As I mentioned earlier, we heard many references to doctrinaire socialism in this debate and I pointed out it had little or no relevance to the topic under discussion. However, as it was offered as an argument I should like to put these thoughts before the House for consideration.
Doctrinaire socialism is the product of envy. I heard no envious remarks in this House from the Government side. There is not a scintilla of envy in the Government's White Paper and it is totally foreign to any approach we have adopted. I think there has been plenty of doctrinaire conservatism. That is the product of fear of change and it was expressed in the House. It was a wrong approach at a time when change is needed in many areas.
We also had the ingredient of doctrinaire capitalism. This is distinct from a proper understanding of the purpose and use of capitalism. A doctrinaire capitalist probably accepts as legitimate that income, which is the value of labour, should be taxed but opposes taxation of property which is the accumulation of wealth that is in excess of current needs. I consider all these doctrinal concepts wrong and think they are irrelevant and inappropriate to this debate. Because they were introduced we had an extraordinary statement from Deputy Brennan, deputy leader of Fianna Fáil, that the Wealth Tax Bill would promote a revolution. I do not know if he was giving fair warning that some people are considering a coup d'état. The remarks of Deputy Brennan would appear to foment discontent in a few people to whom I referred earlier.
A number of Deputies referred to the comments of the Confederation of Irish Industry published in their bulletin of 27th February last. It would be appropriate that I should deal with that comment which was based on a number of inaccuracies, which produced figures that were wrongly calculated and which was, at best, very selective in the type of illustrations offered.
I want to emphasise once again that a company as such is not liable to wealth tax. It is the shares in the hands of the shareholders which may become liable and only if shareholders happen to be fortunate enough to have wealth in excess of £100,000 in addition to a private residence and its contents. The valuation of company shares will be by reference to market value and market value will have regard to a number of things, including the control element.
The Confederation of Irish Industry values the firm on a net assets basis irrespective of the percentage rate of return on those assets. They have not taken into account the fact that valuations would consider amongst other things the net rate of return. In the case of the lower rates, for instance, up to 10 per cent, the value of the shares would undoubtedly be much less than on an asset basis.
An additional element which would operate to reduce the valuation of the shares would, of course be the very high level of loan capital employed. That is another factor that is not being considered by the Confederation of Irish Industry. But, supposing we assume, for the sake of argument, that the valuation of the shareholding as given at £¼ million is correct, is it realistic to think that a married man with a shareholding of £250,000 has no other assets whatsoever, does not even have a principle private home with ample contents? One can only conclude from the example shown by the Confederation of Irish Industry that if such assets are not held by such persons, they are included as part of the assets of the company.
Surely it is not unthinkable to ask that a person with assets in excess of £¼ million should pay about £950 or £1,000 wealth tax per annum? That is what this Bill proposes and I do not think it is unreasonable. Incidentally, the Confederation of Irish Industry paper overlooks the fact that there is an additional allowance of £2,500 per child and they suggest that the tax liability would be £1,000 whereas in fact the amount would be £950.
But the submission is also faulty by what it omits, and that is, a contrast between the system that we are getting rid of and the system that will replace it. It suggests that the proper picture is a no estate duty, no wealth tax, situation on the one side compared with a wealth tax situation, but that is not what is on offer. We are getting rid of estate duty and we are replacing it with a wealth tax. We have never said and we would not say, because we do not believe, that estate duty should be abolished without some alternative capital tax replacing it. But the contrast which should be printed in black and white on the CII document is with the present situation in which wealth holdings of the size illustrated in their paper, of £¼ million would carry a tax of 55 per cent under estate duties and that would involve a tax payment of £137,500. It will be a long time, indeed, before wealth tax, even as calculated by the CII, would reach to anything like that extortionate figure.
The confederation also suggests that a business would not be subject to wealth tax if in the ownership of a foreign company and they have suggested that that is wrong. Very strong representations were made to the Government that they should ensure that foreign interests which were invited to come to Ireland to set up here should not be frightened off by being subjected to taxation under a capital taxation code. At present such foreigners if they come here might well be subject to death duties. They would not be subject to income tax on profits earned from goods which were manufactured here and exported but they would be liable to death duties. It does seem a bit thick that people should urge that no steps be taken to disadvantage foreign investment and then, as soon as these representations are listened to, come in and say that you were wrong to do that because you have provided a disadvantage affecting Irish people vis-à-vis foreigners. Again, let us look at the facts of the situation as distinct from the theory. The foreign shareholders of the foreign company owning assets in Ireland may be liable in their own countries to capital taxes on such assets, so the differential suggested by the CII may not necessarily exist and in most cases would not exist. In any event the number of cases in which a direct comparison between Irish and foreign ownership of a business of this size can be made would be very few, indeed. It is only in the unusual type of family company that the impact of the wealth tax—which again I want to emphasise is leviable only on the individual—can be regarded as an indirect impact on the company and on the company's funds. In the more general case of foreign investment in Ireland ownership, shareholding, would be very widely distributed and it is clear that in such cases the comparisons drawn by the CII are not relevant.