Dáil Éireann díospóireacht -
Wednesday, 22 Nov 1972

Vol. 263 No. 12

Double Taxation Relief (Taxes on Income) (Kingdom of Belgium) Order, 1972: Motion (Resumed).

Debate resumed on the following motion:

That Dáil Éireann approves the following Order in draft:

Double Taxation Relief (Taxes on Income) (Kingdom of Belgium) Order, 1972

a copy of which Order in draft was laid on the table of Dáil Éireann on the 18th day of January, 1972.

—(Minister for Finance.)

Minister for Finance (Mr. Colley)

Perhaps I may be permitted, in view of the discussion that took place on this item previously, to say that since then I have made some inquiries about the circulation and I am informed that four White Papers each containing the full text of the respective conventions were transmitted to the Librarian for laying before both Houses of the Oireachtas by the Minister for Foreign Affairs. They were transmitted on the following dates: that for Belgium on 10th September, 1970; Italy, on 15th June, 1972; Luxembourg on 11th July, 1972 and Zambia on 20th July, 1971. On the same dates the Department of Foreign Affairs sent 250 copies of the respective White Papers to the Clerk of the Dáil for circulation to Deputies and Senators. I understand from the Dáil office that the White Papers were in fact circulated but I am not certain at the moment of the dates on which this was done.

In accordance with well established practice 60 copies of the text of the respective conventions scheduled to the draft orders at present before the House and 60 copies of the explanatory memoranda of the conventions were also despatched by his Department to the Dáil office at the same time as the motions to be moved by me in respect of the conventions were placed on the Dáil Order Paper. I shall not bore the House with the dates on which that was done. This morning, in case some Deputies likely to be involved in the debate on the motions were not in possession of the text of the four conventions and explanatory memoranda, 20 further copies of each of these documents were handed to the Dáil office at 9.50 a.m. for circulation to Deputies in the House. I say this because I want to make it quite clear that so far as I could I ensured that Deputies were supplied with all the documents in due time.

Dr. FitzGerald

I fully accept what the Minister has said. It is certainly in on way his fault. The problem arose because I understood from what was said that these documents were circulated together. I had no recent recollection of receiving them. They were circulated over a period of time including a period when I had no direct responsibility for this matter. That accounts for the fact that I did not have them together in a form suitable for debate. The fault was clearly on my side and not the Minister's. I thank the Minister for his courtesy in permitting the adjournment to enable me to study the matter fully.

I should like to make a number of points in regards to these agreements. First, I think it is common ground that the more agreements of this kind the better to facilitate commercial relationships between the countries concerned. We have a number of agreements already ratified and others are before us today. There are, however, a number of countries in respect of which agreements do not exist but with which we have significant trading relationships and in some cases where there are companies either in existance or contemplating investment here from the countries concerned and I ask the Minister if he can indicate what progress, if any, is being made in relation to similar agreements with countries such as Australia, Israel, Japan, Spain and Portugal. I name only five but these seem to be five with which our relationships are sufficiently close to warrant negotiation of agreements of this kind between us.

This morning I asked the Minister whether a matching credit arrangement existed in all four of these agreements as I had no opportunity to go through them when speaking. My understanding was that he replied that such an arrangement did exist. In so far as I am correct in recalling his saying that—I think it is what he said—I think what he said was less than the complete picture in regard to Italy. In the case of Italy my understanding is that the matching credit arrangement is limited to cases —which would be the minority of cases—where the Italian company hold at least 51 per cent of the share capital of the Irish company. This is a serious restriction of a kind that does not exist in most of the other agreements, those we are ratifying today and others that have been ratified previously. It is regrettable that this restriction is imposed.

In one or two other agreements there are certain provisions of this kind. The normal arrangement is that a 25 per cent holding is sufficient but in the case of Canada I think it is 100 per cent and for France it is 50 per cent. However, in the case of Italy the matching credit arrangement seems to operate only where the company is a majority-owned subsidiary of an Italian company. This is not the case in other instances and I wonder if the Minister could indicate why the problem arose in the case of Italy. Further, can he state if the agreement we have signed involves our recognisation of any Italian tax incentives to industry? Is this reciprocated? Is there any prospect of having the Italian agreement more in conformity with the general pattern of agreements? When I asked this question this morning it might have been better if the Minister had indicated there was a significant exception in the case of the Italian agreement but possibly he had not time to consider his answer fully at that moment.

I am concerned at the time taken to ratify the Belgian agreement. This might not matter if the Belgian agreement was restrospective but that is not the case. It comes into effect only when both sides have ratified it. It was signed two years ago and I am wondering why it has taken so long to bring it to this House. The procedure for ratification is a fairly simple one; it is not time-consuming as will be evident by the short debate that will follow my remarks. Considerable inconvenience and cost has been incurred by some Irish companies because the Belgian agreement has not been brought to the Dáil for two years after signature. I am wondering if this has been influenced by the Belgian ratification procedure? Perhaps the Minister could tell us which of these agreements have been ratified in the countries in question and, where they have not been ratified, if ratification is imminent? A possible reason for failing to bring the Belgian agreement before the House might be that the Belgian Parliament was similarly neglectful, although even if that were the case and if the two Parliaments were hesitating it would be better for us to get on with it and remove a possible impediment in the minds of the Belgians regarding ratification. If each of us is waiting for the other to ratify, the procedure could take a long time.

In general, these agreements have been received favourably. It is unfortunate that the Belgian agreement has been delayed but otherwise the time-lag between signature and the approach to the Dáil for ratification seems reasonable, given the problems of Dáil procedure and the necessity to fit in other matters. However, I should be glad if the Minister would comment on the Belgian agreement in his reply.

It seems a pity the agreement with Italy does not provide for recognition of export and mining reliefs granted by this country. This may be an impediment to Italian investment in Ireland, except on terms that might not be entirely desirable. So far as possible we should be concerned to ensure that investment here by other countries would be minority investment rather than majority investment. An agreement which limits the benefits of tax relief to a case where the Italian company owns 51 per cent of the shares gives a strong incentive to Italian companies investing here not to invest in a minority role but only in a majority role. It should be the purpose of this Parliament to try to encourage investment by foreign companies in a minority role, with majority Irish shareholding. The fact that this agreement appears to operate in a manner contrary to what this Parliament would wish is disturbing and I wonder if there is any prospect of making a change in the period immediately ahead.

There appears to be some differentiation between these agreements in respect of certain other provisions. In regard to portfolio investments, the withholding tax charged appears to be different in the case of Italy and Luxembourg and Zambia. In the case of foreign subsidiaries of an Irish company, the withholding tax appears to be 5 per cent for Luxembourg, 15 per cent for Italy and Belgium and no amount whatever in the case of Zambia. Are there reasons for this differentiation? Has it not been possible to introduce any kind of standardisation or uniformity?

Members of the Dáil are given a volume of documentation that is physically cumbersome. I understand several of these agreements are in print; in fact, this morning I was told that one of the agreements is out of print already and copies are not available from the Government Publications Office. It would be preferable for Members to be given printed versions of the document rather than the rather cumbersome stencilled copies. I should like to know the reason for the rather curious procedure of printing copies and letting them go out of print in some cases, while giving Members of the Dáil stencilled copies. Perhaps the Minister could explain this in his reply.

Mr. Colley

With regard to the general policy on the conclusion of double taxation relief conventions, it is the declared policy of the Government to complete arrangements of this kind with all countries where interest in investment here is likely to develop and where it is clear the absence of such an agreement is operating positively to prevent new desirable external investment here.

Further, it is necessary for us to keep in step with international developments in this field. Because of a growing relationship between many countries they are concluding double taxation agreements with each other. This is clearly illustrated by EEC developments which take account of the need to eliminate double taxation on the nationals of member states within the Community. To this end, Article 220 of the Rome Treaty specifically charges member states to engage in negotiations with each other. Finally, in deciding to conclude a double taxation arrangement with a foreign country account must be taken of whether the demand for such arrangement would warrant it.

With regard to the countries mentioned by Deputy FitzGerald, in the case of Australia preliminary steps were taken some years ago with a view to concluding a comprehensive double taxation agreement with that country. While the Australian Government were willing in principle to enter into negotiations, considerable delay in opening negotiations was expected because of previous commitments by Australia. I understand the position in this regard is unaltered. As far as we are concerned negotiations can be take place as soon as Australia indicates a date for their commencement. I might add there is provision under existing law which enables a measure of relief to be accorded in certain circumstances against Irish tax in respect of Australian tax charged on income derived from that country. The relief applies to the extent of one-half of an Individual's Irish tax or the amount of Australian tax paid on income derived from Australia, whichever is the lesser, provided he is domiciled and resident in Ireland for the year of assessment in question, and, prior to that year, was resident in Australia for a period not less than ten years.

There are no double taxation agreements in force between Portugal and Israel on the one hand and Ireland on the other and none is contemplated at present. In regard to Japan the conclusion of a double taxation convention has been authorised and negotiations are in progress at present.

Mr. Tully

It would be a lot more important than one with Portugal.

Mr. Colley

That may be indicated by the stage of the negotiations I have outlined.

In the case of Spain the conclusion of a sea and air transport agreement, such as one that I referred to in my opening remarks in the case of Belgium, has been authorised with Spain.

With regard to the point raised by Deputy FitzGerald on the Italian agreement I should say, perhaps that, in general, this problem of matching credit often causes considerable difficulty in these negotiations. In this case the Italian Government found difficulty in giving full matching credit and the measures of matching credit in this convention was as much as they were prepared to agree to. We do not give reciprocal credit to Italy.

Dr. FitzGerald

Why not?

Mr. Colley

That was the outcome of the negotiations.

Dr. FitzGerald

Would it have been worthwhile our offering it in return for a better concession from Italy or was that not possible?

Mr. Colley

What we got from Italy seemed to be the best we could get, whatever circumstances were obtaining.

Mr. Tully

Surely the position must change now?

Mr. Colley

I was about to say that I think the negotiations were concluded in the expectation of our being in the EEC, but there is some reservation on that because it is far enough back for there to have been some doubt about whether we were going into the EEC, so maybe the Deputy has a point.

In the case of Zambia I understand there is no withholding tax levied by them on dividends payable from Zambia to a resident in Ireland.

Mr. Tully

They will catch on to that before too long.

Mr. Colley

Maybe, but again in general in these negotiations this question of the withholding of tax creates a number of problems. The rates involved have to be negotiated. A fair bit of hard bargaining goes on as we try to get the partner country to reduce the rate as far as is practicable. In the case of Zambia there was not a problem really for the reason that I mentioned.

I am afraid I cannot tell Deputy FitzGerald what the position is in regard to the progress in the four other Parliaments in relation to the agreements as to the steps they must take before these conventions come into force. I do not have that information at present.

Dr. FitzGerald

If the Minister has not got it he can hardly use that as an alibi for not introducing the Belgian one here two years ago.

Mr. Colley

I did not intend to. The main reason for the Belgian agreement not being before the House up to now has simply been the difficulty of getting it in on the parliamentary programme.

Dr. FitzGerald

Unconvincing.

Mr. Colley

The Deputy will appreciate that there are a number of other items. When we resumed after the long summer recess the Taoiseach announced a number of items which it was hoped to get through before Christmas. One of them is of particular concern to me and, I think, to Deputy FitzGerald. That is the Ministers and Secretaries Bill. I am not going out of order. I am mentioning this as an example which explains why we have not been able to get the Belgian agreement here up to now. I would very much like to have had that Bill, and indeed this Belgian agreement before the House before now but there is a great rush of business and, without being unduly critical of the benches opposite, there were items on which a great deal of the time of the House was spent which, I would say, in cool retrospection the parties opposite might agree did not merit all the time that was given to them.

However, the Government have to co-operate with the Opposition to some extent in these matters and the Opposition have to co-operate with the Government to some extent. The fact is that I am in the position, when trying to get the matters before the House, of having to compete with other Ministers. Various other factors come into play such as the availability of people on this and on the other side of the House. It all adds up to delays which I would prefer did not occur. They do occur and this is a fact we have to live with. This is the primary reason why the Belgian agreement did not come before the House before now.

Dr. FitzGerald

Would the Minister agree that for a 20-hour a week Parliament that took three-and-a-half months holidays on the instructions of the Government, that is not a very good alibi to give to the business community.

Mr. Colley

I think the Deputy has had enough experience in the House now to know what I am about to say but if he has not he will have it very soon. I have no doubt that Deputy Tully would agree with me—he may not say it in the House—from his experience that any given amount of time in the House will be used up with whatever business is put before the House. If we sat 365 days a year it does not follow that we would do more business. There is a fine balance to be brought between the amount of time the House will spend in sitting and the amount of business it will get through. Parkinson, I think, had some rule which if transposed into parliamentary terms would apply to this. That is my experience. Additional time does not necessarily mean additional business transacted.

Dr. FitzGerald

This Bill would take about a half hour out of 2,400 hours in the last two years. There is something wrong with the way we do our business.

Mr. Tully

With respect to the chair, if the Minister and Deputy FitzGerald continue to be as irrelevant as this it will take longer than a half hour.

Mr. Colley

That thought had crossed my mind.

Dr. FitzGerald

Deputy Tully is not at the moment in the Chair, fortunately for us, perhaps.

Mr. Tully

I said: "With respect to the Chair."

Mr. Colley

Deputy FitzGerald may not be satisfied with the explanation, but that is the explanation.

Dr. FitzGerald

Could the Minister explain why we have these stencilled versions when there are printed versions? Why do we have this bulky stencilled documentation when the documents are in print, as I understand it? I have been shown copies of the printed agreements.

Mr. Colley

The printed version is issued by the Department of Foreign Affairs. The stencilled version is somewhat different in the sense that it is an annex to the draft order and is supplied to the House in the normal way for documents coming before the House. We will have a look at this to see if it can be improved. It might apply in a very small number of cases only that there would be a printed version of part of a document which comes before the House in stencilled form. I cannot think that there are many examples of this happening.

Question put and agreed to.