Dáil Éireann díospóireacht -
Wednesday, 4 Jun 1975

Vol. 281 No. 9

Capital Gains Tax Bill, 1974: Committee Stage (Resumed).

Question again proposed: "That Schedule 5, as amended, be Schedule 5 of the Bill".

Mr. O'Malley

When I was speaking before the adjournment of this debate I drew attention to the problems that are created by paragraphs 3 and 4 of Schedule 5. Many of the same sort of difficulties are created by subsequent paragraphs such as paragraph 5 where nominee shareholders will be compelled to disclose the beneficial ownership of the shares which they hold in trust and so on, and paragraph 6 relating to returns by a party to a settlement and so on. I do not propose to go into these later paragraphs at this stage because paragraphs 3 and 4 in themselves are paragraphs of the greatest significance and of considerable novelty in our tax law.

One of the things that perhaps I did not advert to sufficiently when I was speaking before the interval was the fact that under subparagraph (3) of paragraph 3, in contradiction of what the Minister stated in the very short remarks he made in relation to these paragraphs, the notice concerned, which the Revenue Commissioners will be entitled to serve, relates not just to chargeable gains but to assets and, very significantly, to income, and the words are there in subparagraph (3):

(or if the notice relates to income or chargeable gains of some other person of any assets acquired by that other person)

It clearly gives the lie to the suggestion by the Minister that notices that would be served by the Revenue Commissioners under this Act, or under this Schedule in particular, would be served for the purpose of obtaining information with a view to charging capital gains and with a view to that alone. As I said earlier, anyone who has any experience of dealing with the Revenue Commissioners in more than one of their spheres knows perfectly well that is not the way they operate, and the proof of it here is the use of the word "income"—"if the notice relates to income"—in subparagraph (3) of paragraph 3.

The manner in which paragraph 4 is drafted is extraordinarily wide, particularly so far as stockbrokers are concerned, because it provides

(4) A member of a stock exchange in the State may be required to make a return giving particulars of any transactions effected by him in the course of his business in the period specified in the notice requiring the return and giving particulars of—

(a) the parties to the transactions.

(b) the number or amount of the shares or securities dealt with in the respective transactions, and

(c) the amount or value of the consideration.

What appears to be envisaged there is not a notice relating to any one individual or any one company. It seems to relate to every transaction that was carried out by the stockbroker during whatever period would be specified in the notice. The only limitation on the period of the notice seems to be contained in subparagraph (7) which confines it to transactions from the 6th April, 1974, onwards or to transactions within three years of the service of notice.

I suppose we are expected to be very grateful for that, but we have here an obnoxious type of retrospective legislation back to this date when shares, in particular, were perhaps at their lowest ebb, so low that gains are almost inevitable on a large number of them from that date. That is the only limitation. It is not even the date of the passing of the Act. Therefore, the width of the provisions of subparagraph (4) are almost frightening, so much so that I am surprised that stockbrokers have not expressed their concern about it to a much greater extent than seems to have been the case.

The provision about giving information is not confined simply to stockbrokers. It extends, by virtue of subparagraph (5) to any person registering transfers in shares or acting as an agent of the State in transactions in shares and securities. That would include solicitors and accountants who sometimes do this work; it would include secretaries of companies and, above all, it would include banks, who do this work through their legal and other departments on a fairly wide scale.

The only solution I can see, at first sight, to the enormous problems that are created by this paragraph would be simply the employment of stockbrokers elsewhere to carry out the transactions, and it is not even certain in the case of Irish companies that will be sufficient, because it may be possible under the terms of the paragraph, which is so widely drawn, to compel the secretaries or registrars of companies to give details of transfers of shares.

I do not think the general public are at all aware of provisions such as this, and there are equally bad ones to come later in this Schedule. If they were aware of these provisions I think there would be a major outcry. As it is there is an outcry but on a muted scale because the sort of people who realise what is involved are not the people who are given to street demonstrations or the like. They are endeavouring privately and quietly and in a dignified fashion to express their deep concern, but up to this I am afraid they are not having a great deal of success.

It is particularly regrettable that when important matters such as this are being discussed, when major innovations of a frightening character are being pushed through the House by the Minister, when the Opposition in response to their duty to point out the seriousness of these innovations, outline them in some detail, there is regularly nobody on the Government side of the House other than the Minister to listen to what is involved, even though the Whip which appears to apply to this Government is an abnormally strong one which seems to stifle most if not all dissent, nonetheless there must be some people of sufficient intelligence and decency on the other side of the House who feel that this is going far enough, that amendments should be made to this, and that we should not continue to have a situation in which any person in this country, whether he be solicitor, bank manager, stockbroker, auctioneer and so on, or simply a neighbour or friend or relation or acquaintance should be compellable, at the whim of the Revenue Commissioners, to give information about either his client or his customer or his relative or his friend and his financial transactions.

I know my colleagues will have a good deal to say about this matter. Like myself, they will be hoping the Minister will see reason on these provisions and that we can expect some major amendment of them on the next Stage.

Mr. R. Ryan

I shall not follow Deputy O'Malley's provocative remarks suggesting that the purpose of this section is to break the seal of the confessional. I had hoped that we had left emotive vulgarity of that kind behind us some weeks ago. We have had a very constructive and objective debate for some time past and I think that is the level on which the people would expect us to discuss a serious and complicated Bill of this kind. It is relevant to our consideration of the matter that other countries have similar provisions in relation to their capital gains tax to those we are providing in this Schedule. I refer in particular to the British Finance Act 1965, Schedule 10 of which provides that a notice could be served requiring "particulars of any assets acquired by the person on whom the notice is served or, if the notice relates to income or chargeable gains of some other person, of any assets acquired by that person".

There is no point in asking Dáil Éireann and Seanad Éireann to pass a law to tax capital gains unless machinery is provided which will ensure adequate disclosure. There is no point in pretending to tax capital gains and leaving massive loopholes so that people may engage in avoidance and evasion, because that is what Deputy O'Malley suggested would be the consequence of this legislation—that we would be encouraging evasion. There are many people now aware that evasion will not be tolerated.

We have discussed the difference between avoidance and evasion, and recently I was studying the French attitude towards these activities. It is interesting to note that in France what is called evasion here is called fraud, and what is called avoidance here is called evasion. If the law requires—as it does—that the Revenue Commissioners be given full details of people's incomes and the obligation to furnish that information lies on employers who are obliged to give full details as they know them of their employees' incomes, I cannot see how people wax indignant about the provision in the law which requires information to be given about capital gains. What is the philosophy which puts that on a higher level, which suggests that capital gains must be immune from inquiry, which says it is wrong to give the Revenue Commissioners the means by which they can ascertain capital gains while it is right to have provision in the law to disclose the incomes of even the poorest people to the Revenue Commissioners? I cannot see how one can say it is right to oblige people to give information about the incomes of others but it is wrong to require people to give information about the capital gains of others. I should like to hear somebody justify giving special exemption to those who have had the good fortune to make capital gains while denying that exemption to people whose only source of livelihood is their income.

Having said that, I am prepared to look at this subparagraph to see if we could use a form of words which would not leave it open to mischievous interpretation by Deputy O'Malley. To suggest in a sovereign Parliament that the objective of legislation was to break the seal of the confessional is to make a suggestion which is beneath contempt.

Mr. Colley

Is it possible under the subparagraph as drafted that that could be the result?

Mr. R. Ryan

That is Deputy O'Malley's suggestion.

Mr. Colley

But is the Minister saying it is not possible?

Mr. R. Ryan

I do not entertain it.

Mr. Colley

But is it not possible under the subparagraph?

Mr. R. Ryan

I do not entertain it and nobody of any decency would suggest that such a matter was ever in contemplation or prospect. The purpose of the section here and as it exists in other countries is to ensure that the Revenue Commissioners are properly seized of the necessary information to make the capital gains tax work fairly. That is its only objective. The purpose is to ensure that when capital gains are made they come to the notice of the Revenue Commissioners. Is anybody suggesting we should have capital gains tax but should not give the Revenue Commissioners the means to enforce that tax? That would be making a mockery of the Legislature. I gather from some of the remarks that have been made here this evening that that is the thinking behind the suggestion of Deputy O'Malley—that we should pretend to have a capital gains tax but should not provide the Revenue Commissioners with the means of enforcing the tax.

Deputy O'Malley has given voice to the long-standing position of detestation of tax collectors. It existed in biblical days and is still with us but, on the other hand, we have very properly recorded in this House by Deputy de Valera, Deputy Colley and others a respect for the Revenue Commissioners. They have very properly asserted, and I support their assertion, that the Revenue Commissioners act reasonably and apply the law fairly. This has always been the position in Ireland and I am sure always will. It is unfair that we should have heard from Deputy O'Malley a quite unjustifiable attack on the integrity and impartiality of the Revenue Commissioners. Some of the charges which he made against them both as to their motivation and methods of operation should not have been made and I hope on reflection the Deputy will see his way to withdraw them.

Major de Valera

While giving the Minister and everybody else credit for good intentions an objective examination of the principle of this paragraph will go a long way towards substantiating what is implied in what Deputy O'Malley said—that the powers of investigation already existing under the Income Tax Acts are being enlarged. At this stage I think it is in the interests of the Minister and the House and the Revenue Commissioners that this matter should be analysed in detail. Before I embark on that I should like to make this comment: there are two things in this paragraph. First, there is the very natural desire to extend the existing mechanism to capital gains. That, perhaps, would be accepted by all as a justifiable aim although, if time permits, I shall suggest doing this in another way. However, there is something more. Whether designed or otherwise, there is a positive extension of power to capital gains not only in this Act but also in relation to the income tax code. Speaking objectively while giving credit for right intentions everywhere and realising the problems of tax evasion, it is objectionable to effect such an extension in the Schedule to an Act like this.

I should substantiate this assertion in detail. I would like to put on the record in toto subparagraph (3) of paragraph 3. It reads:

A notice under any of the said provisions of the Income Tax Acts, as applied by this paragraph, may require particulars of any assets acquired by the person on whom the notice was served (or if the notice relates to income or chargeable gains of some other person, of any assets acquired by that other person) in the period specified in the notice, being a period beginning not earlier than the 6th day of April, 1974, but excluding—

(a) any assets exempted by section 19 (exemption of specified securities) or section 24 (miscellaneous exemptions), or

(b) any assets acquired as trading stock.

The first point to notice in regard to this paragraph is that it refers to "a notice under any of the said provisions of the Income Tax Acts". The said provisions are not what might appear first—the provision of sections 500 to 503 referred to in subparagraph (2) of the paragraph in question. The provisions are those referred to in subparagraph (1) which reads:

The provisions of the Income Tax Acts relating to the making or delivery of any return, statement, declaration, list or other document, the furnishing of any particulars, the production of any document, the making of anything available for inspection, the delivery of any account or the making of any representation, shall, subject to any necessary modification, apply in relation to capital gains tax as they apply in relation to income tax.

In other words, all the provisions of the Income Tax Act relating to these matters are what are referred to in the word "revision" of the Income Tax Act in subsection (3).

Therefore, it is not confined to the three sections mentioned in the previous subparagraph (2). The objectionable part of this subsection is contained in parenthesis and reads:

(or if the notice relates to income or chargeable gains of some other person, of any assets acquired by that other person).

Surely that extends the powers of both Income Tax Acts and this Bill in two respects. It extends where assets are concerned, where property is concerned and where the person is concerned. The specific relation to income imports that extension into the whole income tax code, being the Income Tax Acts and the subsequent Finance Acts.

I am making this point purely in the legal sense. It is not intended to be a political or any other sort of argument but is presented as I would submit it in court for interpretation and I want it on the record as such.

The only exclusion to this extension of powers is in relation to paragraph 19 which deals with government securities in respect of which the information would be available anyway and, also, in relation to section 24 which is interesting because chargeable assets but not gains are referred to. From a legal point of view one must read section 24 carefully to see the limitation of the exception here. The exception does nothing more than exclude information already available directly. I have said that as well as extending to the person, the powers extended to assets. In this context I refer the Minister to section 7 which reads:

All forms of property shall be assets for the purposes of this Act whether situated in the State or not, including—

(a) options, debts and incorporeal property generally,

(b) any currency, other than Irish currency and sterling, and

(c) any form of property created by the person disposing of it, or otherwise becoming owned without being acquired.

In other words, paragraph 3 extends the existing powers to acquiring from any person in regard to any property a notice which relates to income or capital gains. That is the substance of the objection to that section.

Let us look now at the Income Tax Act. Section 176 of the Income Tax Act, 1967, was the section which became notorious as the one that compelled the agent of another person to disclose information, but the section is limited to "Every person who, in whatever capacity"—and that included lawyers, brokers and everyone else—"is in receipt of any money or value or of profits or gains arising from any of the sources mentioned in this Act, of or belonging to any other person who is chargeable in respect thereof, or who would be so chargeable if he were resident in the State and not an incapacitated person, shall, whenever required to do so by any general or particular notice"—given to him by an inspector—"prepare and deliver, within the period mentioned in such notice, a list in the prescribed from, signed by him, containing"— and then it specifies what should be contained in it and specifies for a declaration, and then there is a subsection which deals with a person acting jointly, but they are all persons who are specifically related to the transaction or the person chargeable. There is a specific relationship there, but this paragraph says "some other person" and "by that other person", "other person" being totally unqualified. There is no qualification on what that person is to be.

In face of that, I find it hard to disagree with Deputy O'Malley that there is not a very significant extension of power in this section under two heads. "Any person" is made even more objectionable, as he pointed out, by subparagraph (4), but subparagraph (3) in itself extends not only to any person but to any property. If I am wrong in that, will the Minister please give me the section? I want to take this as if we were in court and I invite the Minister as a lawyer to reply to me in kind. My submission to the House is that because of the fact that there is no qualification on the person who becomes liable to respond to a notice under this section, there is an extension of the powers conferred by the section because in the Income Tax Acts and the legislation to date the persons liable are in general in classified classes.

The second point is that as far as I can read it under the Income Tax Acts the information sought is restricted to certain types of property and under this Bill the definition in section 7 of assets is so wide as to extend the scope of the section as to what information must be provided as well as to what persons are to supply that information. That is my submission and I put it as objectively as I can. I say that for that reason this section is objectionable, and particularly objectionable in the way it appears in the Bill. Having regard to the nature of the rest of the legislation, it should not be buried away in a Schedule with the appearance of being just an extension of existing provisions of the income tax code to capital gains. I am not in any way commenting on intention when I say this. I am commenting on the legal effect, the legal consequences, the legal import of the wording of this section if it is passed into law. I pass then to subparagraph (4)—"The particulars required may include particulars of the person from whom the asset was acquired and the consideration for the acquisition". I am not in a position to judge, but it certainly does not restrict the objectionable features of subparagraph (3) as I have outlined them.

With regard to penalties subparagraph (6) applies Part 35 of the Income Tax Act which deals with penalties and assessments. They would apply without the Minister having taken the trouble to include subparagraph (2) which seems to me to show an undue anxiety in regard to this matter. The very fact that subparagraphs (1), (3), (4), (5) and (6) are in that paragraph under the heading "Returns and Information" is sufficient to capture everything so far as I can see in subparagraph (2) of this paragraph which appears to me to be unnecessary.

A very interesting point arises on the Minister's exclusion of section 176, and here I have two points. First, I have a question, and secondly, I have a very good illustration of what Deputy Colley and I meant when we pointed out not only the lack of necessity for including this tabulation but also the possible dangers, or should I say, the undesirability, of such explicit inclusion. The opening paragraph of subparagraph (1) of paragraph 3, coupled in particular with the rest of the provisions, is quite enough to capture the whole of the income tax code in this regard and I may very legitimately ask now on the amendment, to which we agreed, what was the purpose of going to the trouble of excluding section 176 by an explicit amendment, leaving the rest in? I wonder was it because it could have been interpreted on the income tax side as being in conflict with the extension affected by subparagraph 3.

If I turn to section 176 of the Income Tax Act of 1967, I find a much narrower provision. That section applies only to persons "who are in receipt of any money or profits or gains arising from any of the sources mentioned in the Act of or belonging to any other person who is chargeable in respect thereof or would be so chargeable if resident in the State and not an incapacitated person"and who shall whenever required to do so, and so on.

The persons liable to notice and to make a response to a notice are limited to a very specific class in a relationship to the person charged. The subject matter of the notice is also qualified and restricted. That is in direct contrast to the expanding provisions of this paragraph. I am not making and do not wish to make any imputations, but from a legal interpretative point of view it was a significance that that section should be omitted by specific amendment from the Bill while this provision is in. I would be permitted to use that as a yardstick for judging the legal intention of the section. I hope that in what I have said I have convinced the Minister that this section needs reconsideration from that point of view.

Here is a real extension of the powers of enquiry by notice both in regard to the person subject to the enquiry and the property the subject of the enquiry. I accept what the Minister says, that as far as capital gains is concerned, you want to extend the income tax provisions here. You do more than that. You extend powers under both headings that were not there; you import new powers. This section is objectionable because of the place it is placed in and the forms in which it appears. We could have missed it if it had not been for the alertness of Deputy Colley.

The Minister is wise to reconsider what he is doing in this. If it is his intention to widen the powers under both codes, let him say so and then we can debate it as such. I do not think we should allow this to pass unnoticed.

This section raises another type of question. I will make two comments. The deletion of section 176 from the table that follows was an ineffective gesture in so far as it was a gesture but it might have done a great deal more; it might have imported something into the Bill much wider than section 176. Secondly, the penalties under Part 35—I am referring now to subparagraph (6) of paragraph 3— are all imported. Whether paragraph 2 subparagraph (2) is there or not, they are all imported to capture any person who is captured by the parentheses in subparagraph (3) of paragraph 3. This kind of thing raises a very wide issue which I will just touch on now.

We must not forget that we have a Constitution and that under our Constitution—there are citizens who are beginning to say fortunately—we have an independent Judiciary and under Article 34 justice shall be administered by the courts established by law and by judges and the High Court and particularly the Supreme Court are empowered under the Constitution to enforce the administration of justice by adjudging laws and the provisions of laws in accordance with the provisions of the Constitution. There are provisions in the Constitution such as Articles 40 and 43. I shall not expand further on it. There are provisions that would amply justify our courts embarking on the course that the American Federal Court was forced to embark on. If this House does not protect the individual citizen, eventually a situation will arise where the courts will take it upon themselves to declare just how far the Executive can trespass. We here, although the system is very similar to the British system, have a balanced system of executive, legislature and judiciary in a constitutional set-up that can in many ways be analogous to the set-up in the United States of America, and if this House fails in its duty—I have complained about this very often and this is not the occasion to expand on it—if the executive is going to roughshod through provisions for administrative convenience, even if it is done with a cry of tax evasion and all that, the courts will find themselves invited to intervene. This is where we are heading. This is not the time to expand on that theme, but the warning is here in this provision.

I am not attributing mala fides, nor am I attributing any ulterior intention. I am dealing with what this section will do. In these circumstances, therefore, I would strongly ask the Minister to reconsider this provision. If he wishes to extend powers, by all means let him extend them but it should be by way of a substantive section in the Bill. Then we can debate it as such. As this paragraph stands it is an invitation to a development that probably would not be altogether a happy solution.

The fault is in the failure of this House. Let no one make a scapegoat out of anyone in the administration. It is the executive who carry the responsibility for marching the majority of the sheep around the corner. Let us be frank about this. We are not blaming anyone else. It is the Minister and the Members of this House who share the responsibility. I disagree with placing the responsibility, as had been done on other occasions, on advisers or anyone else. It is our responsibility.

The Minister has rightly complained of the denigration of the administration, particularly that part that carries out the vital job of collecting the revenue that makes the State function, and that has to carry the unenviable burden of legislation like this. The least we can do to support them is to have legislation that is frank and forthcoming. If there is anything that lends itself to being a stick that beats the Revenue Commissioners it is a provision like this. It should not be there.

I have said it is objectionable. One of the greatest reasons it is objectionable is that the provisions of a section like this are buried away in a certain obscurity in a Schedule and an important extension is contained in a parenthesis. The psychological effect on anyone who studies it, whether a professional person or someone who reads the Official Report, will be unfortunate to say the least. I would strongly urge the Minister to take this paragraph out and if he wishes to extend the powers let him do so. If he does not, and if it has been done inadvertently or in an effort ex maiore cautelae, let us correct it.

In the presentation of this Bill and the extension to the Income Tax Acts a general mistake has been made. The Bill is a bulky one but the Income Tax Acts, particularly the Act of 1967, are even more bulky. It would probably have been better to confine oneself to a general provision as in paragraph 3 (1) and afterwards, instead of legislating by reference to the Income Tax Acts, to take the corresponding sections, to modify them, section by section as might be required for capital gains and include them in this Bill. That would give two benefits. First, it would mean the Bill was self-contained and that the nexus was a general one, ensuring there was one code, that there was mutual support and no contradiction. Secondly, it would remove ambiguity and would make the Bill easier to deal with for those who will have to administer it and those who will have to comply with it. It was a false economy to attempt to do what the Minister has done in this Schedule by making specific references.

Much of what is in the Table is unnecessary. The Minister may include paragraph 3 (1) if necessary and where specific extension of powers to capital gains and capital taxation are required he could take the corresponding sections of the Income Tax Acts, rewrite them with the necessary modifications as separate sections and include them in the Schedule. It may make the Bill more bulky but it will be a definite improvement.

I have said that the extension of powers is objectionable in the present context but I accept that an extension of powers is needed. If there is this type of extension of powers which is imported by means of a phrase in parentheses, preferably it should be a substantive enactment in this Bill and I suggest it might be imported into the Income Tax Acts through the Finance Bill. The Income Tax Acts can wait until next year and it could be put into next year's Finance Bill if necessary. If that were done there would be greater understanding of these matters by the House, the public and the courts. The Minister will not give occasion to people to cast imputations on the Minister's advisers or on the Revenue Commissioners. It is not too late for the Minister to consider such a programme in regard to this Schedule.

It is only when one starts to analyse the Schedules that one understands the import of section 51 of the Bill. Subsection (1) of section 51 states:

Schedule 1 (computation), Schedule 2 (companies and shareholders), Schedule 3 (leases), Schedule 4 (specified securities) and Schedule 5 (administration) shall have effect for the purposes of this Act.

I should like to ask the Minister a question on this. That, of course, can only mean an assurance that the provisions in the Schedules were positive enactments on all-fours with every other provision in the Bill. I do not think I am unreasonable in asking the Minister, if he is going to extend powers of this nature, powers that have traditionally been contained in explicit sections in the Income Tax Acts, why would he not do the same in this Bill and import them into the law by means of a specific section in the Bill? It would be neater, franker and in every way a more desirable procedure.

I do not know whether the Minister would like to comment on what I have said. I want him to take my comments in a completely legalistic spirit. I should like him to accept them, so to speak, as pleading in court and not as making either a political case or a popular case. Indeed, I am rather disturbed about the popular impressions arising from this in that they may not be what one would like them to be.

I have mentioned penalties. We come now to the further tax provisions applied to capital gains tax. Having regard to the Income Tax Act, 1967, and to the deletion of paragraph 176 and having regard to the fact that that deletion does nothing except in so far as it does not potentially introduce a contradiction of the extension imported by the phrase in parentheses in subparagraph (3), if that is unnecessary, and the Minister himself has deleted it, why not drop the whole Table as we have suggested it should be dropped? It is confusing. It is incomplete and, being incomplete, it is misleading. The whole of the provisions of the Income Tax Act relating to returns are imported in by the first subparagraph of paragraph 3. Why pick out certain ones here—I nearly said "ones that suit"—especially when paragraph 176 has been dropped? That is something the Minister should consider.

We have the Finance (Miscellaneous Provisions) Act, 1968, in this Table also: "This Act may be cited and shall be construed together with the Income Tax Act". The Finance Act, 1971 and the rest of the Finance Acts also provide for citation and construction with the Income Tax Acts. There does not seem to be any reason therefore for explicitly mentioning them either. I am referring to section 29 of the Finance (Miscellaneous Provisions) Act, 1968, referred to in paragraph 5 of this Table and that is the citation section. It is also cited in the Finance Act, 1973, and it is part of the same code. It is to be construed with section 98 as similar to section 98 of the 1973 Act. On that argument it appears to me that it is not only incomplete but misleading to include this Table at all. It seems to be totally unnecessary.

In summary, then, the case I have tried to make is that the first subparagraph of paragraph 3, under the heading "Returns and Information" which we are discussing imports the provisions of the Income Tax Acts relating to returns and information. Consequently subparagraph (2) is unnecessary particularly in regard to subparagraph (3). Then, because of that general importation of the provisions of the Income Tax Acts into subparagraph (3) and because of the phrase in parenthesis extending the scope to notice and responsibility both in regard to the persons captured and the property captured, this is a positive extension of powers under both these codes and it should not appear in this way.

If the Minister wishes to do this he should do it in another way and give his reasons for doing it; that in subparagraph (a) relates purely to property of the nature of Government securities where the information is already available; that paragraph (4) is also an extension of power and it is a further expansion and extension of the power contained in the parenthesis in subparagraph (3); finally, that the penalties under Part 35 of the Income Tax Act are extended to capture the extended class of persons provided for in subparagraph (3) and that, for all these reasons, the Minister should make up his mind as to whether he wants this extension of power. If he does, it should not be where it is; it should be a substantive section in the Bill. If he does not, then a drafting amendment is necessary. Furthermore, I made a suggestion that a proper way to import the Income Tax Acts here by re-enactment would increase the volume of the Bill but it would make both codes tidier and interlink them more effectively. The partial tables should be omitted. That will pretty well summarise the submissions I have made. I hope the Minister will take it that I have attempted to do so in a coldly legal manner, including the constitutional point, and not in any emotive way.

Mr. Connolly

I want to deal with this as I see it as an ordinary layman. I have not legal experience. Everybody knows that the Bill before the House is complicated. The ordinary man in the street is not aware of the complicated nature of this Bill and neither are the people who will be affected by it. When the Minister talks about people he may mean a next door neighbour. Will that person now be a spy? Everybody knows if a legal transaction on the sale of a house, land or property of any nature takes place the auctioneer or the solicitor involved is called on under the Income Tax Act to make a return.

What more does the Minister want? Why has the Minister to take it on himself to go to anybody he thinks fit to go to? Most people would regard that the same as the HP people who want to know if you are solvent and what means you have. It is well known the HP people have written to people asking how certain people stood financially. If that person was on unfriendly terms with you he could write a very bad report. I have seen occasions where men with good means were refused HP terms.

The person to whom the Revenue Commissioners can write to under this Bill can give any type of information he wants to give. If the person does not reply I believe a fine is imposed on him. If he fails to pay that fine he is prosecuted and brought into the courts. The Minister referred on Part III of the Third Schedule to any assets exempted by section 19. The exemption is securities.

An Ceann Comhairle

I am sorry Deputy but we are dealing with Schedule 5 as amended.

Mr. Colley

I think the Deputy made a mistake and that he was in fact referring to Schedule 5.

Mr. Connolly

I was. We know that does not apply because the Revenue Commissioners, as well as everybody else, know, if you have securities, where they are and it will not be too long until they find out where they are. I believe the people all over the country are not aware of the complications of the Bill. They are not aware of the fine print that goes into a Bill of this nature. When the Revenue Commissioners close in on them they will realise it, and also if this goes through in the form it is now before the House their neighbours may be spies or informers.

We have all the machinery at our disposal under the Income Tax Act and that should be enough to cover all the necessary sections of the Bill. I cannot understand why the Minister goes out of his way to refer to persons or some other person when he does not define who that is. I believe, as well as a lot of my constituents, that that can be anybody or whoever the Revenue Commissioners think fit to write to. As I already said if they do not reply they have to face prosecution. I ask the Minister to amend this part of the Bill to the straightforward reading of a Bill and to specify who the persons are. We know that the Incorporated Law Society have come to an agreement with the Revenue Commissioners to the effect that they will disclose all transactions concerning finance. Up to March they were reluctant to do so but their attitude has changed since. They will now give the Minister all the information he wants.

The ordinary person would take a poor view of the Minister if he knew that the Minister has given power to the Revenue Commissioners to get neighbour to spy on neighbour. The Minister may say that there has been avoidance, but we are going out of the way now to take away the privacy of our people. No person can be involved in any transaction now without the Revenue Commissioners knowing about it. I should like to remind the Minister that the farming community are very perturbed about this.

Notice taken that 20 Members not present; House counted and 20 Members being present,

Mr. Connolly

It appears that the Minister is not satisfied with the means at the disposal of the Revenue Commissioners. As the Government benches have filled up a little I should like to ask those Members if they realise the effect this will have on the farming community. Of course, many of the Government Members are not allowed to show their hand. As I am not a legal expert I cannot comment on the consitutionality or otherwise of this portion of the Bill but I have no doubt that the courts will come to the conclusion that it is unconstitutional. In my view this goes outside the authority of the Minister for Finance and the Government. The powers sought here are very far reaching.

Mr. Coughlan

Has the Deputy not got all the legal advice he could wish for before him and behind him? He has senior and junior counsel and other legal experts close to him. I am not going to sit here and listen to this nonsense; it is complete thrash.

Mr. Colley

Maybe Deputy Coughlan would like to contribute to the debate; that would make a good change.

Mr. Coughlan

What thrash!

Mr. Connolly

The people do not know the implications of this Bill. They will not realise them until they get a 21-day notice under the door.

Mr. Coughlan

Bring out the brylcream.

Mr. Connolly

Deputy Coughlan needs all the brylcream he can get to take the people off dole queues in Limerick.

Mr. Coughlan

We will do that and the Deputy need not worry about it.

Mr. Connolly

The Deputy is a long time doing something about it. Deputy Coughlan is doing his best to impede me but his efforts will not succeed. If this provision goes through it will have the effect of running the money out of the country, something the Government are succeeding in doing at present. We will finish up with nothing except our state of bankruptcy.

Mr. R. Ryan

There is one thing to be said about this type of argument, that it is the very best justification for the quick passage of this legislation, because until such time as it is law and in practice there will obviously be no limit to the number of outrageous suggestions being made about the way in which the legislation will operate. None of these horrendous consequences flowed from similar provisions in the British Finance Act, 1965, or from similar provisions in other capital gains legislation across the world. As I said earlier, if we have a capital gains tax we shall see to it that the Revenue Commissioners are given the weapons to make it work. We shall not, as a Government, invite endorsement of legislation which is only a mockery. We must ensure that, if capital gains are made, capital gains are taxed. It would be completely inequitable to tax only easily detected gains and to allow these hidden gains to go tax free. That would be both an inefficient and an inequitable tax, and we shall not be a party to it.

Before Deputy Connolly came in I said I was disposed to look at paragraph 3 to confine the type of person from whom information could be sought to the type of person from whom it is intended to seek it, that is, persons who have been engaged with or on behalf of others in transactions which could give rise to capital gains. These stupid suggestions—that is the most polite word I can use—that some self-styled tax consultants have been spreading around the country so as to try to fool people into engaging them as tax consultants later on——

Mr. Colley

Surely people have to take it as they find it, not as the Minister intends to amend it?

An Ceann Comhairle

The Minister without interruption.

Mr. R. Ryan

I said I was prepared to consider whether a form of words could be used which would ensure that it could not be open to the misinterpretations that the perfectly innocent paragraph has been open to.

Mr. Connolly

Can the Minister assure us that the Revenue Commissioners will not write to a neighbour?

Mr. R. Ryan

I can say quite bluntly that the Revenue Commissioners never contemplated, and I have certainly never contemplated, that neighbours would be asked to spy on neighbours or that they would be subject to fines if they failed to do so. That kind of ridiculous suggestion has been made within the last few weeks.

Mr. Connolly

It is in the section.

An Ceann Comhairle

Deputy Connolly should allow the Minister to speak.

Mr. Connolly

I merely want clarification from the Minister.

An Ceann Comhairle

The Deputy may make his contribution at some other time.

Mr. Connolly

Would the Minister tell us now how he intends to draft that? Who will the people be? That is why everybody is going around saying that one's next door neighbour——

An Ceann Comhairle

The Minister is in possession and must be allowed to speak.

Mr. R. Ryan

That type of irresponsible comment will continue to be made by people who are trying to persuade the timid and the stupid to engage them as their tax consultants. I would ask people to have a little common sense and not to be misled by mischievous people who are putting the most outrageous interpretations upon various sections of the capital tax legislation. There is one principle of law that the court respects, even if the so-called experts do not respect it, that is, that the executive act reasonably and must be presumed to be acting reasonably. If the executive or the Revenue Commissioners were to act unreasonably, as Deputy de Valera says, the court would not be slow in condemning them.

Mr. Colley

What would be unreasonable in law in the Revenue Commissioners writing to a neighbour?

Mr. R. Ryan

And asking a person to spy on his neighbour. That would be wholly unreasonable. The Revenue Commissioners could not even establish that a neighbour would have information about the property of another. Quite clearly the notices are intended to be addressed to people who are in possession of knowledge on relevant matters.

Ruairí Brugha

The Minister suggested earlier, quoting the 1967 Act, that any person might be required to give information.

Mr. R. Ryan

Yes, that exists under the Income Tax Acts at the moment, that any person could be required to give information.

Ruairí Brugha

With respect, it is any person——

Mr. R. Ryan

It has not meant that the Revenue Commissioners have gone round the country addressing notices to 2,999,000 people in order to get information about the others in relation to income.

(Interruptions.)

Mr. Colley

Because they did not have the power.

An Ceann Comhairle

Let the Minister be heard.

Mr. R. Ryan

It is necessary that the Revenue Commissioners should have the powers provided here, and I cannot understand the suggestion of Deputy de Valera to the effect that we should write in extensively all the applicable sections of the Income Tax Acts, amending them for capital gains tax purposes.

Major de Valera

Suitably amended.

Mr. R. Ryan

If one were to engage in that exercise a major redrafting job would be required and the legislation would not be through.

Major de Valera

I do not ask the Minister to answer that.

Mr. R. Ryan

We are dealing with a Bill which will collect the tax from April, 1974, and we have a clear obligation to get the legislation through as fast as possible.

Major de Valera

I accept that. I did not ask the Minister to do that. I did ask if it was possible.

Mr. Coughlan

On a point of explanation, we all know what is happening around the country, that there are people who would say to the Revenue Commissioners and to other people concerned in Revenue that this is being done and that is being done. This has been going on since Fianna Fáil was formed. Fianna Fáil were the people who started this, and they sent out more spies around this country, spying on everybody with regard to——

An Ceann Comhairle

This is hardly in order, Deputy.

Mr. Coughlan

They are in every town.

An Ceann Comhairle

The Minister was in possession. The Deputy is entitled to make his contribution, but it must be relevant.

Mr. Coughlan

What was instituted by them is not being continued now.

Major de Valera

This debate has taken a very unfortunate turn.

Mr. Coughlan

It has, because you are trying to drag it out.

Major de Valera

I am at a loss to understand the Minister's reference to the particular tax consultants. That is neither here nor there. The simple fact is that the Revenue Commissioners are a reputable, responsible arm of the State service who carry out their duties responsibly and justly, but like all agencies of that nature they must have the power to do it. It is all very well to talk about how they get their information, but it is necessary for them to get information in certain places in the best way they can, and I do not think it is appropriate for us to inquire in detail as to the methods they use, any more than we would the police. The police have a similar job to do in another way and beyond the general control, which I am quite satisfied was there in regard to the Revenue Commissioners we should not seek, unless there is positive evidence of abuse, to go behind it. It is bad for our own morale; it is bad for the morale of the country, and makes it very difficult for the Revenue Commissioners to function if we are to proceed on those lines. When all is said and done, it is the Revenue Commissioners who will have the difficult and unenviable task of implementing this legislation and, I hope the Minister will agree that the necessary powers must be given but that the powers that need to be given should be given explicitly. I do not need to repeat what I said before in regard to being prepared even to err on the side of giving discretion.

I suggest we return to the provisions of the Schedule. It is an undesirable thing to have the situation here which has arisen but, unfortunately, it has arisen just because of the method by which the powers legally contained in this subparagraph happen to be there.

Ruairí Brugha

This paragraph has been covered more than adequately but a reasonable reading of subparagraph (3): "(or if the notice relates to income or chargeable gains of some other person, of any assets acquired by that other person)"is open to the interpretation which has been put on it on this side of the House, that it can relate to any other person. My understanding is that the ordinary requirement under subsection (1) of section 500 of the 1967 Act is that any person required to provide information in relation to the income or assets must provide that information and that information can provide the commissioners with other information as to where the income was acquired and to whom assets were disposed of. I believe this reference is too broad, the "chargeable gains of some other person of any assets acquired by that other person". This is causing concern.

What we presume is meant here is that any person who has had dealings with a person who has made chargeable gains should be required to disclose those dealings. Subparagraph (4) of the same paragraph 3 requires that particulars may include particulars of the person from whom the asset was acquired. Any ordinary reading of that conveys that it is requiring a person to provide particulars about another person other than in relation to the assets, with whom the person had dealings. That is a reasonable interpretation of that sentence. What is required from the Minister in relation to both the words "some other person" and "particulars of the person" is that he should spell out here what is intended by this and, if necessary, make some amendment.

Mr. Colley

I do not think the Minister has any right to protest at the interpretation put on what is before us. As indicated very clearly by Deputy Brugha, the sentence to which the Deputy referred bears no other reasonable interpretation than that which has been put on it. When we find this vastly extended power proposed here is being imported in relation not only to capital gains but also to income tax we are entitled—indeed, obliged—to point out the consequences and possible consequences of what is before us. If the Minister wishes to protest at this and wishes to convey that there was no such intention, he should not bring before the House a provision which gives such a power and if he does so, what can he expect from an alert Opposition but that the consequences will be pointed out?

In general, the Minister has tried to justify the kind of powers proposed in this paragraph of the Schedule on the grounds that not to give these powers would produce an inequitable tax situation. I want to remind him that there are limits beyond which one is not entitled to go even to make a tax equitable. If the Minister does not accept that proposition, I suggest that he turn his mind to the protections in the law for those accused of crime— for criminals in some cases and in some cases for innocent people accused of crime—and if the logic which the Minister is trying to apply here is to be extended, then all the protections in the law for a person accused of a crime will be abolished because the objective being to make those who are guilty of crimes suffer for them will justify the means. The end does not justify the means and it is time that was said in this House. That relates not only to taxation but to criminal law and to many other areas. I think it is time——

Mr. Coughlan

That was done by Fianna Fáil. You hanged them and you shot them.

Mr. G. Fitzgerald

You do not talk about shooting or I will remind you of a few things when you ran away. You remember Tralee.

Mr. Coughlan

I know it and I knew it before you were born.

Mr. G. Fitzgerald

Do you want me to tell you more about it?

An Ceann Comhairle

There is no need for disorder, no need to engender heat.

Mr. G. Fitzgerald

There are some things I could say.

Mr. Coughlan

Say what you like; this is the place to say it.

An Ceann Comhairle

Order.

Mr. Colley

Deputy Coughlan's interventions may not be quite ad rem but they are welcome in the sense that we have had virtually no contribution from that side of the House other than from the Minister. Even Deputy Coughlan's interventions are welcome for that reason. I was saying it is time that this was spelled out clearly and particularly spelled out to the Minister for Finance who, I think, is losing sight of it—that there is a limit beyond which we cannot go. We cannot trample on the rights of citizens in order to ensure that there is no avoidance or evasion of taxation. We can go a great distance but there is a point beyond which we cannot go and that point is passed in this provision of this Schedule.

I think what the Minister has said already indicates that he accepts that, but I want to make it clear that the fact that Deputies on this side are drawing attention to what is being done here is merely indicative of the fact that they are doing their duty. It is quite unjustifiable to suggest, as has been suggested in some quarters, that it is an effort to aid and abet people in avoiding their tax liabilities. I suggest that the implications of the inclusion here of the word "income" have not fully sunk in.

The Minister said at an earlier stage in relation to income tax that the Revenue Commissioners have the power to demand information from anybody and he pointed out that they were not inundated with information nor were they inundating the population with notices seeking information. The fact is that the Revenue Commissioners have no such power and we have pointed that out to the Minister.

Mr. Coughlan

They always had that power.

An Ceann Comhairle

Order.

Mr. Colley

The power they have relates to persons who either themselves are liable for tax or are connected with persons liable for tax as agents or in receipt of money on their behalf. We have asked the Minister to point out the relevant section in the Income Tax Acts which gives power beyond that and the Minister has failed to do so. He has failed to do so for the very good reason that no such section exists.

The implications of including the word "income" here are that if this subparagraph is maintained with the word "income" in it, the Revenue Commissioners will be given power to serve a notice on any person and to demand from any person information in relation to income—as distinct from liability for capital gains—of any other person. There is no use in the Minister protesting and saying that we are misrepresenting his intentions. If this is not what is meant by the subparagraph it should not be worded in this way. The word "income"is dragged in here where the rest of the paragraph is dealing with gains and losses in relation to capital gains. When one considers the manner in which this vastly extended power is proposed to be given not only in relation to income tax but also in relation to capital gains tax, that it is included in the last Schedule and worded in such a way that even the beginning of the subparagraph suggests it is only extending existing powers under the Income Tax Acts to Capital gains tax, one is entitled to wonder why it is being done in this way. When one looks at the amendment which was moved by the Minister to delete the reference in the Table to section 176 of the Income Tax Act, 1967, and in the light of what Deputy de Valera said in that regard, one is entitled to be suspicious about what exactly was going on here.

I want to make it clear that I am not accusing the Minister of deliberately bringing in something which was hidden but which was in reality a vast extension of the powers of the Revenue Commissioners so as to enable them to serve a notice on anybody about any person's financial affairs. As I have said, though, the Minister is responsible to this House for what happens. I am distinctly unhappy not only because of the proposed extension of the powers but because of the manner in which this is being done. Whoever was responsible for this ought to be made think again about this kind of approach.

As has been said by others, if the Minister wants these powers he should say so clearly in a section of the Bill where everybody, apart from those on this side of the House whose duty it is to study it, can see what the Minister is doing and so that the principle involved can be debated. The only reason why the principle involved is being debated here is because we adverted to what is happening under this rather well-concealed wording in subparagraph (3).

I protest at that method of approach. The Minister has indicated that he is prepared to look at the subparagraph again with a view to applying the power of the Revenue Commissioners to serve a notice of the kind dealt with here only on persons who are themselves liable or who are connected with such persons in the capacity of agents, for example. That would be a considerable improvement in that regard but I would like to know whether, first, the Minister would intend to extend in any way the existing powers of the Revenue Commissioners in relation to income tax and, secondly, whether he would wish to extend the existing powers of the Revenue Commissioners in relation to income tax and to apply them to capital gains.

One of the implications of what is provided here in regard to income tax is that some persons who are paying income tax under the PAYE system —and these are persons to whom the Minister referred as those who are having to make full disclosures and be asked why this should not apply to others—are also earning money outside that system by what are called commonly, nixers, or by other methods. This is known to the Minister and to everybody else. Some of those people are paying tax on that extra income while others are not. In this House we must try to ensure that such persons pay income tax on those earnings but the question is how far we are prepared to go to make them pay. Are we prepared to go so far as to give the Revenue Commissioners power to demand, under pain of substantial fine for failure to comply, the information of any other person who might have knowledge of such a person's activities outside the PAYE system so that the necessary income tax can be collected? That kind of system, so extended without limitation, is too high a price to pay. That is why I am asking the Minister to indicate whether the kind of review he has in mind would involve any extension of the existing powers of the Revenue Commissioners in relation to income tax. To reiterate, the other question I am asking is whether he would propose in relation to capital gains tax to provide powers that would extend beyond the analogous and existing powers of the Revenue Commissioners in regard to income tax.

Mr. R. Ryan

I think the Deputies opposite are misreading the section. The purpose of obtaining information in relation to income or chargeable gains is in relation to capital gains tax liability and not to income tax liability. These powers may be used only for the purposes of assessing liability to capital gains tax but a change in income or information about income may help to identify a capital asset which otherwise might go undetected if the income came from a capital source and not from the sale of labour, and that is the function of the word "income" in that context. It is not an income tax context.

While Deputy Colley and others fear that there is a sinister motive in putting this particular provision in the Schedule, I would like to assure them that they are wrong, certainly as far as the Minister for Finance, the Revenue Commissioners and the parliamentary draftsmen of Ireland are concerned. A look was had at the British capital gains legislation, and they deal with matters of this kind in Schedules and the same form is used because it was a convenient way to set out the rules which would be followed in relation to the administration of the tax. It seemed to me very relevant indeed to have the provisions relating to returns of information in the Schedule which is dealing with the administration of the tax and have other provisions in relation to returns and information. That is the only reason it is here, and there was certainly no intention to mislead anybody or to hide away this power which I have openly defended and which I consider it absolutely essential to have.

Perhaps it can be more tidily defined so that it cannot be misused or used in an unreasonable way. Even though I am convinced, as I am sure are most Deputies, that it would not be used unreasonably, I accept the strictures delivered that we should not allow through any piece of legislation which could be used unreasonably, if it is possible to tighten it up. I think the way I have in mind may be able to do that, but I do not want at this stage to be tied to any particular form of words. I intend, if it is possible to do it, to ensure that the persons from whom the information can be sought are persons who can reasonably be assumed by reason of the transactions in which they have been involved to have the information.

Major de Valera

I want to resume the legal approach to this. It is a question of intention in the legal sense and not intention in the sense of motive. I do not think we are importing motive into it, though, as Deputy Colley says, the deletion of section 176 certainly gives colour to a construction. I want to resume the legal argument I made earlier, the basis of which was that under paragraph (3) "any of the said provisions of the Income Tax Act referred to in subparagraph (3)" means the provisions in subparagraph (1) of paragraph 3. That is the totality of the income tax provisions in that regard. That point is vital. It is not a restricted importation of the income tax code; it is an omnibus importation—all the relevant provisions of the income tax code— and I would suggest that it was the possible contradiction with the extension of power in the parentheses that brought about the deletion of section 176 from the table.

The point I want to make is that the income tax code is imported in its generality, and it is not necessary for me to repeat the argument I made on that paragraph, but it is worth calling attention from a legal point of view to the point made by Deputy Brugha, that in subparagraph (4), the particulars of the person are in any reasonable reading unqualified and in fact from a legal point of view are unqualified. "May include particulars of the person"—those particulars might even include an inquiry as to whether the person ever had been in court on a charge of dangerous driving so that from a legal point of view Deputy Brugha's point has importance. Lastly the importation of the penalties in Part 35 is important.

I would invite the Minister to look at the end of the section which we have not touched on. If this is not positive evidence of going beyond the capital gains code I am somewhat perplexed. Take paragraph 16 on page 78 which is headed "Power to combine returns etc. with income tax documents." It reads:

Any return or assessment or other document relating to chargeable gains or capital gains tax may be combined with one relating to income or income tax.

There you have a direct tie-up. Read that paragraph from a legal point of view in conjunction with subparagraphs (3) and (4). The effect of it is twofold. On the word "document", it certainly is any notice, but the second point connected with that is that the words "relating to income or income tax" clearly substantiate the construction earlier put by me and others on the phrase "or if the notice relates to income or charitable gains of some other person of such assets acquired by that other person." That is the phrase in parentheses in subparagraph (3) of paragraph 3. If that does not positively substantiate on the two grounds a legal connection which effects an extension of the powers beyond the deleted section 176, I would like to hear a strong argument to the contrary.

So much for paragraph 16, but I am not finished yet. Look at paragraph 18 headed "Miscellaneous". It reads:

For the purposes of this Schedule, section 94 of the Income Tax Act, 1967, as applied by paragraph 3 (returns and information) shall apply to property or leases of property other than premises as it applies to premises or leases of premises.

Here is another consolidated extension of the powers of the Income Tax Act because section 94 of the Income Tax Act, 1967 says:

For the purpose of obtaining particulars of profits or gains chargeable to tax under Case 4 or Case 5 (b) of Schedule B by virtue of this chapter the inspector may by notice in writing require

(a) any lessor or former lessor of premises to give within the time specified by the notice such information as may be specified in the notice as to the provisions of the lease and the terms subject to which the lease was granted and as to payments made to or by him in relation to the premises;

(b) any lessee, occupier or former lessee including any person having or having had use of the premises to give such information as may be specified in the notice as to the terms applying to the lease, occupation or use of the premises and where any of those terms are established by any written instrument to produce it to the inspector for inspection;

(c) any lessee or former lessee of the premises to give such information as may be specified in the notice as to any consideration given in the grant to him of the lease;

(d) any person who as agent manages premises or is in receipt of rent or other payments arising from the premises to furnish the inspector with such particulars relating to the payments arising therefrom as may be specified in the notice.

It will be observed that that section is limited to a particular class of person and to premises. There is tucked away at the end of this Schedule with a quiet reference back to this subparagraph (b) a provision which says:

For the purposes of this Schedule, section 94 of the Income Tax Act as applied by paragraph 3 shall apply to property or leases of property other than premises as it applies to premises or leases of premises.

It goes far beyond the purposes of that Schedule because that Schedule is imported into the whole Act by section 51.

We look at the definition of assets in section 7. Assets include any type of property. Subsection (18) does not say "property and leases of property"; it says "property or leases of property". In the context of the Bill the word property has a generality that goes far beyond what is contemplated by section 94 of the Income Tax Act. Therefore subparagraph (3) not only extends the scope and powers of the deleted section 176 but also extends both as to classes of persons and as to property the provisions of section 94 of the Income Tax Act, 1967.

I am somewhat puzzled as to why it was thought necessary to extend this section but I shall not confuse the argument at the moment. I give the Minister notice that when we come to paragraph 18 of the Schedule he will be asked to explain why the extension of section 94 is sought. That is a separate question which can be answered when we come to that paragraph.

The point I am making here is in substantiation of the case first made by Deputy O'Malley and repeated by Deputy Colley and expanded by him and the point made by Deputy Brugha that in the context of the purely legal interpretation, the relevance of paragraphs 16 and 18 is that they completely support the case that there is a covert rather than frank importation of very extended powers, which the Minister admits and he says he will look at it, both in regard to persons and property by this subsection. I repeat the point I made that this is objectionable, from the legal as well as other points of view. I should like the Minister to bear these points in mind when he is revising it.

I can understand what the Minister said, that it would not be practicable at this stage to accept my suggestion to redraft all the sections. I will not ask for that now. Later, consolidation will be needed. The sooner the better. I would join with Deputy Colley in asking the Minister to indicate positively whether he wishes to extend the powers of the Income Tax Acts or feels that it is necessary to do so because he is applying them, legitimately, to capture capital gains. Would the Minister say whether he feels it necessary to extend the powers? We are with him that he must apply the powers, but remember the wording here. There is a lack of frankness. The Minister uses the word "applied" in the tables. I gather from the Minister's statement that his intention was to apply. Naturally, the application would have certain modifications but application is a totally different thing from extension of powers. Extension of powers can take place in two ways, either locally in reference to the capital gains code or more generally in respect of the income tax code.

My submission is that if the Minister wanted to do it in respect of the income tax codes, why did he not do it in the Finance Act? Would that not be the more frank and proper way to do it? The Government were quick enough in the House to include a section—for political convenience— in the Finance Bill purporting to abolish death duties.

When we were dealing with income tax we had not the extended powers that are buried in the last part of this Bill. If the Minister is extending a power of this nature he should put it in as a substantive section in the Bill rather than put it into the provisions of a Schedule. There has been an extension of the powers in relation to income tax. The income tax code that was contained in the 1967 Act which was a consolidation measure, as kept up-to-date and amended by Finance Acts, is substantially affected by the scattered provisions in a schedule to a Bill that purports to deal with capital gains. To say the least, that is sloppy legislation. While I accept the impracticality of rewriting every section, I would ask the Minister to tidy up the matter. I would go even further and ask him to confine any extensions here to capital gains. If another extension is necessary, he should wait for the next Finance Bill unless there is a very good reason to act otherwise.

Adverse comment has been made about this legislation but the fault does not lie with those of us who pointed out to the Minister what was in the section. The Minister introduced the provisions here and he must carry the responsibility. I do not think it is fair of him to complain that anyone else has been at fault. I regret the adverse comments made as much as the Minister but we cannot be blamed for them. The case made by us is unanswerable. The method used by the Minister is objectionable. At the beginning of this debate I said it was objectionable from a legal point of view but it has since been demonstrated that it is objectionable from every point of view. It would have been better if the Minister had adopted a different approach.

Mr. R. Ryan

I must remind the House that the purpose of this Bill is to charge and impose on certain capital gains a duty of inland revenue to be known as capital gains tax. Section 51 provides that the Schedule shall have effect for the purposes of this legislation, namely, for the purpose of capital gains. There is no power in this measure which says that the Schedule can have effect for the purpose of income tax. It is for the purpose of capital gains tax that the Income Tax Acts are being introduced——

Major de Valera

I disagree completely.

Mr. R. Ryan

——and adapted and amended as necessary to cover capital gains that were not previously involved in the income tax code. We are simply using the same code because it is applicable, with the minimum of amendments, to the administration of a capital gains tax regime.

So far as paragraph 16 is concerned, that simply makes it in order to obtain information about income and capital gains on the one form. As I have already informed the House, the income tax forms in future will have a section which will enable the taxpayer to make a return of capital gains. This is a matter of convenience that will suit the taxpayer as well as the Revenue Commissioners and it was considered necessary to provide for such an arrangement in paragraph 16.

So far as paragraph 18 is concerned, leases of property are being included to cover items such as plant and machinery that previously were not within the ambit of section 94 dealing with leases of premises and the like. Clearly, with capital gains chargeable on items other than premises it is appropriate that the provisions of section 94 would apply to such property.

Mr. T.J. Fitzpatrick

(Dublin Central): The Minister has said that in the new assessment form provision will be made for wealth tax, capital gains tax and income tax. I do not believe that subparagraph (3) will apply to capital gains and wealth tax but will not apply to income tax. Eventually it will be one complete packet and the Minister knows well that is the idea behind it although he may say otherwise now.

Major de Valera

The Minister has referred to the new type of form and perhaps it is not unreasonable. When paragraphs 16 and 18 are taken together they reinforce the argument on paragraph 3 (3). By virtue of the provisions in paragraph 3 there is an extension of the Income Tax Act, 1967. The Minister has referred to the wording of section 51 which states: " . . . for the purposes of this Act." As I pointed out before, that puzzled me because a Schedule is normally for the purposes of an Act. The effect here is to make the Schedules a substantive portion of the legislation, to put them on the same basis as the other enactments, and to give these Schedules the same force and subject them to the same canons of interpretation as the rest of the Act and, therefore, applying the same canons of interpretation to this paragraph 3, regarding it, as section 51 makes me regard it, as part of the Act, I do not see that one can escape willy-nilly whether motivated or unmotivated in point of legal intention. I do not think one can sustain the case that the Income Tax Acts are unaffected. That is the kernel of our dispute over the whole of that section. It needs to be looked at.

The use of the words "application of the Tables" makes me say to the Minister again, if you want to extend powers, very good, say so explicitly. We have not been unreasonable about an extension of powers. If the extension is involuntary, then contain them, but let us be clear on exactly what we are doing and, if the Minister positively wishes to exclude any effect on the Income Tax Acts or extension of the powers there, he will of necessity have to alter subparagraph (3) in some drastic way. In fact, if he wishes to substantiate the claim that the Income Tax Acts are to be unaffected he will have to restrict both the property and the persons to the limitations contained in the Income Tax Act, 1967, and the subsequent Finance Acts amending it; in other words, he will have to restrict it to the existing contents of the income tax code. I suggest that would be a reasonable approach where the two have to be tied up. Any explicit extension necessary then in regard to capital gains only should be carefully drafted to capture capital gains only and, if any further extension other than some very necessary one is to be made in regard to the income tax code that should be held over until the next Finance Act or, if it is urgently necessary to act, a short amending Act should be introduced. But if we are going to have a capital code and an income code as two separate things, let us try to keep them orderly and separate. Do not let us enlarge one with the other; do not let us mix up one with the other. This subparagraph does both and it is therefore objectionable. The Minister should now give us some indication of what his attitude is in that regard.

Mr. R. Ryan

I cannot put it any further.

Major de Valera

I have sympathy with the Minister. He has had a difficult day. All I am asking the Minister is does he wish to extend the powers under the income tax code?

Mr. R. Ryan

No, and I am not doing so.

Major de Valera

Then he will have to amend this Bill to see that that will not happen incidentally, because it will happen incidentally.

Mr. R. Ryan

I do not think it will, quite frankly, but I do not mind examining the point and, if it is well founded, I will see what can be done.

Mr. Colley

Good. That is progress. Is it the Minister's intention to give any greater powers in relation to capital gains, other than necessary modifications, than at present exist in relation to income tax?

Mr. R. Ryan

Necessary modifications, but I would say not. We will have to provide that details of property and assets be given which were not required under the Income Tax Acts, and information must now be received from persons who are involved in transactions which may give rise to gains.

Mr. Colley

If the Minister's intention is not to give any greater powers in relation to capital gains tax than exist at present in relation to income tax, other than the necessary modifications, and if he would redraft these subparagraphs in the light of the intentions he has expressed on both those grounds, there would be no difficulty on this side of the House.

Major de Valera

I agree.

Mr. T.J. Fitzpatrick

(Dublin Central): But it is the Minister's intention now to have it the same as the income tax.

Mr. R. Ryan

We will have to have the powers necessary to enforce the law.

Major de Valera

We appreciate the difference in the nature of capital gains tax and income tax and I think that is what is worrying the Minister. Am I right in that?

Mr. R. Ryan

Yes.

Major de Valera

I want to reassure the Minister. There is a difference in nature between the capital code and the income code and, subject to that, we accept the Minister's statement.

Mr. T.J. Fitzpatrick

(Dublin Central): But the wording here automatically gives the Revenue Commissioners more powers.

Mr. R. Ryan

It gives them the powers necessary to deal with property and assets as distinct from income. That involves additional powers, and, if they have not got those powers, they will not be able to enforce the Capital Gains Tax Act.

Ruairí Brugha

What is concerning this side is what is meant by "some other person" and particulars of the person. In another Bill the Minister is making an amendment to delete "any other person". The Minister is amending section 14 of the Wealth Tax Bill.

Mr. R. Ryan

I have said what is intended—any person with whom or on behalf of whom the person receiving the notice having a transaction——

Mr. T.J. Fitzpatrick

(Dublin Central): Is the Minister going to redraft it along those lines?

Mr. R. Ryan

I will endeavour to do so.

Major de Valera

This is progress.

Mr. Colley

In relation to subparagraph (5), why does it provide for returns by a partnership having regard to the fact that such returns are not required from individuals or, presumably, companies without the service of a notice as provided for in subparagraph (3)? Why this specific provision in regard to partnerships in subparagraph (5)?

Mr. R. Ryan

Although under subsection (5) of section 4 partners will be assessed separately on their respective shares on any gains on the disposal of partnership assets the subparagraph requires the precedent partner to make a return of acquisitions and disposals of partnership assets.

Mr. Colley

What partner did the Minister say?

Mr. R. Ryan

The main partner or the partner taking precedence. I used the words "precedent partner." This follows a corresponding income tax provision in section 70 of the Income Tax Act, 1967.

Major de Valera

It is a pretty extensive section.

Mr. Colley

I would like to refer the Minister particularly to subparagraph (b) which says that the return of income of a partnership shall include:

With respect to any acquisition of partnership assets, the particulars required by subparagraph (3).

I do not know if that really is in conformity with section 70 of the 1967 Act or whether it is in addition to it. Subparagraph (3) provides for the serving of a notice requiring particulars of various kinds whereas this subparagraph seems to make this automatic in the case of a partnership. On the face of it it would appear that such details are required from an individual or a company, only if a notice is served. I assume there is some reason for this difference in approach.

Mr. R. Ryan

Section 70 of the Income Tax Act, 1967 deals specifically with partnerships. All we are doing in this particular section is relating the income tax provision, where it is relevant, to the property or assets situation which, of course, has to be looked at in connection with capital gains tax.

Mr. Colley

That may be true of paragraph (a) but is it true of paragraph (b)?

Mr. R. Ryan

Is it the Deputy's point that paragraph 3 says that particulars may be sought but does not specify what they are.

Mr. Colley

No, but that is a point I might make although I must confess it was not the one I was making. The point I was making was that the particulars required by paragraph 3 I take to mean particulars which are required if a notice is served under subparagraph (3). This subparagraph provides for the serving of such a notice if the Revenue Commissioners decide they should serve it. Why is a partnership singled out as a taxpayer or a potential collection of taxpayers who are required to give such information even without a notice whereas other taxpayers must get a notice in order to be obliged to furnish this information.

Major de Valera

The best way of dealing with this is to put section 70 of the Income Tax Act, 1967 on the record. It states:

(1) The precedent partner of any partnership, when required to do so by a notice given to him in relation to any year of assessment by an inspector, shall, within the time limited by the notice, prepare and deliver to the inspector a return in the prescribed form of—

(a) all the sources of income of the partnership for the year of assessment (in this section referred to as the preceding year) immediately preceding the year of assessment in relation to which the notice is given;

(b) the amount of income from each source for the preceding year computed in accordance with subsection (2);

(c) such further particulars for the purposes of income tax (including sur-tax) for the preceding year or the year of assessment as may be required by the notice or indicated by the prescribed form.

I take it that the two additional paragraphs (a) and (b) in the Bill would be added to these. That means you would add to that subsection the two provisions that are provided in this paragraph. The section continues:

(2) The amount of income from any source to be included in a return under this section shall be computed in accordance with the provisions of this Act save that the computation shall be made in all cases by reference to the preceding year:

Provided that—

(a) in the case of such interest as is referred to in section 344 the computation shall be made without regard to that section;

(b) where, in the case of a trade, an account has been made up to a date within the preceding year or more accounts than one have been made up to dates within that year, the computation shall be made by reference to the period or to all the periods, where there are more than one, for which accounts have been made up as aforesaid.

(3) If a person delivers to any inspector a return in a prescribed form, he shall be deemed to have been required by a notice under this section to prepare and deliver that return.

(4) In proceedings for recovery of a penalty incurred under section 500 or 501 in relation to a return referred to in the preceding provisions of this section—

(a) a certificate signed by an inspector which certifies that he has examined his relevant records and that it appears from them that a stated notice was duly given to the defendant on a stated day shall be evidence until the contrary is proved that that person received that notice in the ordinary course,

(b) a certificate signed by an inspector which certifies that he has examined his relevant records and that it appears from them that, during a stated period, a stated return was not received from the defendant shall be evidence until the contrary is proved that the defendant did not, during that period, deliver that return,

(c) a certificate certifying as provided for in paragraph (a) or (b) and purporting to be signed by an inspector may be tendered in evidence without proof and shall be deemed until the contrary is proved to have been signed by such inspector.

(5) In this section "prescribed" means prescribed by the Revenue Commissioners.

I wish to have that section in toto recorded on the record and I have this comment to make on it, which is somewhat similar to the one I made on the later paragraphs of the Schedule. It seems to me that the first effect of paragraph 5 is to add the two subparagraphs (a) and (b) to subsection (1) of that section in the Income Tax Act. When it does that the wider aspects of subparagraph (3) apply to extend the scope of section 70 of the Income Tax Act, 1967 in so far as partnership assets are concerned, but it is an extension. I am again talking of legal effect. Here again we have an involuntary extension of the scope of section 70 of the Income Tax Act, 1967.

Furthermore, subsection (4), which specifically relates to the recovery of a penalty, is applied to everything captured by this paragraph. I am willing to accept that what was intended was to add clauses A and B of subparagraph (5) to the clauses of subsection 1 of section 70, but having regard to what we said on subsection 3 and to the content of section 70 of the 1967 Act, it may be that something more is done than was intended. If justification and reason can be advanced for that, well and good but I should like Members to realise what we are doing in regard to this Schedule.

Whatever is done in relation to subparagraph (3) will be pro tanto imported into section 70 of the Income Tax Act, 1967. This now becomes a matter of legal tidiness, legal intention and drafting but it is a matter that should be taken into account with the remainder of the provisions in the Schedule. It lends all the more force to our plea to delete these Tables and I urge the Minister to do so. Sections 70 and 94 are applied in the Table but why should this be so? Why are they applied when they are so affected and section 176, which was not affected, is left out? From a legal point of view would it not be wiser to delete these Tables? They are not necessary; they are misleading.

I am attempting to seek the contradictions between the applications and the extensions and my intention to pursue that point later could be obviated if the Minister took my point and said that these extensions are probably more dangerous than useful. If they serve no useful purpose, it would be much safer to delete them.

Mr. R. Ryan

They are necessary in order to make the Income Tax Acts, as amended for the purpose of capital gains tax, relevant.

Major de Valera

I am referring to the Tables which are incomplete and misleading.

Mr. R. Ryan

I do not think so. They will help the practitioner to identify the most pertinent ones and it is clear that they are applicable subject to any necessary modifications and to the amendments which are spelled out in the paragraphs themselves.

Major de Valera

Am I to take it that this Table applies to section 94 as it is or am I to take that "applied" in the Table means applied and modified by paragraph 18? Am I to take it that the section is applied and then modified by subparagraph (4) of paragraph 3. I am aware that one can reconcile the interpretation but it does not seem to be a very useful thing seeing that the whole of the Income Tax Acts are applied in their relevant portions. If section 176 is deleted, the Minister should also delete sections 94 and 70 from the Table.

Mr. Colley

The penalty sections, sections 500, 501 and 503, are not listed. They are referred to in subparagraph (2) but they are not part of the Table.

Major de Valera

The whole thing is very confusing. The answers received in teasing it out are, to say the least of it, disturbing as we have demonstrated.

Mr. R. Ryan

If one takes section 70 of the Income Tax Act, 1967, which deals with partnership returns, by virtue of paragraph 3, subparagraph (2), and the Table that section applies. By virtue of subparagraph 5 there is added to that particular section subparagraphs (a) and (b) of subparagraph (5) but because we strengthen it or make it relevant to assets in paragraph (5) there is no reason why we should delete it altogether other than for the argument that has been previously advanced that the Tables may not be complete. We provide for that by saying that the Tables are without prejudice to the generality of subparagraph (1).

Major de Valera

The words, "subject to any necessary modifications" as used in subparagraph (1) of paragraph 3 cover a lot. If the Minister asked himself what way a court would lean towards the interpretation of that clause, subject to any necessary modifications, he would get all the answers necessary in approaching the redrafting of the section.

Mr. R. Ryan

One simple answer would be that unnecessary modification would be where the words "income tax" appear in the original Acts that one would read "capital gains tax" for the purpose of this Bill.

Mr. Colley

I should like to point out to the Minister that under subparagraph (5) it refers to section 70 although it is in the Table, whereas in subparagraph (2) sections 500, 501 and 503 are referred to but they are not in the Table. There does not appear to be any consistency about the way this has been done.

Progress reported; Committee to sit again.

The Dáil adjourned at midnight until 10.30 a.m. on Thursday, 5th June, 1975.