Dáil Éireann díospóireacht -
Tuesday, 13 Jun 1967

Vol. 229 No. 3

Finance Bill, 1967: Committee Stage (Resumed).

NEW SECTION.

Mr. Sweetman

I move amendment No. 10:

Before section 10 to insert a new section as follows:

"Section 439 of the Income Tax Act, 1967, is hereby amended by the insertion in subsection (1) of a further paragraph as follows:

`(v) or being payable to a charity for a period which exceeds or may exceed four years provided that the exemption provided by this paragraph shall not be effective for purposes of surtax'."

The point of this amendment is to provide that a convenant on income in certain circumstances for a charity will be effective for relief in income tax but will not be effective by way of surtax relief for the purpose of enabling otherwise a high surtax payer to give, at the expense of the revenue, substantial sums to charity. A case could be made that if substantial sums were to be given by a surtax payer in these circumstances to a charity, the surtax payer should give them himself and should not make the selection in such a way as to give the large amount that would be involved in surtax at the expense of the revenue.

This is a matter which was dealt with at some length in the Seventh Report of the Commission of Income Taxation, and the Commission ultimately, in paragraph 355, arrived at the conclusion which is included in my amendment and which has also been submitted by other bodies concerned over past years to various Ministers for Finance. Let me say at once that I do not claim at all that the drafting of the amendment is 100 per cent effective to carry out what I have in mind. It seems to me that this was the appropriate drafting in which to implement paragraph 355 of the Commission's Report, but if, in fact, it does not do it in that way, then I want to make it clear that it is the principle I wish to urge on the Minister and on the House rather than the wording of the draft.

The position in relation to covenants was that they were allowed for certain substantial purposes in relation to charities until the Finance Act of 1940 was framed to put an end to subscriptions to charitable purposes being given by people who were paying heavy surtax. The charity got, in effect, a subsidy from the State, I agree, and, in addition to that the subscriber got a substantial reduction in the amount of his surtax. That restriction, therefore, that was included in section 3 of the Finance Act, 1940, and which was carried in with section 439 of the Consolidation Act, was one which reasonably enough prevented the surtax payer taking a covenant as a charge on his income for the purposes of reduction in surtax. The Minister for Finance of that day made it very clear, when introducing section 3 of the Act of 1940, that it was an escapement from surtax which he thought all wrong and a gap he was anxious to close.

I do not know what the amount involved in this amendment at the present time would be. Even then it was only £13,000 a year, and the Seventh Report of the Income Taxaation Commission, which I would say from recollection, was published around 1962, estimated that perhaps the amount that would be lost in surtax if section 3 of the 1940 Act were wholly repealed would be £50,000. For that reason the Commission at that time, and I in this amendment, deliberately excluded surtax, so that the revenue would not lose the £50,000 involved and would not lose any surtax on such covenanted income in the future.

At that time when the Commission was considering the matter, the Revenue Commissioners pointed out that the covenant system was likely to be entirely lopsided because people with modest remuneration would not be liable to income tax and, accordingly, would not be able to avail of a subscription to charity in this way. That may have been true then, that they were not so liable, but with the increase in monetary remuneration, apart from real remuneration, and with the manner in which allowances have remained static, people now are liable often to heavy income tax without having any excessive incomes at all. In fact, many people with most moderate incomes have now pretty heavy tax liabilities.

At that time also the provision in relation to a covenant was that it had to be operative for a period in excess of six years. It was felt then that the obligation to look ahead so far was a thing that militated against the person of moderate means. Accordingly the Commission came down flatly and recommended that the covenant to rank in this way should be one that could operate for more than four years. The Report also made it clear that the Commission were very handicapped in considering the matter of covenants because of lack of information. I do not think that can now be the position because there has been a campaign, if I may so describe it, in recent years by Revenue to obtain such information.

Various people from time to time— in particular, my colleague, Deputy P. Byrne—agitate against carrying in certain provisions here from British tax legislation. That always infuriates Deputy Byrne, and rightly so, because if it is a taxing provision we always copy it but, if it is a relieving provision, we never carry it into our legislation. It is interesting to note in this respect that the British Revenue authorities have provided relief exactly of the type we ask for in this amendment. There are many charities which would benefit considerably if this amendment were accepted. The universities have got a concession in respect of research. Science is treated as research. There are areas of university education in which it would be highly desirable to afford an opportunity to those who graduated from those universities to support the universities by tax-free subscriptions. That would be a substantial help.

There are many charities which have the greatest difficulty in carrying on and anything that might act as an incentive to people to subscribe to these very worthy charities is something of which I am sure everybody would approve. Restricting it to income tax alone, I do not think the Minister would lose by accepting the principle of this amendment. The amount would be small in the context of the Budget with which we are dealing.

Secondary schools naturally try to get help for projects of one kind or another from their past pupils. These schools would be helped considerably if this amendment were accepted and the schools would be enabled to deal with their appeals in a way in which they would be guaranteed far greater support and a much bigger response.

The Minister may argue that the effect of this amendment would be to give something to these charities at the expense of revenue. That is not so. The amount involved from the revenue point of view would be very small. Payment would be the net amount under the covenant when one takes into account that it is not to be treated as a charge against income for surtax purposes. There would be the dual effect in that it would act as an incentive, on the one hand, and represent, on the other, a saving in relation to certain aspects and permanent features of education. It would also act as an incentive in regard to other charitable works which are badly in need of funds. I accept, without question, the definition of charity as a charity operative in Ireland. If the amendment is not absolutely copperplate, it can be amended.

Mr. P. Byrne

This is an amendment with a social purpose. It is quite remarkable to discover the astonishing number of charitable organisations doing national work without any assistance of any kind from the State. The position here in that respect is in marked contrast to the position obtaining in other countries and, in particular, the position obtaining in Great Britain where the paid social worker is commonplace. We have literally dozens of religious orders quietly doing the most remarkable work. If this work were not done by them, it would have to be done by the community, at considerable expense to the community.

There is no harm in being specific. I am carrying on annually a tradition founded by my late father many years ago; annually I am invited to preside at the opening of a sale of work in Portland Row. The good nuns there do not get one pennypiece from the State. The order which runs the Hospice for the Dying does not, so far as I know, get one pennypiece from the State. The Little Sisters in Kilmainham and in Roebuck do not get one penny from the State. There are orphanages run by nuns, in which literally thousands of children are cared for, which get the most meagre of State assistance and, in some cases, no State assistance at all.

This amendment is designed to serve a social purpose by generating a new source of subscription from the charitable public. We are alleged to be living in an affluent society. It is a marked feature of our society that those who are newly affluent are not as socially conscious as one would wish them to be. There are demonstrations of gross vulgarity by the new rich. They are not giving the lead they should give. They do not recognise their responsibility. The acceptance of this amendment would provide such people with an incentive to make what might be described as a healthy transfer of income for the benefit of those in need. The amendment would, in fact, serve a socially desirable national purpose. It is a very reasonable amendment and one which was recommended by the Commission on Income Taxation in its Seventh Report. It behoves the Minister not lightly to disregard the recommendations of that Commission which studied this problem in considerable detail. Any argument which the Minister can produce against the amendment was anticipated by the Commission.

When the change in the law, which disqualified charities which previously benefited, was effected in 1940, the Minister for Finance at the time was under considerable wartime stress. That situation no longer exists. He was concerned about the loss of revenue in surtax of £13,000 a year. He felt it necessary to plug that gap. The need for this 1940 restriction is no longer with us.

There will be very little loss of exist ing income tax revenue to the State in this amendment is accepted. It will serve to provide an incentive to gene rate a new source of income for the deserving charities of which I have spoken which are put to the pin on their collar to carry on in these extra ordinary times of fantastically high costs.

The Lord knows, having regard the fact that so little is done by the State, officially, for the bodies of which I have spoken, it would seem not be asking very much of the Minister to accept this amendment.

Minister for Finance (Mr. Haughey)

I want to say, at the outset, that regret to have to inform the Deputies opposite that I am not in a position to accept the amendment. I agree with Deputy Sweetman that it is not necessary for us to argue about the wording of this amendment and that we can discuss it in principle. I must tell the House that I am opposed to it in principle.

Before I say any more, I should like to agree with some of the things which Deputy Byrne and Deputy Sweetman have said and to disagree with some others. First of all, I want to subscribe fully to the tributes paid to the many wonderful charities which carry on, in difficult circumstances, in our capital city and indeed throughout the country. Certain religious orders, as Deputy Byrne pointed out, render a most valuable service to the community. It is difficult, in regard to some of the services they render, to see how the work would be done if it were not undertaken by religious bodies. As I go about my duties as a public representative, like other Deputies, I am, time and again, struck by the devotion and the dedication of these people, both lay and clerical, to the various charitable purposes which they undertake.

I disagree with Deputy Byrne in his reference to some apparent lack of interest by the better-off in the less well-off sections of the community. In my experience, it is the opposite. I am continually amazed at the generosity and decency of the ordinary people.

Mr. Byrne

I was not speaking of the ordinary people; I was speaking of the new rich.

Mr. Haughey

There may be some of the nouveau riche who are not mindful of their obligations. I cannot say I find that generally. I find that there is a great generosity and charity at all levels of our society. Like other Deputies, I have the experience from time to time of helping this or that particular cause. I personally cannot agree that there is any great deal of selfishness in our society or in our community at any level. I suppose that, in our society, there will always be some who are not prepared to accept the obligations which their comparative affluence would place upon them but I do not think this is general. In any event, that is largely by the way.

I am opposed to this idea, on principle, because, in the first place, I do not think it is the desirable way to do what the Deputies have in mind. I do not think it is the right way to go about achieving this particular objective. They want to help charities. I have pointed out that there are many charities that carry on with very great difficulty without any assistance from the State. That is true. I am not sure that it is not a good thing, in many cases, that they do not get assistance. There are certain types of institutions which glory in the fact that they do not get State assistance. They seem to be able to command a greater degree of loyalty and dedication from their members and supporters because of that very fact.

Mr. Sweetman

Does the Minister not think that is really only applicable to a subsidy than to anything else? This would not be a subsidy.

Mr. Haughey

For the charity in need of support, the precise way of doing it and the orderly way of doing it is to give direct assistance from the State. That assistance could then properly be measured on the basis of the situation of the particular charity and geared to its exact requirements. This method could be a very imperfect method of doing it. In effect, what would happen here is that for every £1 a person gave to a charity, the State would, willy-nilly, have to give 10/-. We would, in fact, be giving the power to a private individual to decide, in relation to a particular charity, that the State would give a 10/- supplement to it for every £1 that the covenantor gave it.

I do not think an individual should have that selective power. He is perfectly free to give his own money to any charity he wishes but the effect of this amendment would be that not alone would he be giving his own £1 but he would in fact be taking from the Exchequer another 10/- for the charity of his choice.

Mr. P. Byrne

The Minister is already doing this for research work and science teaching.

Mr. Haughey

That is a breach in the code. I am not sure it should have been made. However, it is there and I do not now propose to interfere with it.

Deputy Sweetman referred to the situation in Great Britain. It is of very great interest to us to see what has happened there. In Great Britain, this system applies. Deputy Sweetman is quite right: in Great Britain it applies for the purpose of income tax and not surtax. I understand that there is the most intense activity by professional fund-raisers in Great Britain in regard to these convenants. Of course, the professional fund-raiser is very much in favour of a convenant because it binds the donor to give a particular amount of money for a number of years. I understand that there is actually very intensive advertising and door-to-door canvassing in this regard. They go so far as to specify the type of convenant and so on.

There is no doubt that, if we were to agree to Deputy Sweetman's proposal, it would certainly skyrocket here too. We know that various charities are more and more engaging the services of professional fund-raisers and we could expect in a short number of years that these covenants would mushroom into something very substantial. It is difficult to put a figure on it, and I do not want to attempt to mislead the House and to use figures to confuse the House, but I am told that we could contemplate a loss of revenue of something like £¾ million a year.

Mr. Sweetman

Yet the Commission said only £50,000, including surtax.

Mr. Haughey

I agree, but the Commission were talking about some time ago. This notion, as I say, is catching on very much in Great Britain and it would follow very rapidly here.

Mr. Sweetman

Is the Minister referring to limiting it to income tax?

Mr. Haughey

I do not want to be throwing out figures, which I cannot very scientifically substantiate, to buttress my argument.

Mr. James Tully

What figure did the Minister say?

Mr. Haughey

£750,000.

Mr. James Tully

Threequarters of a million pounds. That makes a very big difference.

Mr. Haughey

That would be after a period of years if the thing were to develop on the line on which it is developing in Britain and which would most certainly follow here. There is that aspect and it would be a different proposal from what the Commission had in mind.

Secondly, there is this very solid argument in principle against it. We should not give the right to the individual taxpayer to take 10/- from the Exchequer and give it to the charity of his choice. There is no objection to his giving his own pound and it is open to him to give that one pound to the charity of his choice but it is a different thing when he takes 10/- and adds it to his own.

I am afraid that for these reasons I have no option but to oppose the amendment, much as I am in sympathy with the notion behind it, the social purposes to which Deputy Byrne has referred. But if we want to achieve that particular social purpose, if a charity finds it cannot carry on on the basis of voluntary subscriptions and voluntary work, then the proper machinery is for them to go to the appropriate Minister under whose jurisdiction the charity works, whether the Minister for Health, Social Welfare, or whoever it may be, and say: "Here is our financial position; our expenditure is so much and we can depend on so much income from traditional sources, and we must have a grant." The taxpayers for the specific purposes of the charity could decide to support the particular form of activity. In this way you would not be spending the taxpayers' money at the discretion of the individual, which I think is indefensible.

Mr. Dillon

In all matters relating to the raising of revenue, we usually take a swipe at the Revenue Commissioners via the Minister for Finance and perhaps I may be excused if on this occasion I ask the Minister, on behalf of the House, to compliment one of our distinguished Revenue Commissioners on the international honour being so appropriately conferred on him. It reflects a high distinction. Mr. Culligan has been appointed Chairman of the Customs Co-operation Council in Brussels. I know I speak for all sides when I ask the Minister to express our satisfaction with this well-deserved honour.

The point involved here really is the Revenue approach and, I trust the Minister will excuse me if I say, the commonsense approach. I consider that when we start speaking of £¾ million from the Treasury point of view, the Revenue Commissioners have an obligation to tell the Minister what is the maximum they reasonably apprehend cases of this kind might involve the Exchequer in and thereupon say to him: "If you want to spend £¾ million, we imagine you prefer to inform the Government that you have this at your disposal for distribution and let the appropriate Department increase the social services to the tune of approximately this sum and then we will know where we are, whereas this is a step in the dark."

May I ask the Minister to contrast with that the commonsense point of view? The purpose of this amendment is to operate on human nature which we politicians understand much better than the Revenue Commissioners do. Many a person is contributing to an orphanage or to some of these organisations to which Deputy Byrne referred, whenever the case is made to him anew about the merits of the charity, but having made his subscription and the thing having passed out of his mind, he does not subscribe again. Here, however, the case can be made on behalf of a deserving charity: "If you will undertake to subscribe for five years, the charity will not only get the benefit of your subscription but also the refund of the income tax". In the vast number of cases, people would gladly contribute for the period of five years ahead for the very reason they gave the first subscription.

On the other hand, there are cases where people will say: "I am good for one contribution but I am not prepared to commit myself further; come back again if you want to". There is no use anybody in this House saying that a proviso such as that contained in the amendment would not encourage ordinary people to convenant for the support of a charity to which they would otherwise give a single contribution. In the matter of principle mentioned by the Minister, I think that disposes of the argument that this amounts to no more than charging the Exchequer with 10/- for every £1 the donor gives. In fact it does encourage the average donor to undertake to repeat his donation for a period of years. There is no answering the case made by Deputy Byrne that a great number of these charities do work that the State, of its very nature, cannot do.

I do not agree in the matter of principle raised by the Minister that, if there is a worthy work in progress which we all here in Oireachtas Éireann come to the conclusion requires further finances than are available by way of charitable donation, the proper thing is to bring the matter to the attention of the Minister responsible for that general sphere of activity so that, if he can, he will prevail on the Government to provide some supplementary income which the Government see their way to provide. I want to impress on the Minister most energetically that in that principle he is wholly mistaken because in the ordinary course of financial practice —and it is a sound course as a general rule—if public money is donated to a body not directly responsible to the Minister, then the Committee of Public Accounts must follow it up. I know that to that rule there are exceptions.

I remember when I was Minister for Agriculture there was the question of the IAOS charity. It was a society concerned with the development of co-operatives in the country and was entitled to an annual grant. I remember saying: "I am going to ask the Government to increase your grant, and not only that, but I am going to suggest that your receipt will be a full discharge for the Accounting Officer." I remember another voluntary body which was doing work of incomparable value to the rural community. These people could not expand their work if they could not hire six organisers. They were prepared to say to me that, if they could get the money to get these six organisers, they would never have to ask for a penny. They could get the money they wanted from voluntary sources.

I went to the Minister for Finance and I said that we were prepared to give a sum to this organisation, their receipt for which would be a full discharge for the Accounting Officer. At first he made the case that this was impossible because public money must be accounted for. Eventually I proposed this compromise. I said that, if we had a certificate that this money was used for no other purpose than organisation, that should meet the requirements of the Department of Finance. Eventually that compromise was agreed upon and they furnished the Minister for Agriculture with a certificate that this grant was used solely for the purpose of organisation. The ordinary rule is that a grant such as the Minister thinks would be a suitable substitute for Deputy Sweetman's amendment has to be accounted for.

Mr. Haughey

I do not think that is reasonable. We give a great number of grants.

Mr. Dillon

It is the general practice. I think that, if the Minister inquires, he will find it is the general practice. It was the then Deputy McGilligan who made an exception in the case to which I am referring. I do not want to name the organisation because it has long since passed out of the stage where it required that supplement. It got under way and developed its own income and is now doing invaluable work. Surely the Minister will agree that the general tendency must be that, if public money is allocated to a body not under ministerial control, it must be accounted for.

Mr. Haughey

The audited accounts are presented to the Minister.

Mr. Dillon

When the Minister was a young Deputy, I tried to teach him that I as Chairman of the Committee of Public Accounts could ask the Accounting Officer to produce the audited accounts in respect of grants made. There is the very heart of the question. They get a grant and they must produce a certificate. Inevitably that comes under the control of an Accounting Officer whose duty it is, if the account is unsatisfactory, to send it back and say: "The Minister is not satisfied with the material in that account and requires the accounts to be cast in the following form."

What is the situation of an independent charity functioning by its own genius? It has to start adapting itself to the rigidity of Treasury control. A great deal of nonsense is talked at times about the excessive rigidity of Treasury control but, if you start relaxing Treasury control, you open the floodgates to abuses of every possible type. An account must be subject to Treasury control or it must not. The moment you start introducing grey middle country, the floodgates are open to abuses.

The Minister makes the classic argument against that form of relief and says: "Why should an individual taxpayer have the right to donate 10/- of Treasury money for every £1 he himself gives?" I do not think that is a fair description of what actually transpires in transactions of this kind. The effect of Deputy Sweetman's amendment would be to sway the citizens who recognise the value of a particular charity to give an undertaking for four years or more to support it instead of giving one £5 note or one cheque and forgetting the charity thereafter.

Deputy Sweetman's Treasury training is not lost upon him and he recoils from the idea of including surtax. Am I wrong in believing that the fact that these endowments are exempt from tax in the US has given rise to great foundations? I do not say the relief is identical, but it is along this principle. Can anyone say the world is a worse place because these foundations were called into existence? I do not think the world has been any the poorer because of the fact that the Rockefeller Foundation or the Ford Foundation or the Kellogg Foundation were called into existence by tax concessions. I am certain that America is not the poorer.

It requires an imaginative approach to see this problem in its right perspective. It was pointed out to the Minister that this concession is already available in regard to certain educational functions. He burshes that aside and says that a breach was made in the general principle and that on the whole he regrets it. I think he is mistaken and I think he is mistaken because he is allowing the Treasury squint to grow upon him. He is forgetting the side of the problem from which he would have looked at it before he became Minister for Finance and from which the average person looks at it.

The important thing is that the type of charities described by Deputy Byrne should retain their autonomy by virtue of the fact that they are sustained exclusively by charitable contributions. If it involves taxation concessions which further increase their resources, it will be a very rare circumstance if the consequential contribution from the Treasury is used to a bad purpose. This is the phenomenon which haunts the Minister. Suppose this thing began to skyrocket and we had people running high-powered collections. I do not want to introduce anything approximating to controversy into this discussion, but to hear the father of Taca warn us against these dangers in respect of the carry-on of such groups is rich; if this concession generated a burden on the Treasury and if the Minister felt that it really got out of control and that such expenditure got beyond the beyonds what objection would there be to coming back and saying: "It was never envisaged that the Treasury would ever have to carry a burden of £750,000 in income tax refunds or over £1,000 a year." An end could be put to it.

In 1940 this was done. The concession existed and it was put an end to on the ground that we were facing a European war and that every penny had to be saved. If this thing got out of control, and the charities were perhaps getting more than their share, what would prevent the Minister for Finance of that day coming back to the House and saying: "This concession must stop. We are not forbidding anyone to contribute to charity, but saying that the secondary impact on the Treasury no longer exists after the lapse of a fair period which the Oireachtas should determine"? Therefore, I suggest to the Minister that the Treasury seeks to establish a user. The size of the charity he anticipates as possible—and I have no need to put it higher than that—is almost fantastic, but, even if it were realistic, it is not irremediable.

There are two methods that can be adopted. One is the Treasury method which I think is false in the sense of the approach by the ordinary legislator. The purpose of Deputy Sweetman's amendment is to persuade the prescribed charity to do it in a systematic way from the point of view of the charity and the irreplaceable work these people do.

I urge on the Minister to look at this again, and perhaps posterity might care to call this concession in celebration of the international recognition and the distinction of our Revenue Commissioners, the Culligan-Sweetman amendment, or, including the Minister, the Culligan-Sweetman-Haughey amendment.

Mr. Haughey

This is all very persuasive but I do not think that I am influenced solely by the Treasury outlook in this matter. We are facing today, as I mentioned earlier, a situation where you have planned giving and there are certainly not many Catholics, in the parishes of Dublin at any rate, and perhaps throughout the country, and parishes of other religious denominations who have not now put their finances on a comprehensive basis. All of those would qualify for this. I would visualise that any parish that has this planned system of giving would very quickly avail of this concession if we were to make it.

I would just put this calculation before the House as a tentative one. We have about 600,000 income tax payers in the country. If, for instance, 25 per cent of those, that is 150,000, decided to give 5/- a week under covenants it would cost us £700,000. I do not think that the figure of £750,000 is altogether out of the question.

I am afraid this is too much to contemplate and I think it would be realised very quickly, bearing in mind the new tendency there is in all fund-raising today. I know that these covenants are very widely availed of in Britain by churches and other charity organisations. If this were something which were to be confined to a clearly recognisable charity, which all of us would understand to be a charity in the popular sense, then we could probably take a risk, but I am afraid it could not be so in fact and it would be very widely and very comprehensively availed of.

For that reason I do not think that I could be persuaded to adopt it. I am not at all convinced by Deputy Dillon's argument about the undesirability of giving direct subventions where they would be needed. I cannot find any specific organisation, whilst talking, but I do know for certain that there are a number of organisations which get grants from Ministers simply by the production of their audited accounts and the audited accounts are not for the purposes of checking on the activities of the organisations but for simply determining the amount they should get. Very frequently the arrangement of the pound for pound applies. The Minister agrees to put up a pound for every pound the organisation puts up, up to a certain sum. In this case the Minister concerned does not interfere at all in the affairs of the organisation.

I have been given a list of grants which the Minister for Education gives. He gives a grant of £17,625 to the Royal Irish Academy; £17,500 to the Royal Irish Academy of Music; £5,250 to the National Film Institute of Ireland; £2,000 to the Royal Zoological Society of Ireland, and I am sure my colleague, Deputy O'Malley, does not interfere with the internal affairs of the Zoo, and £2,500 to the Irish Committee of Historical Societies—

Mr. Dillon

If the Zoo authorities did not make the lions roar when he went up there would they not have every reason to apprehend a cut in their grant?

Mr. Haughey

My friend O'Malley would roar back.

Mr. Sweetman

Depending on whether it was a token roar.

Mr. Haughey

And Muintir na Tíre get £5,000. I think that is the correct way to assess the size of a particular form of social charity. The proper way to do it is by direct grant based on the needs of the organisation in question related to the scale of its activities.

Mr. Dillon

I still hope that on reflection the Minister will redetermine the matter. In regard to that last point the Minister makes on the kind of charity that cannot reasonably aspire to a State grant but urgently needs some prosperity through sustained subscriptions for its function as a local charity, take an Irish country town where a lottery is operated by the nuns. It has no more claim to a State grant than any other charity; yet it is the neighbours' children who very probably constitute 20 per cent or 30 per cent of the recipients. It is a fitting and a proper thing that local people should direct their charity in that direction. It is a good thing that, where possible, we should encourage them to covenant to that end. I wish the Minister to bear that type of charity in mind as being peculiarly suceptible to the kind of benefit Deputy Sweetman's amendment could confer and which, by its very nature, is disqualified from the alternative of a State subvention.

Mr. Haughey

I would not disqualify it at all.

Mr. Dillon

As the Minister will readily see, one such institution applying to the Minister for a subvention immediately confronts the Minister with corresponding applications from a hundred others between which he finds it virtually impossible to distinguish. If you are a covenanted benefactor to a local charity, you will help on the annual carnival; you will lend flags to decorate the grounds for a garden fate. You become associated with it. Now I cannot expect the machine of the Revenue Commissioners to have regard to these kinds of local considerations. We are here to qualify their expert approach to such matters by our more human political approach, knowing the conditions of the people we represent, amongst whom we live, and the circumstances of the local charity we seek to promote.

I am inviting the Minister to reflect on that aspect of the situation, always bearing in mind that if the mushrooming into great figures which he is entitled to apprehend should materialise, he can always come back to the House and say: "This thing has got out of control and we simply have to revert to the grant."

Mr. Haughey

The British Chancellor of the Exchequer regarded it as getting out of control. He tried to end it and failed.

Mr. Dillon

Why?

Mr. Haughey

You can never give up a concession of that kind.

Mr. Dillon

Was it not because 640 politicians said: "We do not want a change"?

Mr. Haughey

Your local charity comes to rely on you and you cannot just put it off.

Mr. Dillon

Well, 640 ordinary representatives of the people——

Mr. Haughey

I do not want to interrupt the Deputy but I want to point out to him the fallacy of saying that you can always come along and scrap it if it gets too expensive.

Mr. Dillon

I can see the Minister's difficulty there. If the thing went wrong, if the thing were producing a bad end result, I do not think the Minister would have any difficulty in coming back in here and saying: "Look, some of the cute boys who have got into the business of organising charities and so on, have turned the whole Act into a colander by punching holes in it which in this new kind of organised charity collection has become a scandal." I think the House would support him in that and say: "Well, we tried to do the right thing and the cute boys got past us; the only way we can remedy the matter is to review the whole situation again." But, mark you, do not quote the experience of the Internal Revenue in Great Britain as being a warning to us. They naturally, approached their Chancellor and said: "This burden has become very substantial." But, when the Chancellor—as the Minister tells me—went to the House of Commons, they said: "We do not think it is excessive. We think the money is being well spent. It may be an unusual way of conveying money to charity but we feel that voluntary charities do the kind of work that State social services, even in this socialist State of Great Britain, cannot do." And, when you have all of the social services, all the social workers and all the machinery they have, is it not an interesting thing that the British House of Commons, which at present is dominated by a majority which professes to believe that in a welfare state all human aid ought to be covered by State social services, still say to their own Chancellor: "Although your duty is to provide money to cover every human contingency, still there is a place left for voluntary charity which we know is a large burden but it is not too great to sustain, so great is its value, albeit we have a great welfare machine far more comprehensive than anything operating in Ireland?"

Mr. James Tully

The word "charity" is being bandied around here. God be with the times when people would be ashamed to look for charity. Some of the organisations have been listed by the Minister here as receiving what the Commissioners refer to as "charity". They are given this on the ground that it is, in fact, a charity.

Mr. Haughey

I mentioned these to indicate that these were types of bodies which get grants without any interference in their affairs.

Mr. James Tully

I mention charity being mentioned here as if charity were a way of dealing with all of these things.

Mr. Dillon

Faith, hope and charity: do not let any of us be afraid of its challenge. I ask it of every man and woman of my acquaintence.

Mr. James Tully

If you have that, it is about all you need. The position about it is that we have at the present time in this country numerous organisations doing an excellent job because they know they are jobs many of us believe the State should be doing and is not doing. For that reason, the charities, as they are called, must take them up. When they find themselves short of money, they occasionally ask that the State would help them out, but I do not think all Ministers for Finance would be as generous as the present Minister has stated he would be—that he would not turn them down. I honestly believe there should be some set way of dealing with these matters. I go a long way with the Minister when he says—though he does not use these words—that people may attempt to salve their consciences by giving to charities what they themselves are giving but what the State should be getting. Indeed, it is not the only field in which people prefer to give rather than to the State.

The Minister gave a figure of £750,000. I wonder how this would be affected by the amendment which Deputy Sweetman has suggested? Would the amount involved—which would go for charity, because of this amendment—be very much greater? It was only a notional figure; nobody could put a definite on it, but, from the discussion here this afternoon, I would be inclined to agree with the Minister that the right line is being taken and, if more money is needed, then he should be in a position to provide this extra money.

Mr. Haughey

I shall just leave these two final figures with Deputies. In Great Britain, the experience has been that the gross figures under covenants trebled in the past ten years, from £11 million in 1956 to £33 million in 1966, doubled in the past five years, from £16 million in 1960 to £33 million in 1966. Therefore the amounts in Britain trebled in ten years and doubled in five years. That is indicative of the sort of thing that would probably happen here.

Mr. P. Byrne

This is what the Income Taxation Commission described as a healthy transfer of income.

Mr. Haughey

I would not regard it as such.

Mr. Sweetman

I am not surprised that Deputy Tully prefers a State subsidy to an incentive. That is part of the outlook of the old hat socialist on which we had some discussion the other night.

Mr. James Tully

Christianity is old hat too, according to some people.

Mr. Sweetman

That certainly is. Nobody has ever been more forthcoming than I have been in the tributes I have paid publicly and in private to the people whose advice I was privileged to receive when I was in the office of Minister for Finance. However, it is undoubted that the whole set-up—if I might put it that way—of the establishment, the whole manner in which the establishment has grown up and is bound to grow up, is that it sets its face against tax incentives.

I remember one of the most distinguished public servants we have had, who was then in Revenue and is now retired, when I informed him that I was going to introduce the tax incentives for exports in 1956, being utterly appalled, and saying that this was not a Revenue job, that the Revenue job was to provide the revenue and to give, if I thought it necessary, what was necessary by way of subsidy. I think the Minister personally will agree with me that it was a good thing that I overrode that advice. The Minister in section 9 has extended the decision I then took contrary to that advice.

I now find that the necessary caution of the Revenue Commissioners is clearly imparting some advice to the Minister against tax incentives. The reason I like tax incentives more than the direct subsidies to which Deputy Tully has referred, which the Revenue people prefer and which the Minister has asked for, is that they stimulate private individuals to get on with the job and in a job like this the private individual, if he is given the incentive, has a far greater chance of getting on with the job than has State direction.

The Minister completely minimises, completely overlooks, the effect of the incentive in relation to this. I do not think that in our circumstances here there is any possibility whatever of escalation to the figures the Minister has suggested which have been drawn up by comparison with Britain. Their way of life and their industrial base for taxation would provide very different figures and a very different approach and results from here. I think the Minister is wrong in dropping out the incentive that would be available here. I accept that it is the job of the Revenue Commissioners to protect their revenue and to resist inroads of all sorts. The Minister said a moment ago that a research inroad was one, the wisdom of which he was doubtful about. It is the job of Revenue to protect the Central Fund, the Exchequer, which adventurous Ministers for Finance might diminish by way of incentives. The incentive in this case would be very worthwhile and I would urge the Minister strongly to reconsider this matter between now and Report Stage.

The position as I understand it in the US and in Canada to which Deputy Byrne referred is slightly different. There, a fixed percentage of the taxpayer's income can be donated to charity and, if so donated, is allowable for tax purposes. I would not quarrel with the Minister if he were to adopt the American system here and to say: "Yes; I will allow a convenant up to a certain percentage of a person's income", the same percentage if you like all the way or any escalating one, as he thinks fit. However, I do want to have some provision which is an incentive towards the charities remaining in being and in operation, able to do the work they have done for many years, the marvellous work to which Deputy Byrne, Deputy Dillon, the Minister and all of us want to pay a tribute. I feel that an incentive is the best way of doing that.

An Leas-Cheann Comhairle

Is amendment No. 10 withdrawn?

Mr. Sweetman

If the Minister will consider it between now and Report Stage, yes; otherwise, no.

Mr. Haughey

I shall consider it.

Amendment, by leave, withdrawn.

SECTION 10.

Question proposed: "That section 10 stand part of the Bill."

Mr. Sweetman

Before we go on I wish to raise a point of order. I think by mistake the last day we jumped from section 8 to amendment No. 4, omitting to deal at all with section 9. Column 48 of the Dáil Debates bears out what I say. There is no mention there whatever of it. The "Question put and agreed to" relates to section 8 and then immediately we jumped to amendment Nos. 4 and 5. To be quite honest, Sir, I must accept some of the blame myself because though it is not recorded, I said straight away to the Ceann Comhairle that I was quite happy to have amendments Nos. 4 and 5 taken together, and he so announced.

An Leas-Cheann Comhairle

I would point out that the Chair has examined this matter very carefully and the official note of proceedings made at the time by the Clerks shows clearly that section 9 was agreed to. The official note of proceedings which is before me at the moment, made by the Clerks at the time of the debate, shows section 9, along with the preceding section, as having been agreed to.

Mr. Sweetman

But not in the Debates, Sir.

An Leas-Cheann Comhairle

That may be so, but the Dáil did agree to section 9.

Mr. Sweetman

I do not think it matters a bit; I was only going to compliment the Minister on section 9.

Mr. Haughey

We can recommit the section on Report Stage.

An Leas-Cheann Comhairle

It has been agreed to by the House.

Mr. Sweetman

In fact it was not discussed. We all know what happened: it just went through.

Mr. Haughey

I do not mind.

Mr. Sweetman

I would not like to miss the opportunity of saying something nice for once; it does not often happen.

An Leas-Cheann Comhairle

Scarcely at this stage.

Mr. Haughey

When we come to Report Stage.

An Leas-Cheann Comhairle

Very good.

Mr. James Tully

It would be only for the purpose of the compliment.

Mr. Haughey

It does not matter for what purpose.

Mr. Booth

The bouquet will still be fresh.

Question put and agreed to.

Section 11 agreed to.

SECTION 12.

Mr. Byrne

I move amendment No. 11 in the name of Deputy T.F. O'Higgins:

In page 9, lines 13 and 14, to delete all words after "care".

The scope of the relief, as drafted, excludes routine ophthalmic and routine dental treatment and we consider that we should ask the Minister at least to justify their exclusion. Both items can be very expensive. For any given person they could exceed the limit of £50 for which the section provides. That being the case, it seems anomalous that they should be excluded from the relief being made available.

Mr. Sweetman

What is the word "routine" intended to cover?

Mr. Haughey

It is intended to cover ordinary care and maintenance, as it were. The whole principle behind this new provision is that where a taxpayer is faced with something in the nature of a disaster in a year, a major illness, he will be enabled to charge the medical expenses involved for tax purposes. Anything in the nature of routine dental care or routine ophthalmic treatment is clearly not within its scope. People would be expected to make reasonable provision for ordinary routine medical expenses.

Mr. Sweetman

Would it be routine to get a set of dentures?

Mr. Haughey

Yes.

Mr. Sweetman

The word "routine" means to get the thing regularly. One would not get dentures regularly.

Mr. Haughey

It is defined in the section, at page 10, as being the extraction, scaling and filling of teeth and the provision and repairing of artificial teeth or dentures.

Mr. James Tully

It is a most unfair qualification because a person might have a number of illnesses to be dealt with, one of which might add £20 or £25 to the bill. That would not be considered because of the word "routine".

Mr. Haughey

Unless it costs £50 in a year it is not in.

Mr. James Tully

Supposing somebody has a stomach ailment and has to go to hospital for treatment and is told to get all his teeth out and get dentures in, it could cost almost £100. Supposing its costs £60 and £35 for dentures, it would not count.

Mr. Haughey

We are concerned with it very largely from the point of view of expense. If we were to let in routine medical expenses, the sort of year to year medical expenses which all of us incur as a matter of course and of which dental care is a particularly good example—we are all expected to have routine care and maintenance of our teeth during the year—the bill would be very heavy.

Mr. James Tully

It is only when a person would have something else wrong with him that it might go over the £50. Would the Minister have another look at this because it appears to be an angle he has not considered?

Mr. Haughey

I will look at it but it is not something we could contemplate taking within the scope of the provision, the whole purpose of which is to take care of an exceptionally heavy medical bill for an unfortunate taxpayer in a particular year which he could not have foreseen. Routine maternity care and ophthalmic treatment are normal and natural and occur from year to year. They are not included and I could not afford at this stage to include them because the cost would be enormous.

Mr. James Tully

In view of the cumulative effect of this and other things, because of the fact that this added to other things——

Mr. Haughey

The other things would be catered for.

Mr. James Tully

The entire cost might be £49 10s and these other things might be more than £20. There is another angle to this section which I should like to mention. A number of things are allowed for and it means there will be greater difficulty in filling in income tax forms. It will have to be dealt with in a certain way and details will have to be given. These forms are Greek to 70 per cent of the people. There are so many qualifications that they find it most difficult and they go to Deputies or to county councillors who know as little about it as they do. There is still another angle at which the Minister should have another look. I wrote to him about it. Somebody who is not clear about his entitlements might wish to discuss the matter with the income tax officials. He must stand in a queue with a number of other people and there is a public confession of everything to the official who opens a shutter like a confessional.

Mr. Haughey

To give absolution.

Mr. James Tully

Unfortunately, they do not give absolution but very often impose a heavy penance. The whole thing is wrong. There is not even a seat provided in most cases for people waiting and it is extraordinary that people who go there to find out how they are to pay money to the State are treated like people who do not count. They count very much. As a trade union official, I have to go occasionally and I know that it means standing in a queue. I do not know whether one has to knock twice to get the official to open the shutters. There are two sliding shutters, one on each side.

Mr. Booth

It hardly arises on the amendment.

Mr. James Tully

I have already cleared this with the Leas-Cheann Comhairle. If Deputy Booth were in the Chair he might rule me out of order. My point is that it is extremely difficult to find somebody who wants to avail of the benefits of the amendment to go to the income tax office and try to explain his case in the full hearing of the public, both male and female. The Minister should at least have cubicles where such people can talk in private. The conditions for even the staff in those places should not be tolerated in 1967. Now Deputy Booth can have the floor.

Sir Anthony Esmonde

I should like to clarify one point. In regard to routine ophthalmic treatment, which means a refraction or a small thing like that, it does not imply that there is any particular exclusion for hospital treatment. If a person has to go into an ophthalmic hospital——

Mr. Haughey

That is in provided the cost is more than £50 a year. In reply to the Deputy's point, I want to say that routine ophthalmic treatment is, in fact, any treatment not carried out by a specialist so that, in fact, what is out is very narrow. In reply to Deputy Tully, I want to say that I hope there will not be any great difficulty in the administration of this. It will not be included on the ordinary income tax return. There will be a special form prescribed by the Revenue Commissioners. It will be a simple form where at the end of the year the person will set out the medical expenses he has incurred and claim his reduction accordingly.

Mr. James Tully

Suppose the medical expenses are not allowed will the people concerned have to go in, as they often do, and incur travelling expenses? No matter how simple the form is it means standing in a queue and discussing your business with somebody and half of Dublin city standing around.

Mr. Haughey

I agree there is great necessity for privacy in those matters. From our point of view, and here I identify myself with the Revenue Commissioners, people naturally enough and understandably enough do not send in their return forms in time and when they should and, therefore, there is always a bit of congestion at certain times. If we could persuade all taxpayers to send in their forms every year in plenty of time there would be no need for this congestion. I accept that there is an obligation on us to enable the taxpayer to conduct his affairs with resonable comfort and a certain degree of privacy.

Mr. James Tully

I would not expect a taxpayer to be comfortable when he goes to discuss his business with the Revenue people. I want to make it clear that the staff of the Revenue Commissioners are always anxious to be helpful. It is the method which is entirely wrong. It is not the matter of sending in a form in time which is the cause of this congestion. It is when the tax assessment is sent out that the trouble starts. People then go in to claim for something which they should have been allowed. This is something which they do not want to discuss in public. They have to discuss their business in front of other people. This is something which should not be put on the long finger. Privacy should be provided for people who want to go in to make a case like this. Any time I have gone in there has been at least a dozen people standing in a hallway waiting their turn. Some of those people have to discuss their private business in front of other people, some of whom they may know and some of whom they may not know. This should not be the case.

Amendment, by leave, withdrawn.

Mr. P. Byrne

I move amendment No. 11a.

In page 9 between lines 27 and 28, to insert a new paragraph as follows:

"(g) curative training prescribed by a practitioner".

Let me make it clear primarily that the amendment is based on the assumption that mental ill-health and mental disability come within the scope of section 12. I would ask the Minister to clarify that point. It seems to me that mental illness is an ailment, an infirmity, a disability which must come within the scope of the definition set out in respect of health care. That being the case, I would suggest to the Minister that the modern treatment of certain forms of mental illness, particularly in relation to mentally retarded or arrested children, children whose development is arrested or autistic children, in some cases is not carried on in a hospital. It would, therefore, seem necessary to provide in this list of cases which are covered for what I have termed in the amendment curative training prescribed by a practitioner. I invite the Minister to clarify particularly the question of mental illness.

Mr. Haughey

Mental illness will certainly be covered. I would just like to point out to the Deputy that any treatment in hospital is covered. That covers treatment whether he is an in-patient or an out-patient. Hospital is very widely defined. It includes any health institution within the meaning of the Health Act, 1947, that is to say a hospital, sanatorium, county home, home for persons suffering from mental or physical disability, maternity home, convalescent home, preventorium, laboratory, clinic, health centre, first-aid station, dispensary or any other similar institution. I think that is certainly wide enough to cover the sort of treatment which Deputy Byrne has in mind. I want to point out that this section will be administered by one agency in the Revenue Commissioners which will ensure uniform treatment. It will be under instructions to administer and to interpret those provisions generously and in such a way that they will not be niggardly and not exclude any type.

Sir Anthony Esmonde

Might I just intervene on a point of clarification here? The line of demarcation is sometimes very difficult between what is known as severely retarded children and moderately retarded children. Sometimes institutions in which it is possible to give some form of education, no matter how small it is, to this type of child, even though it might be designated as a moderately retarded child, are known as schools. In spite of that, many of those children, in fact, most of them, who are severe moderates are severely retarded, go in and stay indefinitely and they are a considerable charge on the taxpayer.

The Minister has made it quite clear, and I agree with him on this, that the severely retarded child is completely and absolutely covered here. The severely retarded child is a charge on the Minister for Health and the Department of Finance to start with and, secondly, all places in which he is found are institutions. There is the other type of child who is not covered. In fact, there are two types. The first mentioned just now by Deputy Byrne is the autistic child. This is a child who needs prolonged detention in an institution. In fact, the institutions who have autistic children are really schools. Therefore, the purpose of Deputy Byrne's amendment is to cover that type of child, to ensure that autistic children are covered and that there will be no difficulty in that regard.

Mr. Haughey

They are covered. If the Deputy will look at paragraph (d) of the definition of "hospital" in subsection (1) of section 12 he will find that the definition is very flexible. It includes any other hospital, nursing home or maternity home approved of for the purposes of this section by the Minister for Finance after consultation with the Minister for Health. What hospital means is set out in paragraphs (a), (b), (c) and (d) and paragraph (d) makes it quite flexible. What will happen, of course, is that if there is any doubt the Revenue office dealing with this section will consult with the Department of Health for an expert decision.

Sir Anthony Esmonde

But the point I really wanted to make is that the severely moderate child, who is in a different category from the severely handicapped child, very often has to stay ad infinitum and that that will be covered, too.

Mr. P. Byrne

Specifically what I have in mind is an institution like Temple Hill, Blackrock, run by the Sisters of Charity. It is not a hospital.

Mr. Haughey

It is a clinic, surely?

Mr. P. Byrne

I suppose it could be described as a clinic. In fact, part of it is a national school. The Minister has referred to paragraph (d) which states:

...any other hospital, nursing home or maternity home approved of for the purposes of this section by the Minister for Finance after consultation with the Minister for Health.

Would this particular definition be improved by inserting the term "institution"?

Mr. Haughey

I doubt if it is necessary really.

Sir Anthony Esmonde

Would the Minister not put in "institution"? It would make the thing gilt-edged then.

Mr. Haughey

"Hospital" covers it.

Mr. P. Byrne

I can see, on having a second look, that what I have in mind would be covered by paragraph (d) under the heading "hospital". I am obliged to the Minister for resolving the doubt in this matter and I am happy to withdraw the amendment.

Amendment, by leave, withdrawn.

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

Mr. Sweetman

The Minister was quite clear in relation to mental illness and hospitalisation and institutional care, but there is considerable doubt as to whether mental illness is in fact covered by the words in the definition "ailment, infirmity or disability." I have no doubt about it but many other people have taken leave to dispute my interpretation. I take it it is intended that this section will include mental illness?

Mr. Haughey

Certainly.

Mr. Sweetman

I am glad to hear it. I agree with that definition, but, as I said, there are many who dispute it.

Mr. Haughey

I think it is just as well that it should be put on record that it does.

Mr. Sweetman

I have also a distinct problem in relation to subsection (2), lines 25 to 35 on page 10, which deals with the aggregation of the £50. It states:

...expenses which were incurred for the provision of health care for any one qualified person.

As I understand this, if a person has two children and has in respect of each of those children medical expenses for one to the extent of £60 a year and medical expenses for the other to the extent of £70 a year, they are both dependants, both qualified persons, but he is entitled to claim for only one.

Mr. Haughey

No.

Mr. Sweetman

I do not think that is the Minister's intention.

Mr. Haughey

I will tell the Deputy what is our intention.

Mr. Sweetman

But I think that is what the drafting means.

Mr. Haughey

What it is meant to mean is that each individual must accumulate £50——

Mr. Sweetman

I understand. That is why I deliberately choose my figures that way. I think it would be met if, for example, it was "for each qualified person" but "any one" could mean you pick out only one of them.

Mr. Haughey

If the Deputy reads further, it states:

section, where an individual, having made a claim in that behalf and having made a return in the prescribed form of his total income, proves that in the year of assessment he defrayed health expenses which were incurred for the provision of health care for any one qualified person and which amount in the aggregate to more than £50, he shall be entitled, for the purpose of ascertaining the amount of the income on which he is to be charged to income tax, to have a deduction of the appropriate amount made from his assessable income.

Mr. Sweetman

For "any one". He has to choose.

Mr. Haughey

He can make six or seven claims.

Mr. Sweetman

I do not think so. I admit the Minister wants to do that but I am not a bit clear that the drafting says so.

Mr. Haughey

I will look at the drafting, although I have no doubt that where he makes a claim for one, he can make six, seven or ten claims. However, we will look at it.

Mr. Sweetman

We are both agreed as to what is desired. I am only worried that it is not included. Again, let me tell the Minister I am not alone in thinking that. That view is being canvassd in the city.

Mr. Haughey

They are a queer crowd in the city.

Mr. Sweetman

I will not deny that one.

Mr. P. Byrne

I am just wondering about the definition of "dependant" as set out at paragraph (b) by reference to sections 139 to 142 of the Income Tax Act, that is bringing within the scope of the definition of "dependant" one's housekeeper for the care of children, one's child and one's dependent reletatives. Is the Minister quite satisfied that is the most desirable method of defining the qualifying people? I have in mind in particular the income limits. There may be a certain anomaly there. I do not think there is any ceiling on the income of a housekeeper for the care of one's children. I think she will get the £100 allowance irrespective of her income. Certainly, the limit of the child's income is £80 and the new limit for the dependent relative is £200. Also in this connection is it quite clear that if one's aged parents get the non-contributory old age pension they will come within the scope of the relief?

Mr. Haughey

Yes. It includes people who are prevented by old age or infirmity——

Mr. P. Byrne

I am thinking in terms of the income ceiling.

Mr. Sweetman

The means ceiling, if you like to put it that way.

Mr. Haughey

This is only for defining "dependant" and means do not enter into it.

Mr. Sweetman

No, but it says "allowed". Therefore, the dependant must not have the income.

Mr. Haughey

There is no income limit for the housekeeper.

Mr. P. Byrne

It is rather anomalous. There is an income limit for your child of £80 and for your dependent relative now of £200.

Mr. Sweetman

Is it not rather unfair, that, if the dependent relative has a small income that excludes him from the ordinary tax allowance, it should also exclude him from the health allowance? We all know the dependent relative is one of the people most likely to cause this type of heavy expense. I raised the question on the Second Reading and the Minister correctly referred me to the manner in which the child over 16 is transferred from one section to another. In the case of the child over 16 who is mentally retarded, who is never going to be all right, the grandparents might have made some small provision for him. It might be enough to take the child out of the category of being a dependent relative for the purposes of the parents' tax allowance but it does not minimise in any way the very heavy expense that is going to be borne under this section.

Although I appreciate the Minister has to have some definition, I think he should have the definition without reference to the income limit. I would urge the Minister to consider that very strongly between now and Report Stage. It would be very simple to have a definition of a person in respect of whom an individual is allowed for the year of assessment a deduction under so-and-so, or would have been, were it not for the income of the person concerned.

Mr. Haughey

The income limit in the case of a child is £230—reasonable enough, I think. If it went much higher than that, he would be a taxpayer himself and, therefore, could deduct it himself.

Mr. Sweetman

He would have to go a long way beyond that.

Mr. Haughey

If it were £300 for a single child, he would become a taxpayer himself.

Mr. Sweetman

It would not be earned income: that is true.

Mr. Haughey

I will see what the implications are.

Question put and agreed to.

SECTION 13.

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

Mr. Sweetman

A penny a pint—or is it not more than that now?

Question put and declared carried.

Section 14 agreed to.

SECTION 15.

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

Mr. Sweetman

Section 15 deals with stocks. How much will this bring in this year?

Mr. Haughey

£100,000.

Question put and agreed to.

SECTION 16.

Question proposed: "That section 16 stand part of the Bill".

Mr. Haughey

This is a notable reform. It enables us to have transit depots away from ports.

Mr. Sweetman

Will this be done under regulations or by individual arrangements with the Revenue?

Mr. Haughey

Individual arrangements.

Mr. Sweetman

That is probably necessary for security reasons.

Question put and agreed to.

Sections 17 and 18 agreed to.

SECTION 19.

Question proposed: "That section 19 stand part of the Bill".

Mr. Sweetman

Would the Minister give us an explanation in relation to the second Imposition of Duties Order, please? The matches Order, we presume, deals with matches. Is the second one the one that brought in the new general customs tariff?

Mr. Haughey

This Order came into effect on 1st July, 1966. Its general effect was to implement certain provisions of the Free Trade Area Agreement to provide special tariff concessions for certain Northern Ireland goods and to make some other miscellaneous changes affecting the customs tariff.

Mr. Sweetman

It is not the new tariff?

Mr. Haughey

No. Does the Deputy mean the Brussels tariff?

Mr. Sweetman

Yes.

Mr. Haughey

That was done a couple of years previously.

Question put and agreed to.

SECTION 20.

Question proposed: "That section 20 stand part of the Bill".

Mr. P. Byrne

On this section might I express the pious hope that the Minister at an early date would see his way to extend a cognate provision to unfortunate purchasers of dwellinghouses in the city of Dublin? The burden of stamp duty on such people added to the existing high costs which they have to bear is quite outrageous.

Question put and agreed to.

Section 21 agreed to.

SECTION 22.

Question proposed: "That section 22 stand part of the Bill".

Mr. Sweetman

Section 22 is a complement of section 9 and deals with corporation profits tax—is that not so?

Mr. Haughey

That is right.

Mr. Sweetman

I am glad to welcome it, and I should like to know whether the Minister has got any indication as yet of any increased interest in prospecting licences.

Mr. Haughey

I have not checked the recent position with the Minister for Industry and Commerce but there are many indications, many reports, that we can anticipate considerable expansion in exploratory and mining activity. I think Deputy Sweetman knows much more about the situation than I do.

Mr. Sweetman

I do, and I want to say something although it is not the Minister's responsibility; it is the responsibility of the Department of Industry and Commerce. I shall take an opportunity of urging on the Minister for Industry and Commerce that it is desirable that in so far as this section has brought increased prospecting interest and therefore increased applications for prospecting licences, those licences be shared around on some type of equitable sharing arrangement or allotment rather than that they should be given to one person who applied after another who has been passed over. It is not the job of the Minister for Finance but I would say that the number of applications that came in in a certain period shows that certain people were anxious to jump the gun.

Mr. Haughey

I am afraid I do not know anything about that.

Mr. Sweetman

No, the Minister would not. He would not know anything as Minister for Finance.

Mr. Haughey

No, or in any other capacity.

Question put and agreed to.

SECTION 23.

Question proposed: "That section 23 stand part of the Bill".

Mr. Sweetman

In view of the fact that I have been able on section 22 to say what I wanted to say on section 9, I need not ask the Minister about this.

Question put and agreed to.

NEW SECTION.

Mr. P. Byrne

I move amendment No. 12:

Before section 24, but in Part IV, to insert a new section as follows:

"Subsection (2) (b) of section 53 of the Finance Act, 1920, is hereby amended by the addition of the words `other than loans granted by the Industrial Credit Company which are repayable over a period not exceeding twenty years'."

This amendment relates to corporation profits tax and urges a repeal of section 53 of the Finance Act, 1920, a British Act. Interest payable on long-term loans is not an allowable charge for purposes of corporation profits tax, although, of course, bank overdraft interest is so allowable. Interest on short-term loans is an allowable charge for relief of corporation profits tax.

The amendment relates specifically to interest on loans granted by the Industrial Credit Company which are repayable over a period not exceeding 20 years. The Act which we seek to amend is the British Act of 1920. The Industrial Credit Company, which was not even dreamt of in the year 1920, plays a most significant role in the Irish economy in regard to the development of industry. It is clearly very desirable that that role should not be hindered by tax law. The Institute of Chartered Accountants in their submission to the Minister some months ago urged this amendment, pointing out the big number of Irish industries which draw on the Industrial Credit Company for short to medium-term capital in place of bank accommodation. This is a very significant feature of the development of the Irish economy; the banks are not being relied upon to the extent that they were in the past for short to medium-term industrial capital.

Taking things by and large, ignoring the odd occasion when there may, perhaps, be intervention with the Industrial Credit Company, the work which they do, the capital which they advance to industries, is socially very desirable in the national interest and it is wrong that this should be hindered.

There is an anomaly here. The interest on short-term loans is allowable, as the Minister knows, but the usual loan granted by the Industrial Credit Company over a period of ten, 15 or 20 years is normally redeemable by the borrower not on three months' notice, which would qualify as a short-term loan under the existing practice, but on six months' notice. There is an obvious case for this relief and for synchronising the tax law with Industrial Credit Company practice. The Industrial Credit Company is, after all, a State company. It is owned and controlled by the Minister, and I feel confident that this amendment must be acceptable to him, particularly having regard to the recommendations submitted to him by the Institute of Chartered Accountants and to his predecessor's undertaking a year ago to have a pretty close look at this matter.

Mr. Haughey

I do not think I could introduce a concession for my own company that would not be applicable generally. I do not think this would be good practice or procedure.

Mr. P. Byrne

Why not?

Mr. Haughey

The Industrial Credit Company operates on a commercial basis and it is competing in a certain market with other firms, many of them private. If we were to make any changes in regard to the allowability of this interest for corporation profits tax purposes, then it would have to be of general application. I do not think we could ask the private sector to tolerate some very special concession to the Industrial Credit Company. In any event, I would be against doing it, because, as Deputy Byrne knows, this provision was introduced to prevent profits being distributed in the guise of interest. If we had not some sort of provision, then a lot of capitalisation would be in the form of loans and the profits would be distributed in the form of interest and, of course, would qualify for relief for corporation profits tax purposes. Therefore there is very good reason for retaining the provision.

This is somewhat of an academic question, because I understand there is a form of words which may be used in regard to these long-term loans which gets over the difficulty from the point of view of the lender and the company concerned. I think this device has been resorted to by many of the companies interested, including, I believe, the Industrial Credit Company.

Mr. P. Byrne

On that last point, as far as I am aware, Industrial Credit Company loans are never redeemable at the borrower's option at anything less than six months' notice.

Mr. Haughey

I am informed that this device of expressing the loan to be repayable at less than three months' notice has, on occasions, been availed of by a number of companies, including the Industrial Credit Company.

Mr. P. Byrne

The Minister must be aware that the Industrial Credit Company frequently figures in proposals for the development of new industry activated by the Industrial Development Authority and by An Foras Tionscal, proposals which are the subject of State grants of 25 per cent to 50 per cent of the necessary capital. I am satisfied that it defeats the purpose of the Industrial Development Authority's work to quite an extent if hindrances are placed on the Industrial Credit Company by the Revenue authorities. I think the Minister is being academic when he says he cannot do something for the Industrial Credit Company without doing it for merchant bankers and other commercial operators. That cuts across the whole purpose for which our State companies are operated, which is a social purpose.

Mr. Sweetman

What the Minister means is that he might have to provide more money if he gave this concession to the Industrial Credit Company.

Mr. P. Byrne

I doubt that.

Mr. Sweetman

I think that is the reason.

Mr. Haughey

No. I do not want to breach what is an important protection from the point of view of corporation profits tax. We must maintain it, particularly in view of the fact that there is a readymade device which is known and availed of by anybody who really wants to get around it.

Mr. P. Byrne

I must learn more about this device.

Mr. Sweetman

Put it down for Report Stage and learn more then.

Amendment, by leave, withdrawn.

Section 26 and 27 agreed to.

NEW SECTION.

Sir Anthony Esmonde

I move amendment No. 13:

Before section 26 to insert a new section as follows:—

"Notwithstanding anything contained in any other enactment the first £7,500 of any estate shall be exempt from estate duty."

This amendment means that the first £7,500 of an estate should be exempt from duty, and it also means that in estates over and above that value, the sum of £7,500 should be deducted from them before they are dutiable. As I know the position, at the moment, admitting that there have been some minor concessions in relation to estate duty over the past few years, up to the first £5,000 is exempt from estate duty, but if there is £1 over that, duty must be paid on the whole sum. Therefore, the benefit the Minister and the Revenue Commissioners are offering in relation to estates is really negligible, and when we take into consideration the valuations as they were when this clause was first introduced a couple of years ago, it will be seen they bear no relation to valuations today.

It does not take very much to run an estate up to £5,000 today. It would be a very small farm that one would not pay £5,000 for today. The value of land is increasing all the time. If one takes into consideration such things as livestock, machinery and so forth, the £5,000 will be reached very easily. It is for that reason I am urging the Minister to go a little further and extend it to £7,500. When one comes to the urban area and considers the value of house property, a figure of £5,000 can be reached very easily.

I believe estate duty is immoral. I have always believed that and I have raised this matter every year since I came into the Dáil and I intend to continue raising it so long as I remain in the Dáil. Estate duty imposes a considerable hardship on the lower and middle income groups. I realise that it is the duty of the Minister's advisers to resist any revolutionary change in taxation. My amendment last year was rejected, even though I pointed out that this estate duty acts as a disincentive to saving. If this duty were abolished, there would be an inflow of capital and we all know that we are suffering from a serious lack of capital in expanding our economy.

The Department of Finance published a document recently entitled "Work for All". At page 12 there is a heading "Saving for Investment". I will read what is stated here for the edification of the Minister and his advisers.

It was pointed out earlier that a big increase in national savings is needed to provide money for new investment. No one policy will achieve a dramatic rise in savings by individuals, savings by private and public companies and savings made by the Government spending less than its gets in taxes.

In Ireland today, the effort devoted to persuading people to save is small compared with that employed to persuade people to spend.

It is possible for thrifty, hardworking people, with comparatively small incomes, to save considerable sums throughout their lifetime, with advantage to the State and to the economy as a whole. Estate duty acts as a direct disincentive to such saving. I am sure the Minister will not accept this.

Mr. Haughey

The Deputy is a pessimist.

Sir Anthony Esmonde

Shakespeare said "Hope springs eternal in the human breast". Deputy Byrne fought a lone battle for years for medical expenses. He carried the day. I suppose I cannot hope to carry my point today, but I have hopes for the future. It is more likely that the present Minister may be inclined to accept something on the lines of my amendment as compared with his predecessors.

The document continues:

The balance between these two kinds of persuasion is clearly out of line with the longer-term goals of the country. People must be persuaded to save more and save regularly.

The Department of Finance would seem to be going all the way with me here.

And there should be direct incentives to encourage them.

Is there any more direct incentive to encourage people to save than the feeling that their savings will not be swiped from them eventually in estate duty? The Government have produced many documents, some meaningless, some with some grist in them, but this is one of the most interesting and illuminating ever produced. At page 9 we find the statement:

Money for investment is scarce and likely to get scarcer. National savings are the only reliable source and they must be substantially raised.

The Department of Finance is going all the way with me in this illuminating document.

But even at the most optimistic reckoning they would not be large enough, for a long time to cover the investment we need.

Mr. Haughey

The Deputy is quoting from an NIEC report, not a Department of Finance report.

Sir Anthony Esmonde

This was published by the Department of Finance.

Mr. Haughey

It is only a summary of the NIEC report.

Sir Anthony Esmonde

It is quite obvious that the Department of Finance has embodied it in its policy.

Mr. Haughey

I am merely making a technical correction.

Sir Anthony Esmonde

And the Department of Finance seem to be accepting the suggestion I am putting forward. They make such an admirable case that they have made my contribution here on this amendment a very easy task indeed.

But even at the most optimistic reckoning they would not be large enough, for a long time to cover the investment we need. Even if all the external investments now owned by Irish residents were realised, and the proceeds re-invested in Ireland, we would still need help from abroad. We would have to use this borrowed money to create enough new exports at least to pay for the interest on the debt.

Is it not perfectly obvious that, if the Minister takes this step—it may be a revolutionary step—and frees the first £7,500, there will be an immediate inflow of capital? Everyone today is being advised by accountants, economists and financiers as to how they can best escape estate duty. We want money and want it badly. The return from estate duty is not very big. Apart from that there is another issue. I know—I am sure the Minister knows —the considerable hardship caused in the middle income groups when widows are compelled to dispose of property or borrow from the bank in order to pay estate duty. I am not asking very much really. I want to establish if I can, the principle of the thing, namely, that whatever reliefs are given will be deducted from the whole estate. If they are deducted from the whole estate, something has been achieved, a principle has been established and it has been recognised by the present Minister for Finance that hardship is being imposed on people. It is also recognised that there will be an incentive to save and there will be an incentive for small savings, and they are what will really come because it is the bulk of the residents in the State who produce the money for development.

I would ask the Minister seriously to consider what I have said. Even if he turns me down perhaps he will be good enough to tell me in what way I am wrong in the arguments I have put before the House. I am not an economist and I am not an accountant but I am a realist.

Mr. Haughey

The Deputy modestly says he is not looking for much. In fact, he is: he is asking for a very great deal. There is an exemption in this country for small estates under £5,000. Then the scale starts at one per cent on estates between £5,000 and £6,000, and so on, until for estates over £100,000 the rate is 40 per cent. The Deputy is asking, in the first place, that that £5,000 exemption limit be extended to £7,500. In other words his proposition first of all is that all estates under £7,500 should be exempt. The Deputy is going farther than that. He wants to exempt the first £7,500 on all estates. That would cost £1 million if the rates of duty were not affected. We do not do that at the moment in regard to the £5,000. It is only if the estate is under £5,000 that it is exempt. If it is £6,000, you pay on the full £6,000 at the appropriate rate.

If we were to exempt from estate duty and from aggregation the first £7,500 of all estates, it would be enormously expensive because it would not be £7,500 at the low rates but at the top because the whole estate would move down to a lower rate, maybe from 40 per cent in some cases, 20 per cent in others and so on, so it would be enormously expensive if we were to do that which Deputy Esmonde suggests. It would be £1 million for the full year to do even the limited thing of exempting the first £7,500 of all estates without altering the rates of duty.

We have not been doing too badly in this business of exempting small estates. Between 1894 and 1951, £100 was the exemption limit. Any estate over £100 paid estate duty. In 1951, the limit was increased to £2,000. That lasted until 1960 when the £2,000 was increased to £5,000. In addition to the fact that any estate which does not reach £5,000 is completely exempt, there are two other factors to which I wish to draw attention. One is the question of marginal relief and the other is abatement of duty in the case of widows and children.

Marginal relief has a bearing on that question. When an estate is slightly over the figure which brings it into a higher bracket, marginal relief applies, so that a person does not suddenly jump from one rate to another with fairly severe consequences. I think most Deputies know how this marginal relief works. Take, for instance, a figure of £6,000. Suppose an estate is £6,010. The duty payable on £6,010, is one per cent on £6,000 plus the amount by which the estate exceeds £6,000, that is, plus £10, so the duty payable on an estate of £6,010 would be £70 because of the operation of marginal relief.

From the social point of view, by far the most important aspect of this matter is the allowances which have been introduced in respect of widows and dependent children. The net effect of this is that if the estate goes to one dependent child only, there is no liability if the estate does not exceed £8,010, and so on. If there is a widow with no dependent children, an estate of up to £8,750 is exempt. If there are two children and no widow then the exemption limit is £10,100 and so on, until if there is a widow and seven children the exemption limit is £17,850. I think these are fairly reasonable concessions. I am not sure, when Deputy Esmonde was putting down his amendment, if he was concerned with the position generally or was adverting specially to the case of widows and children. There are fairly generous provisions in regard to them under the existing legislation.

Sir Anthony Esmonde

The Minister has not given any reply to my suggestion that, by doing this, it would be an incentive for a inflow of money into this country and an incentive for savings too. That is one of the three reasons I mentioned.

Mr. Haughey

This question of our attracting foreign money, if we were to make concessions with regard to estate duty, is a very debatable point. There is a great deal of argument about this. Today, most other countries have their estate duty affairs so arranged that it is very difficult indeed for anybody to come here and escape the death duty of the country which he has left, very difficult indeed.

Mr. Sweetman

Make him inclined to switch to Irish investment which is what is required.

Sir Anthony Esmonde

If they are domiciled here and die here, they are liable to estate duty laws——

Mr. Haughey

"Domicile" is very difficult to establish, as the Deputy knows.

Mr. Sweetman

I will not accept that as a statement of law at all. A person could be domiciled here and have his property in another country and his death duties would be paid in that country.

Mr. Haughey

If he is living here and has his property here, he could be domiciled abroad.

Mr. Sweetman

If he is living here and has property abroad, death duties would be paid abroad on that property abroad. This he could save if he could switch his property to Ireland.

Mr. Haughey

If Deputy Esmonde has £1 million to spend, is this the way he would spend it?

Sir Anthony Esmonde

I understand that the overall revenue from death duties here is £3 million on an approximate average per annum.

Mr. Sweetman

£4 million.

Mr. Haughey

£4½ million. I did not like to interrupt.

Sir Anthony Esmonde

It depends on who dies. If you get a good year, it is £4½ million.

Mr. Haughey

How is the Deputy feeling himself?

Sir Anthony Esmonde

OK, for the moment.

Mr. Sweetman

It will be £5 million in that year.

Sir Anthony Esmonde

If the Minister would accept the principle of the deduction, in which perhaps I am more interested, from the whole estate——

Mr. Haughey

That would be very expensive.

Sir Anthony Esmonde

No. Why should it be? Most of the revenue comes from big estates; there is no question about that. If it does not, if his £3 million or £4 million is collected from small estates, then in my opinion it is a waste of money because more and more officials are required to administer it. If you take £7,500 from an estate worth £100,000, you encourage a man to come here and invest money, which would be good business. I do not think the Minister has answered that.

Mr. P. Byrne

It is outrageous to suggest that £1 million comes from estates of less than £7,500.

Mr. Sweetman

No, he says £1 million from the first £7,500. That is not the same thing.

Mr. P. Byrne

Is it not a fact that death duties have gone very far away from their original purpose? The people now affected by death duties are, by and large, very ordinary people of modest means and that is notwithstanding the relief brought in for widows and children some years ago at the behest of this Party.

Mr. Haughey

We do everything at your behest; you give us credit for nothing.

Mr. P. Byrne

It is true——

Mr. Sweetman

There is very little credit you can get.

Sir Anthony Esmonde

You would get the widest publicity and credit if you accepted my amendment.

Mr. Sweetman

We would be prepared to give you credit for it.

Mr. Haughey

The Deputy is not serious.

Mr. P. Byrne

Like so many features of our finance laws which have come from Britain, these have been tailored for a wealthy country and they are quite unsuitable to Irish conditions. To my mind the burden of estate duties falls on relatively small estates and the effect of inflation is such that very ordinary, modest-living people with modest incomes of £1,500 or £2,000 nowadays, by reason of the theft of inflation, die and leave a small two by four house in the Dublin suburbs which is valued at £5,000 or £6,000 for the purpose of death duties. The man who some years ago was well insured and considered he was doing well by his dependants if he had insurance of £2,000 or £3,000 must now, to make any reasonable provision for his dependents, cover himself for £10,000 or £15,000, thereby bringing his estate into this net. It is socially most undesirable and to my mind very unjust.

An Ceann Comhairle

Amendment No. 13 withdrawn.

Sir Anthony Esmonde

No, I will not withdraw it.

Amendment put and declared lost.

Sections 26 and 27 agreed to.

First and Second Schedules agreed to.

THIRD SCHEDULE.

Question proposed: "That the Third Schedule be the Third Schedule to the Bill".

Mr. Sweetman

Does all of the Third Schedule deal with vinegar?

Mr. Haughey

It deals with——

Mr. Sweetman

The explanatory memorandum suggests that it does. We all know what a bitter bill the Minister likes to administer.

Mr. Haughey

Part I deals with various documents, stores, contents, masters' declarations, victualling bills and so on, various documents which up to now have been required but are now dispensable.

Mr. Sweetman

Does it deal only with vinegar?

Mr. Haughey

No.

Mr. Sweetman

Then I reprimand the Minister very seriously. The explanatory memorandum says that "The effect of the repeal set out in Part II of the Third Schedule is to terminate the arrangements whereby vinegar makers were required to take out excise licences".

Mr. Haughey

Part II deals with vinegar.

Mr. Sweetman

Only vinegar?

Mr. Haughey

Yes.

Mr. Sweetman

Then Part I deals with other things. Then let us have an explanation of Part I? The Minister has not given us any explanation in the memorandum.

Mr. Haughey

It is to effect various repeals. The repeal of the first three enactments in Part I of the Schedule relieves masters of ships of the obligation to furnish certain documents to the customs. They have become more or less obsolete. I mentioned the type of document already, stores contents, victualling bills and so on. It is to make life easier for ships' captains.

Mr. Sweetman

That is only the first repeal. I will save the Minister. It is the fifth repeal in regard to which I wish to rub somebody else's nose, not the Minister's.

Mr. Haughey

That is section 490.

Mr. Sweetman

People who think they know everything about consolidation measures do not always know, no matter in what high places they may be.

Mr. Haughey

Section 100 of the Finance Act, 1963 and the Fifth Schedule to the Act——

Mr. Sweetman

This is because of the second Income Tax Act the Minister had to bring in.

Mr. P. Byrne

Why is it necessary to repeal section 100 of the 1963 Act and section 490 of the 1967 Income Tax Act? Did not section 490 repeal section 100 of the 1963 Act?

Mr. Haughey

No. It is still alive for things other than income tax.

Mr. P. Byrne

What is the purpose? We are still rather in the dark about it.

Mr. Sweetman

The purpose is to cover the mumbo-jumbo of a certain person. Is the third repeal merely to do away with a lot of unnecessary paperwork?

Mr. Haughey

Yes, the first three.

Mr. Sweetman

The third one is not restricted to victuals, victuallers, and victualling?

Mr. Haughey

In section 6, the words "borne upon the victualling bill" are deleted.

Mr. Sweetman

The third one, please.

Mr. Haughey

Did I not give the Deputy that? The Deputy is just trying to drive me mad now: stores content related to ships' stores.

Question put and agreed to.

Title agreed to.

Mr. Sweetman

On a point of order, Sir, why has the Chair to stand up to declare the Title?

An Ceann Comhairle

It is to dominate, somewhat.

Mr. Sweetman

I think there is another reason. The first Ceann Comhairle, Deputy Hayes as he then was, stood up by mistake and thereafter did not want to admit the mistake and continued to stand.

Report Stage ordered for Tuesday, 20th June, 1967.