In regard to paragraph 11 of the Fifth Schedule in the event of failure to comply with the requirements of this paragraph by way of deduction in the circumstances specified what penalty attaches to failure to do so?
Capital Gains Tax Bill, 1974: Committee Stage (Resumed).
Question again proposed: "That Schedule 5, as amended, be Schedule 5 of the Bill."
The same penalties as apply under the income tax code.
Presumably the minimum range of penalties would be a fine of up to £100 and £10 a day after conviction on continuation of the offence? Is that the minimum?
It is. The Deputy will recall that there is a wide range of penalties in respect of the offence and that there is a continuing fine in respect of each day during which the offence continues.
In the case of a company it is considerably bigger.
That is correct. I have been thinking about the way in which this section might work. It seems to me that worthy of consideration is a provision that where a transaction would affect land, which is usually transferred by deed, it could include a declaration by the vendor that he was not directly or ordinarily a non-resident person. That would put the purchaser in the position of not being under liability to make the deduction. If, however, the vendor was not in a position to make such a declaration then clearly the purchaser would have to make the deduction required by subsection (2).
In order to achieve that presumably some amendment would be required to the Finance Act?
I am not in a position to say at the moment the most suitable location of the requirement. I will certainly give consideration to it. I wonder if Deputy Colley, as a practitioner, would consider that to be of assistance?
It will certainly reduce the area of difficulty that arises here. I agree with the Minister that if such a certificate appeared it could be completed and appear on a deed, then, as the Minister says, the problem would not arise at all. Normally the certificate is given by the purchaser and not the vendor, but here it would be the vendor who would have to give the certificate saying he was a resident of the State.
Some certificates have involved both parties.
If such a certificate could be given it would give the purchaser adequate notice. That is the real point with which I am concerned. I appreciate that that suggestion certinly removes some of the difficulties, but the Minister will appreciate that it does not remove all the difficulties because the other assets could involve rights in relation to the Continental Shelf, minerals or any rights, interests or other assets in relation to mining or minerals, or searching for minerals and assets in the State which, at or before the time when the chargeable gains accrued were used at, in or for the purpose of a trade carried on by the non-resident person in the State through a branch or agency or before that time were used, held or acquired for use or for the purpose of the branch or agency. The remainder relates to the Continental Shelf, exploration or exploration rights.
I do not think the Minister's suggestion in regard to the deed will get over the difficulty in regard to those assets. It might in some circumstances but one could not be sure, as one could in the case of land, that it could. In relation to those I want to suggest to the Minister that the obligation which is imposed with a penalty for non-compliance and in the case of a company, say a bank, which did not comply a very substantial penalty, produces a situation in which we are obliged to look at the machinery proposed and see is it feasible and reasonable to require people under pain of penalty to carry out what is proposed here. It is not reasonable and is not feasible.
I outlined before the adjournment some of the problems arising. It would seem that the provisions of paragraph 11, and in particular of subparagraph (2) would impose on a solicitor, a bank or any other agency an obligation which in many circumstances could not be discharged. This obligation attaches to any person through whom the moneys might be paid even though that person might have no knowledge of the source or the destination of the funds or of the fact that the transaction was connected with someone not resident in the State. The provision in subparagraph (2) in relation to a payment, directly or indirectly—I stress indirectly—to a person who is not ordinarily resident in the State produces a situation which would be quite impossible, in some circumstances, for people to comply with. How could they know if they are responsible for making this deduction if the money will indirectly end up with somebody who is not resident in the State?
The obligation in the case of a solicitor is being extended enormously but he might be in a better position than most other agents to have some idea of whether the person who will ultimately receive the money was or was not a non-resident. However, a bank could be in an impossible situation in trying to determine what transaction the money was connected with and where it was going to end up eventually, not just the direct transfer but the indirect results of the transfer of the money by the bank. I suggest to the Minister that in so far as the machinery proposed in paragraph 2 relates to the kind of assets mentioned, other than land it is unworkable. The object of the machinery proposed is acceptable because it is an effort to ensure that non-residents do not escape without paying capital gains tax—a laudable purpose that we support. However, there is no point in providing machinery which purports to deal with this situation if that machinery is unworkable and if, in the process, it imposes an obligation on Irish citizens which they are incapable of discharging and which, if they fail to discharge, can render them liable to penalties, some quite severe.
Unless the Minister can devise machinery which will not put Irish citizens in the kind of position they are being put into under this paragraph this machinery amounts, effectively, to window-dressing. It will not do what it is supposed to do but it will create a lot of problems for people who are in no way involved or responsible for the payment of capital gains tax in the kind of circumstances envisaged in paragraph 2.
We are not dealing here with small assets with moveable property. One might be dealing with moveable property but there would not be many cases involving moveable property which would be caught by this paragraph. It does not apply where the disposal does not exceed the sum of £50,000. That exempts a lot of people.
(Dublin Central): Would there be exemption up to £50,000?
Yes, subparagraph (8) so provides. The majority of assets would not have this obligation attaching to them and the kind of assets which would have this obligation attaching to them would, in the main, be land. It would also involve property in respect of which it would be quite an easy matter to obtain a declaration from the vendor which could provide protection for the purchaser in the way I have already described.
I will certainly give serious consideration to the other points raised. I can see situations, even though there would not be many, where the purchaser may have some difficulty in ascertaining whether or not the vendor was a person who was a non-resident. I am satisfied, having regard to the size of the consideration and to the necessity to ensure the tax is paid, that, broadly speaking, the paragraph is right, is correctly conceived and is workable. If it is possible to make any adjustment in the minority of cases to ensure that a bona fide purchaser would not be jeopardised I would be prepared to consider an amendment.
I appreciate that the Minister is prepared to examine the paragraph in the light of what I have put forward. The Minister may be misleading himself in so far as he seems to think that because this applies only to cases where the consideration is over £50,000 there will be a small number of cases and that they will be readily identifiable. I should like to put a case to him, remembering that the obligation to do what is set out in the section applies not only to the person paying the money, the purchaser, but to the person through whom the money is paid. For example, we will presume that the bank is the agent through whom the money is paid, the consideration for the transaction is £100,000, the money is paid in to the bank and through the bank is paid out, by direction, to X. The mere fact that that happens appears to impose an obligation on the bank.
That kind of transaction going through a bank is not so unusual that it would draw the bank's attention to it so that they would make enquiries. If a bank held up payments of this kind while enquiries were being made they could find themselves facing other legal problems with their customers. If the bank pays out the money in the ordinary course of business the bank has no way, in most cases, of knowing what the transaction is. They have no way of knowing whether the transaction was one that would bring it within the terms of paragraph 2 and no way of knowing to whom the money is going directly or indirectly.
I suggest to the Minister that in the case of a bank it is utterly impossible to impose, in a realistic way, this obligation on them. I can see no way in which a bank could discharge it. That is perhaps the most clearcut case, but it seems to me that less clearcut, although almost as difficult, could be the position of other agents, and in some cases of solicitors. They may not be in a position to know the facts which would bring about the operation of paragraph 2 and if they do not they cannot do what paragraph 2 calls upon them to do. If they fail to do it, technically they are liable to a penalty. The Minister may say that if they can establish that they did not know they are not liable to a penalty. That may be so but if it is so I do not think it is the kind of machinery that one can stand over.
When the Minister is reviewing the wording of this paragraph he should bear in mind that we should not attempt to impose undue burdens on innocent people, particularly people who are our own citizens, so as to get at non-residents who do not pay capital gains tax for which they are liable. We must ensure that the machinery is workable and that whoever becomes responsible under the provisions of paragraph 2, be they Irish citizens or non-Irish citizens, are responsible in such a way that their responsibility is clear to them and can be clearly established, so that if they fail to discharge it, then the penalty can be imposed on them. As it stands—and it is difficult, I must confess, to see how an amendment of it can overcome the major difficulties that arise—I suggest it is unreasonable and unworkable, and if it is unworkable there is not much point in having it here at all.
It may be that a complete rethink of the problem might produce a better way of tackling what the Minister is trying to tackle here and what we support him in, but not at the expense of imposing obligations and penalties for non-fulfilment of those obligations particularly on Irish citizens.
As I have said, I am satisfied that it will operate satisfactorily in the vast majority of cases, and in so far as there may be areas of specific difficulty, I am prepared to look at the paragraph to see whether or not relief can be given if a person has no way of knowing or ascertaining whether or not the beneficiary is a non-resident.
(Dublin Central): In a situation like this where a property is being disposed of by somebody living in England or elsewhere abroad, is there any danger under this paragraph that the Irish purchaser could lose his deposit if the deal is not fully carried out, because the person is obliged to deposit 50 per cent of the assets? Can the Minister visualise that happening?
No. Any provision in a contract which would have the effect of a person being penalised because the person discharged his statutory responsibilities would in itself be invalid.
Here is an example the Minister could take a look at. It is the reverse case where a resident is disposing of an asset to a non-resident. If he receives an offer through a firm of solicitors is there any regulation or provision at present to compel that person to identify the source of the money?
No, as of now there is not and indeed at the passing of the Bill, if left unamended, there would not be either, but a prudent person would take steps to satisfy himself that a vendor was not a non-resident and, if the vendor was a non-resident, the purchaser should be in a position to protect his interests under subparagraph (2).
There are a few other points on this paragraph I want to put to the Minister. It is a little difficult to follow it because it has been substantially amended, but I think the point I am about to make still applies. The paragraph as a whole is concerned with the payment of the tax on 50 per cent of the consideration, the deposit of that with the Revenue Commissioners, and the issue of a certificate, and so on. However, there does not appear to be any provision giving credit for that tax paid to the person who is actually liable for it, that is, the non-resident.
Subparagraph (6), as amended, reads:
(6) The person chargeable under section 4 in respect of the disposal may apply to the inspector for a certificate that the tax chargeable for the year of assessment in which the disposal is made, and the tax chargeable on any gain accruing in any earlier year of assessment (not being a year ending earlier than the 6th day of April, 1974) on a previous disposal of the asset, has been paid and that no further such tax is payable for those years, and the inspector on being satisfied as to the facts shall issue a certificate to that effect.
The Deputy's question is that there is no provision specifically here for a refund of——
No. I am coming to that in a moment. Does the Minister say that subparagraph (6), as amended, specifically provides for the giving of credit in respect of the tax paid by way of deduction and payment to the Revenue Commissioners by the other party?
Subparagraph (5) as amended reads:
(5) Where the amount of capital gains tax assessed and charged under subparagraph (3) or (4) is greater than the amount of such tax chargeable on the gain on the disposal in relation to which the first mentioned amount was accounted for, then, on a claim being made in that behalf—
I now insert the words put into the amendment:
—by the person chargeable under section 4 in respect of the disposal, relief shall be given from the excess, whether by repayment or otherwise.
I suppose, by implication, that decides that there is credit given although, as the paragraph was originally drafted in relation to the certificate being issued, it was then the purchaser rather than the vendor, which seemed to provide for credit being given to the purchaser but not to the person who was actually liable for the tax. However, it is not a major point, but in regard to the repayment which is provided for in subparagraph (5), what is the position about interest, because presumably in many cases there may be an over-payment, and, indeed, that is envisaged in subparagraph (5)?
These matters may be settled contemporaneously with the transaction itself, and if a taxpayer fails to apply for a refund that is due to him, it is difficult to see why he should be entitled to the payment of interest on money which could have been returned to him if he had made a claim earlier.
That is going a little far.
I do not think so, because once the price of the article is struck, the vendor can thereupon proceed to obtain an assessment of the tax which will be payable by him. They discharge the tax then and avoid the need to make a deduction and the passing over of money by the purchaser. If he does not do that and then does not apply for a long time afterwards to get a refund of any excess, there is some responsibility on his part for any loss he may have to carry as a consequence of his own omission.
(Dublin Central): Could the Minister give us any indication as to how long this will take? In the ordinary course of events a transaction would be finalised within five or six weeks of purchasing, but where a non-resident sells a property and before it can be finally transferred to the purchaser, Revenue Commissioners must be satisfied as to what capital gain is accruing. I cannot see this work being carried out by the Revenue Commissioners in that short space of time. It is quite obvious that it will be anything from three to four months before the Revenue Commissioners are satisfied as to what the capital gain is on the property and it cannot be transferred because one has to get a certificate from the Revenue Commissioners, I presume, before that can be done. Does the Minister not think this will delay considerably the transfer of this particular kind of property of non-residents?
No. Transfers can take place normally. There is no reason to hold up the transfer. At worst—from the point of view of the taxpayer—there will be an excess payment to the Revenue Commissioners but it is an excess which the vendor can forthwith apply for.
Should he have to apply?
If he is non-resident he must take steps to ensure that all the consideration does not pass out of our jurisdiction and that his tax is paid. If he does not want to have this money withheld he can apply from the moment of knowing the price, for an assessment to be made and if he gives, as required by law, the facts relating to the cost of acquisition and the price at the time of disposal, the assessment can very quickly be made.
Is it not possible to have a situation in which twice the amount of tax would actually be paid to the Revenue Commisisoners? If that happens why should the person concerned have to apply for a refund? Why should not the Commissioners pay it without application?
Because they will not be in a position to know what gain has been made until the vendor supplies the facts.
That is true.
(Dublin Central): Is interest payable on the excess deposit?
No.
(Dublin Central): Generally, or very often, when a person sells a property he has other property already bought and the deposit money paid by the purchaser is used as part of a deposit on the other property. The Minister is saying that when the vendor sells his property the purchaser must deposit 50 per cent out of the consideration with the Revenue Commissioners who will hold it for three or, perhaps, six months. The vendor who has sold his property and has probably bought already another property cannot put his hands on this money. There may be no capital gain accruing on the property sold but irrespective of that, 50 per cent of the consideration must be deposited with the Revenue Commissioners who can hold it for four or five months. Surely, in all fairness, the interest the vendor has to pay on a loan comparable to what the Revenue Commissioners are holding should be payable for the length of time the Revenue Commissioners have the money?
The remedy lies in the hands of the taxpayer who, on giving the facts, will get an immediate assessment. There will be no hold-up on the part of the Revenue Commissioners who are supposed to give top priority in relation to assessment of capital gains in transactions of this kind.
(Dublin Central): Suppose there is no capital gain—and this can happen? On any property sold in the past 12 months there would be a loss. But the purchaser must hand over 50 per cent of the consideration to the Revenue Commissioners in order to get a certificate.
No, 13 per cent.
It is 26 per cent of 50 per cent which is only 13 per cent.
If the Revenue Commissioners are in possession of a considerable overpayment of tax for a certain length of time, in principle should they not pay interest on that at the same rate as they charge interest on unpaid tax?
Those who are in a position to establish that there has been overpayment must surely have some responsibility in the matter. They will be the non-resident vendors. If they furnish the information to the Revenue Commissioners, their non-liability will be assessed forthwith and the money returned to them. I would think it wrong that the Revenue Commissioners should be asked to pay interest on money they hold because of the indolence of those to whom the money belongs.
There could be many reasons for delay in applying. I think the Minister's real problem here is that his rate of interest is so penal that he fears people might deliberately do this —leave the money there and get 18 per cent on it.
The purpose of interest is to encourage people to pay their tax.
It should cut both ways.
(Dublin Central): If the same principle applied to the Revenue Commissioners it would make them send back the money very quickly.
Several countries operate two different rates of interest, one chargeable to the taxpayer so that he will pay his tax on time and a lesser rate of interest payable by the State when the State has to make a refund to the taxpayer.
The Minister is beginning to see the snags in his penal rate of interest now.
I do not like that attitude; it is incorrect.
What is sauce for the goose should be sauce for the gander but the Minister finds he cannot live with that. He has set the rate of interest so high that if the Revenue Commissioners are in any situation where they would have to pay interest on money outstanding he tries to avoid that.
There are some queer geese in the Cayman Islands as the Deputy knows. He knows the type of people who would worry about this. Let us not be too soft-hearted about some of these transactions of the kind that have been going on for the last four or five years. These are the people who will be brought to the surface to make their declarations and clear themselves. That is what is behind it.
No, not at all.
Eighteen per cent is 18 per cent. Would the Minister consider putting a time limit on the repayment?
No, I am satisfied the Revenue Commissioners will make prompt repayment as soon as the taxpayer furnishes the information which will enable the Revenue Commissioners to make the necessary assessment.
That does not altogether square with the experience of some people. If the Revenue Commissioners are holding, as they might be in these cases, very substantial sums and if they delay in making the repayment and pay no interest it is difficult to justify that. I do not know how the Minister can justify it. It is easy to deal with it at this stage either by providing that interest will be paid or by imposing a reasonable time-limit.
No. There will not be a huge work load when one has regard to the fact that it will only apply to transactions where the consideration exceeds £50,000.
(Dublin Central): Is there not interest payable by the Revenue Commissioners on refunds of VAT and so on? Why is the same principle not applied here?
Because the cure here lies with the taxpayer. When he furnishes the information the assessment can be made and will be made forthwith.
(Dublin Central): Yesterday I spoke of the certificate which the vendor must get from the Revenue Commissioners if a foreigner is selling property within the country. In the event of a person making a profit abroad, does this apply if a capital gain is made and the money cannot be repatriated? Would this certificate be given if money was due to the Revenue Commissioners?
This deals only with Irish assets which are held by non-residents. We already have in the Bill itself a provision under which payment of capital gains tax can be postponed pending the repatriation of capital gains if it is not possible to repatriate the capital gain at the time it is made. That is already in the Bill.
I should like to refer the Minister to subparagraph (8) of this paragraph which deals with a situation of a person trying to dispose of his property in parts so as to remain below the £50,000 level. It is provided at the end of the first paragraph that where that situation arises the several disposals shall for the purposes of this paragraph and this subparagraph only be treated as a single disposal. Can the Minister elaborate a little on the meaning of this? Some of it is slightly opaque. Assuming that for the purposes of this subparagraph the number of transactions are treated as one transaction, does the obligation imposed by subparagraph (2) to make the deduction and so on apply and, if so, how will that work in practice?
It will apply, but what we are dealing with here are disposals to the same person or to connected persons or to persons acting in concert who would be in possession of the information.
The obligation arises only in relation to the disposal to persons coming within (a) and (b) but not to disposals by them. Is that right?
Yes. It is to the same person or to connected persons or persons acting in concert.
If one takes the simplest case under (a) where the same person is concerned and assumes that portion of assets are disposed to A for £40,000 and that a year later another portion for, say, £40,000 is disposed to him. When that happens both transactions are to be treated as one transaction so that A is under the obligation, in accordance with subsection (2), to deduct and deposit with the Revenue Commissioners.
That is correct.
I cannot see this operating in practice. Even assuming that people are willing to meet their obligations many people will not know about this at the time.
Can the Minister say what is meant by the phrase "for the purposes of this subparagraph and this subparagraph only"? What is the significance of it being worded in that way? As the Minister knows there is a section earlier where a similar approach is taken to deal with people who are breaking up property in order to keep within the thresholds. Speaking from recollection I do not think that kind of wording is contained in that earlier section. I thought that for the whole purposes of the Bill the two transactions were treated as one.
Is not this related to the £50,000?
Yes, but where there was a similar provision it related generally to transactions which would otherwise be liable to capital gains tax, which can be avoided by dividing disposals in this way. There is a provision whereby in prescribed circumstances the whole is to be treated as one transaction. My understanding is that where a number of disposals are treated as one transaction they are treated as such for all the purposes of this Bill whereas here it would appear that they are being treated as one transaction only for the purposes of this subparagraph and not even for the purposes of subparagraph (2). I am intrigued by this.
This is making it clear that the subparagraph is related to the sum of £50,000 and is for no other purpose.
Since it is only for the purpose of this subparagraph could it be interpreted as meaning that it does not apply to subparagraph (2) which is the one imposing the obligation? I know that is not the intention but it seems a possibility.
I take the Deputy's point and will examine this. Perhaps we could delete the syllable "sub" before "paragraph".
This might make it clearer. Paragraph 12, subparagraph (1) provides that:
. . .the persons assessed shall not include a person who is not resident or ordinarily resident in the State.
Why is that?
We are providing that the assessment would be made on the Irish resident and not on a trustee who is non-resident. For practical reasons this ensures that we can operate the paragraph, whereas if the assessment were made on a person outside the jurisdiction it might not be possible to enforce the provision against him.
Would that prevent its enforcement against a person who was resident in the country?
No.
For that reason, why should he be excluded? Since it can be enforced against the non-resident I can see no reason why it should not be enforced in the other case, whereas this provision would seem in some cases to give an out to a non-resident. If the liability cannot be enforced against him that is too bad but if it can be enforced, there is nothing lost.
I am inclined to agree with the Deputy. I can see that it might be useful to assess the non-resident.
But that practical approach is not illuminated in all the other paragraphs.
I am not sure why such non-residents must be excluded specifically. However, I will look at it again. It is in that form simply because it would not be practicable to make the asessment on the non-resident exclusively.
The Minister will agree that unless there is something lost by including the non-resident it is better to include him. On subparagraph (2) what is the effect of the first words "subject to section 8 (3)" on the subparagraph?
This refers merely to a nominee trustee.
In this case what kind of trustee is he?
This makes it clear that where trustees or personal representatives are chargeable to tax on gains accruing to them the charge rests on them and there is no looking through to the beneficiary except in the case of a beneficiary absolutely entitled as against the trustees. This is the reference in section 8 (3). Thus the alternative basis of charge on individuals under section 6 has no application to trustees or personal representatives.
Is this not a reversal of what was provided earlier in the Bill? Again I am speaking from recollection but I thought it was provided that the trustee or personal representative and the beneficiaries under the trust or estate could both be chargeable with the tax on the gains. I did not think that the Revenue were restricted in the way that is suggested here. Is the Minister saying that you can only look through the trustee or personal representative where some person is entitled absolutely as against the trustee or personal representative?
Yes.
And that in any other case the only person liable is the trustee or personal representative.
That is right.
In regard to paragraph 13 on the conclusiveness of income tax decisions, could I refer the Minister to Schedule 3 paragraph 5? I do not know if I have the correct reference but it would appear to me that there is a provision in the Bill which has the same effect as paragraph 13, which says:
Any assessment to income tax or decision on a claim under the Income Tax Acts, and any decision on an appeal under the Income Tax Acts against such an assessment or decision, shall be conclusive so far as under section 6 or Schedule 1 or any other provision of this Act liability to tax depends on the provisions of the Income Tax Acts.
Schedule 3 paragraph 5, deals with cases in which because there was liability for income tax the consideration on which the income tax is levied is to be excluded from the consideration for the purpose of computing capital gains tax in different cases in different sections of the Income Tax Acts with certain exceptions in particular circumstances. Does the Minister feel that the provisions of Schedule 3 paragraph 5 conform with the provisions of paragraph 13 of this Fifth Schedule?
The Deputy anticipated that I would say yes and he would be right in his anticipation. This paragraph provides that any income tax determination is to be conclusive for the purposes of capital gains tax in cases which fall within section 6, which is the alternative basis of charge with reference to income tax, or Schedule 1 which excludes from the computation items treated as taxable receipts or allowable expenses for income tax purposes or any other provisions where liability to tax depends on the provisions of the Income Tax Acts. The person cannot claim, for example, to have an item of expenditure allowed as a revenue expense for income tax purposes and then say in relation to capital gains tax that it is a capital expenditure which would, of course, increase the cost of the acquisition of the relevant asset.
(Dublin Central): Will stamp duty be taken as part of the cost of acquisition?
Yes.
(Dublin Central): That is something to be grateful for.
You have no idea how kind I am.
There may be a time apportionment of the cost of the stamp duty. On paragraph 17 (1) there is a point that I want to make. I shall not elaborate because it has arisen on another provision. It says:
This paragraph applies where a person who is connected with a company resident in the State receives or becomes entitled to receive in respect of shares in the company any capital distribution . . .
I have already drawn the Minister's attention to what I consider to be problems which can arise by use of the phrase "becomes entitled to receive". In subparagraph (2) there is provision for a person being assessed and charged in the name of the company to the amount of certain capital gains tax. I asked this before—I am not sure that I got a satisfactory reply or, if I did, it did not register with me—what precisely is the meaning of a person being assessed and charged in the name of the company? I take it that he is personally liable in such case. Does it refer simply to the form of the assessment and charge?
The form is quite a usual one of charging Mr. X in the name of a particular company. It means that the charge is kept separate from his own personal position and is related to the company. He, of course, is primarily responsible for payment of the tax and he will have his right of recovery against the company but you do not mingle the company charge with any charge which may arise in relation to the individual's own affairs.
I take it from what the Minister has said that a person who is so charged is charged in addition to his personal liability, over and above his normal personal liability and that is so even in the case——
The Deputy used the words "in addition". I trust that he also understands that it is separate from.
Yes, but it is over and above what would be his normal personal liability, and that is so even where this additional charge is based on a capital distribution which he became entitled to receive but did not actually receive. I know that it is provided in subparagraph (3) that a person in this position has a right to recover that sum from the company, but it is conceivable that he could not recover because for some reason the company had gone into liquidation. In such circumstances, he has no priority, whereas the Revenue Commissioners in recovering the tax have a priority. I am merely in saying this highlighting difficulties that arise by the inclusion of a person having become entitled to receive a capital distribution, even though he has not received it. It can create various problems of the kind I have outlined. I do not say it is going to happen on many occasions, but I urge the Minister again to see if some better wording can be found than "becomes entitled to receive", or at least that some account be taken of the person who has become entitled to receive something but cannot receive it, in fact, because the company had gone into liquidation or there was embezzlement in the company. I think that clearly if the person cannot receive the capital distribution, he should not be held liable for tax on it.
The Deputy will recall that we had quite a debate on this earlier and I pointed out that there could be circumstances in which a person might not actually receive a capital distribution but would have a right to such distribution and be able to dispose of that right to another. We are not dealing here with simple people. We are dealing in this paragraph with the recovery of capital gains tax from persons receiving capital distributions from companies with which they are connected——
If they can get them.
——and where the company has failed to pay the tax. In other words, we are dealing with very classified circumstances in which people liable to be charged are in a position to do something about ensuring that the company pays the tax and if it fails to do so, such people should be held accountable for tax.
Normally, I agree that would be so, but there are circumstances in which it might not be so and in which a person could be made liable for capital gains tax, without, in fact, having received anything from the company.
Is it not the first duty of the company to pay capital gains tax?
Yes.
If it has a capital gain.
Yes.
Can the Minister tell me what is the meaning of subparagraph (4)?
This provides that a person's own liability to tax in respect of a capital distribution under Schedule 2 remains unaffected.
Is this really reinforcing what I was saying earlier that this is over and above his ordinary personal liability?
It is separate and apart from.
It may be separate and apart from but, in fact, he is liable on both personally and his assets are liable, with a right of recovery in respect of that for which he is assessed in the name of the company.
That is so.
On the Schedule generally, while I appreciate that the Minister has undertaken to examine and, hopefully, to amend some of the provisions of Schedule 5 and amend them to our satisfaction, there are, nevertheless, some provisions in it as it is before us, and in particular the provisions of paragraphs 3 and 11, which as they stand are quite unacceptable. I am hoping that the result of the Minister's review of the Schedule and in particular of those paragraphs will be that he will find himself in a position to amend them in such a way that they will be acceptable, but as they stand before us they are quite unacceptable. For that reason, we on this side ought to record our disapproval and non-acceptance of them and in relation to this we can only do it under the rules of the House in regard to the Schedule as a whole and for that reason I ask you, Sir, to put the Schedule.
I would go a little further than Deputy Colley. I find that there are some very exceptional things here and we have pointed them out in the course of the debate. I, too, would like to register my respectful protest——
Disenchantment.
I would not say disenchantment. I am not impeaching the Minister or anybody else in regard to intention, but I do think a better job could have been done in the presentation of the substantive parts of this Schedule. Here we are, unfortunately, letting a Bill through which has buried in a Schedule some of the most important substantive provisions in the whole enactment, and that is a pity. Perhaps the House was not diligent enough in the past in querying these matters, but if one compares the type of Schedule in other Acts with the Schedules here, one will perceive a certain difference.
The principal and main objection one has to the Schedule is that, as in earlier Schedules, essential definitions or modifications of sections of other legislation are included and I do not think anybody has referred to paragraph 18 to which I referred last night. I do not propose to repeat the argument on it. The Schedule will probably have to go as it stands, but in letting it go, I would like the Minister at this stage, before his memory fails him, to take note of the points he said he would look into.
We cannot complain that the Minister did not offer to examine certain points. The alacrity with which he accepted my comments regarding paragraph 6 was encouraging. I should like the Minister to make the adjustments he promised so that we will not be in a position to reproach him later. That is not to be taken as a warning but rather as a helpful hint that now is the time to act with regard to the adjustments he promised to make. In this connection we have in mind paragraph 3 (3).
When the Minister is considering this Schedule, will he consider it in the light of other Schedules? He might draw the line at a different point at where the Schedule begins and ends. We have failed to convince the Minister that the Tables are unnecessary. If they are to be applied, will he take care that they are sufficient?
Otherwise they may be turned on him.
It is a canon of the interpretation of tax law that if the law is capable of being interpreted as a relief it will be so interpreted. If one enumerates one is taken to have done so intentionally, expressing fully one's intention. If something is omitted inadvertently the canons of construction applicable to tax law will operate to impute an intenion of positive exclusion. Therefore, there is always the risk, particularly in a tax statute, that if something is omitted that might otherwise apply under a general provision the omission is interpreted as deliberate and intended.
A good example of this is the deletion of section 176 by amendment which has been referred to. I know the courts will have no knowledge of the discussion that took place in this House on this Bill. Nevertheless, the fact that sections 170, 172 and 174 are to be applied seem to suggest that sections 171, 173, 175 and 176 of the Income Tax Acts are not to be applied.
I am pointing out this fact to the Minister as something he should consider. I understand the points he made but I do not think a Schedule or an Act of Parliament should be considered a popular exposition. We have explanatory memoranda and there are always booklets and pamphlets available that fulfil that function. The function of a statute is totally different.
Members of this House have good reason to come to the conclusion that it is intended to exclude the operation of section 176 from the Income Tax Acts. This raises an interesting question in relation to paragraph 16 of the Schedule which, in itself, is eminently reasonable. If section 176 is not applied that is the canon that will apply. Notices and returns under the section appear to be in a rather peculiar character having regard to the other notices provided for in the section and in other parts of the income tax code. That raises interesting possibilities for practitioners and academics. The latter have long ago given up trying to find logic or order in statutory legislation now that Parliaments such as this no longer use their brains on this kind of legislation but use their feet instead.
I suggest to the Minister it might be profitable to reconsider the Tables. None of us will claim credit if he does this. When I pointed out a minor point with regard to paragraph 6, the refreshing alacrity and spontaneity of the Minister's response was appreciated. Any improvements the Minister will make to this Schedule will be accepted by this side of the House in that spirit. In view of what he said on Committee Stage, Report Stage will produce some modifications from the Minister. General comments will be in order on Fifth Stage.
I should like to thank the House for its assistance in completing the Committee Stage. They may be assured their suggestions will receive the consideration they merit.
Question put.
The Committee divided: Tá, 61; Níl, 56.
Tá
- Barry, Peter.
- Barry, Richard.
- Begley, Michael.
- Belton, Luke.
- Belton, Paddy.
- Bermingham, Joseph.
- Burke, Dick.
- Burke, Joan T.
- Burke, Liam.
- Byrne, Hugh.
- Clinton, Mark A.
- Cluskey, Frank.
- Collins, Edward.
- Conlan, John F.
- Coogan, Fintan.
- Cooney, Patrick M.
- Cosgrave, Liam.
- Costello, Declan.
- Coughlan, Stephen.
- Creed, Donal.
- Crotty, Kieran.
- Cruise-O'Brien, Conor.
- Desmond, Barry.
- Desmond, Eileen.
- Dockrell, Henry P.
- Dockrell, Maurice.
- Dunne, Thomas.
- Enright, Thomas.
- Esmonde, John G.
- Finn, Martin.
- Fitzpatrick, Tom (Cavan).
- Flanagan, Oliver J.
- Governey, Desmond.
- Griffin, Brendan.
- Harte, Patrick D.
- Hogan O'Higgins, Brigid.
- Jones, Denis F.
- Kavanagh, Liam.
- Keating, Justin.
- Kelly, John.
- Kenny, Henry.
- Kyne, Thomas A.
- McDonald, Charles B.
- McMahon, Larry.
- Malone, Patrick.
- Murphy, Michael I
- O'Brien, Fergus.
- O'Connell, John.
- O'Donnell, Tom.
- O'Sullivan, John L
- Pattison, Seamus.
- Reynolds, Patrick
- Ryan, John J.
- Ryan, Richie.
- Spring, Dan.
- Staunton, Mvles.
- Taylor, Frank.
- Timmins, Godfre.
- Toal, Brendan.
- Tully, James.
- White, James.
Níl
- Andrews, David.
- Barrett, Sylvester.
- Blaney, Neil T.
- Brady, Philip A.
- Brennan, Joseph.
- Briscoe, Ben.
- Brosnan, Seán.
- Browne, Seán.
- Brugha, Ruairí.
- Burke, Raphael P.
- Callanan, John.
- Carter, Frank.
- Colley, George.
- Collins, Gerard.
- Connolly, Gerard.
- Crinion, Brendan.
- Cronin, Jerry.
- Crowley, Flor.
- Cunningham, Liam.
- Daly, Brendan.
- Davern, Noel.
- de Valera, Vivion.
- Farrell, Joseph.
- Faulkner, Pádraig.
- Fitzgerald, Gene.
- Fitzpatrick, Tom (Dublin Central).
- French, Seán.
- Gallagher, Denis.
- Gibbons, Hugh.
- Gibbons, James.
- Gogan, Richard P.
- Haughey, Charles.
- Healy, Augustine A.
- Herbert, Michael.
- Hussey, Thomas.
- Kenneally, William.
- Kitt, Michael P.
- Lalor, Patrick J.
- Leonard, James.
- Loughnane, William.
- Lynch, Jack.
- McEllistrim, Thomas.
- Meaney, Tom.
- Moore, Seán.
- Murphy, Ciarán.
- Noonan, Michael.
- O'Connor, Timothy.
- O'Kennedy, Michael.
- O'Leary, John.
- O'Malley, Desmond.
- Power, Patrick.
- Smith, Patrick.
- Timmons, Eugene.
- Tunney, Jim.
- Walsh, Seán.
- Wilson, John P.
Tellers: Tá, Deputies Kelly and B. Desmond; Níl, Deputies Lalor and Browne.
Question declared carried.
Title agreed to.
Bill reported with amendments.
Report Stage ordered for Tuesday, 24th June, 1975.