wage and salary earners of tax relief in respect of legitimate expenses incurred by them in the earning of their salaries and wages.
The amendment I have drafted is as recommended by the Income Tax Commission. This Commission reviewed the British background of this Rule and had a look at the decisions of the various Royal Commissions which considered this, amongst other matters. The British Royal Commission of 1955 stated there can have been no part of the tax code which has been so regularly the subject of unfavourable notice as this Rule 9. It has been variously described by learned judges as "jealously restricted", "strictly limited" and "a very narrow and strict Rule". These are quotations from the Report of the Royal Commission, which also give the references to the cases from which the learned judges' remarks are quoted. In one case the provisions of the Rule are described as "notoriously rigid, narrow and restricted in their operation". In the test case, Bolan v. Barlow 1949, the learned judge in Britain declared:
A great number of these cases have produced in my judgment extremely hard results.
It is a Rule which undoubtedly causes a considerable amount of hardship when applied to particular cases. It is a Rule—and this is a most important point—confined to wage and salary earners. It is not a Rule applied to business people taxed on a different part of the tax code and entitled to considerably more latitude and discretion in deciding what expenses they incur in the earning of their profits.
It is not unfair or untrue to say that for all practical purposes wage earners and salary earners are not allowed any expenses as of right. In some cases by concession they are allowed a limited sum in respect of tool money and overalls. These are the restricted examples that occur to me. A worker cannot claim his trade union subscription as an allowable expense for tax purposes. A salary earner who is a professional person, a member of the expanding group of managerial persons, cannot even claim his subscription to his professional association. If he does not pay it, he will be struck off his professional roll and no longer qualified to hold his job. Let us say he is an architect in the Board of Works or a lawyer in the employment of Deputy Sweetman.
I think there is an unanswerable case for this amendment. Under the present Rule, the Revenue are forced into the anomalous position of making very unreal distinctions as between what an employee is obliged to incur in the performances of his duties and what it is desirable he should incur. There is great emphasis in this Rule on the physical performance of one's duties. If an architect, for example, ceases to be a member of the architects' institute he will not be physically unable to prepare plans or make drawings, but he will cease to be an architect. That is an example of the unreal distinctions made under this, not to speak of the broader range of cases involving expenditure on books for their professional learning, on tools and protective clothing and involving for certain types of salary and wage earners perhaps the provision of secretarial assistance and of a motor car.
I do not want to labour the case. As I said on a previous amendment this evening, the fact that our Income Tax Commission considered this matter at length, considered the pros and cons of the various courses of action and came up with the proposal which is involved in my amendment, in itself should be sufficient for the Minister. Bereft of technical details, the nub of my case is that wage and salary earners and individual taxpayers are a section of the community who in equity are most harshly and indeed unjustly treated by our tax code. The implementation of this amendment would be an instalment of justice for these sorely afflicted people.