Dáil Éireann díospóireacht -
Tuesday, 17 Jun 1975

Vol. 282 No. 4

Wealth Tax Bill, 1975: Committee Stage (Resumed).

Question again proposed: "That section 2 stand part of the Bill."

Mr. Connolly

Before the adjournment of the debate I had been alluding to the effect the section would have. I also alluded to the efforts of the Government to borrow money. I made a better prediction than ever made in Old Moore's Almanac. I predicted last week that the Government and the Minister would go around the world seeking money. Now, it has leaked out that when the sheiks have no more, they have decided to borrow from the European Fund or anywhere they can. Can that be denied? Some Labour Deputies who were in the House the last night tried to confuse me because I was hitting rather hard. They are not here today. I stated then that it was not Fine Gael policy to go through with this but Labour have pushed, dragged, shoved and nudged them to the point of no return. We see the effect this Bill will have on the economy.

County councils have not got the money to proceed with sewerage and water contracts. They are all held up. Within the last two weeks the subcontractors' tax-free certificates and numbers have been withdrawn. This is a new method of slowing down. Without the numbers, they cannot proceed. If he does proceed, the builder will find that 35 per cent of the money will be deducted irrespective of whom he employs.

This is far-reaching legislation. The ordinary man does not realise the effect it will have on him. He will realise it when his job is gone. I would warn him now of the consequences of this Bill, the effect it will have on industrial expansion. The policy is to tax to the hilt. The Government are so preoccupied with taxation legislation that they have ignored the real issues facing the economy. They will set out to tackle the economic issues on next Thursday week. This is something they should have done at least two years ago. Everyone knows that we have reached the point of no return. There is nothing in the till. I do not know where it is leading. If the Government continue on the road they are on, there will be total collapse. The worst thing you can have in a country is no security and, above all, no confidence. We read every day of some factory or some other company or financial concern, going into liquidation and if it does not go through it is only a matter of putting off for the rainy day; trying to save our skin to fight another day. That is the situation. I shall conclude by saying that this taxation is cruel and is being imposed at the most inopportune time.

Some members of the Government had no other option open to them. We may not have a favourable Press behind us but the people will realise the reason for our opposition to this measure when they are hit by it.

Mr. Wilson

I would like to ask the Minister, in view of his statement last week that he had great sympathy for the pay-as-you-earn people—the typist, the secretary and the office worker and so on—whether it has been estimated how much relief in PAYE will be provided as a result of the taxation being imposed in this Bill. It is easy to make a general statement but in matters of taxation particularly, the specific is the most important.

Mr. T.J. Fitzpatrick

(Cavan): I dealt briefly with the PAYE system of taxation when I spoke last week. I pointed out that on its introduction into the income tax code in 1959 it ensured that all wage and salary earners who came within that code paid the last penny. They no longer had any option in the matter, their return was made for them, their tax was collected from their weekly, monthly or quarterly pay packets.

I went on to point out that I was concerned because of that situation, that I considered it to be an unjust system of taxation so long as it was possible for people engaged in buying and selling or in dealing on the Stock Exchange or in the property market to earn £10,000, £15,000 or £20,000 a year and have it regarded as a capital gain which was completely free of any taxation. I said that as an individual I was not comfortable with that sort of system of taxation, and I pointed out in reply to an interruption from Deputy Wilson that he seemed to have great concern for the people who were the owners of £1 million of taxable wealth and who would be required to pay £9,000 a year wealth tax but that his Government operated for many years this dreadful, unsavoury system which captured the last penny out of the PAYE taxpayers' package and let go free the person in receipt of capital gains.

Mr. T.J. Fitzpatrick

(Dublin Central): It is wealth tax we are talking about.

Mr. T.J. Fitzpatrick

(Cavan): I am talking of the incident that Deputy Wilson refers to. I stated then and I repeat now that the capital gains tax will go a long way to bring equity into the income tax code and that it will relieve the PAYE taxpayers to a considerable extent. I do not know the exact amount but I will go further and say that the amount of moneys that will be raised by the Bill will also put money into the Exchequer that would otherwise have to be raised in other ways and one of those other ways is the PAYE system.

This trinity of Bills as somebody across the House described them the other day, will take tax from the person who makes money in capital gains, people who were completely free before. It will take money from the very wealthy who can afford it and it will take it from them in small amounts. For example, the man in receipt or in possession of half a million pounds of taxable wealth after all allowances have been given to him and after it has been valued in the way prescribed by the Bill will be asked to pay £4,000 per annum. The man in possession of £1 million of taxable wealth after he has received all his allowances, including the exemption of his residence, no matter how gracious or how princely, and its normal contents, and if he is a landowner or if he is a farmer, will have 20 per cent of his land exempt. If he is a landowner he will have his growing trees, his forests, completely exempt and after all that if he is in possession of £1 million worth of taxable wealth he is being asked to pay £9,000 a year. The same person, if he is owner in possession of the same type of wealth to the extent of £2 million, will be asked to pay £19,000. I cannot give the exact figures, but it is elementary that it will relieve to some extent the demands on the typist or the clerical workers in Dublin living in a flat and going home for the weekend.

Mr. Colley

Not by one penny.

Mr. T.J. Fitzpatrick

(Cavan): It will do something else which Deputy Wilson and myself will be very glad to see happen; the package of taxes will abolish estate duty. It will mean that the farmer or business man in Deputy Wilson's constituency and in my constituency owning an estate of £50,000 will not now have to pay wealth tax. He will not have to pay inheritance tax.

Mr. Wilson

It will cover most farmers in my constituency.

Mr. T.J. Fitzpatrick

(Cavan): They were beginning to be worried about it in Cavan. If he is lucky enough to be in Deputy Crinion's constituency and he has £100,000 of an estate he would be relieved of £41,000. Again, if he is in Deputy Crinion's constituency and he has over £200,000 of an estate, he would be relieved of 55 per cent. It is a fair package. It is a package that does not, as I said last week, hurt anybody. It is not meant to hurt anybody or to crush anybody. We have the extravagant statement made by Deputy Connolly about chasing everybody out of the country; of course he does not believe that. The people are here to stay. This tax will not hurt anybody. It will not punish anybody. But it will give the relief I have been talking about and it will introduce a bit of justice into taxation in general. I make no apology about this tax; I am proud to be asked to deputise for the Minister for Finance in the introduction of this tax.

Mr. Wilson

We are very pleased, indeed, to get this assurance from the Minister that there will be no further increase in PAYE income tax. Some people were so ill-informed as to presume there might be an increase next Thursday week. It is interesting to learn now from the Minister for Lands there will not be any increase in PAYE.

Mr. Crinion

It was rather reassuring to hear the Minister say nobody would be hurt by this wealth tax but I would like to examine it in more detail. People have become very much afraid of it. Since the introduction of the Bill and of the White Paper an amount of money has flown out of the country, money badly needed for its development. It has gone. It is one of the many problems in our financial and economic situation. What is even worse is the lack of confidence in expansion and development.

Most of our firms are family owned; they have been built up over the years. Not alone are they paying the normal 50 per cent tax, which all companies are paying, but now they will have this wealth tax on top of that. The injustice of it is that a person living abroad who has set up a factory here, an offshoot of an existing factory in some other country, will only have to pay wealth tax on the factory here. On the other hand, a person who has money invested abroad or even, as some firms have, businesses abroad, will have to pay wealth tax here on that property abroad. This is very unfair. The foreigner is getting off but the person living here, trying to expand an industry or business, who has a company abroad will have to pay wealth tax on it here. The value of the property abroad is included in the assets here. This seems rather unfair. The Minister says only a few people will be involved but with inflation running at the rate of 25 per cent per annum, it will be only a few years before every business and every farm will be involved in wealth tax. A farm of 80 acres or 100 acres will be affected. The Minister has said nothing about tying in inflation with this. All he said was that it would be reviewed every three years. He seemed to think it very generous to review it every three years. He might well increase the rate every three years instead of giving concessions to allow for inflation. It is unfair not to have a set pattern to offset inflation. This shows how worried the Minister is that the Revenue Commissioners will not be able to collect the proper information regarding wealth. The Minister has provided in the Bill for a fine of up to £1,000 on any individual, solicitor, accountant or bank manager.

Mr. T.J. Fitzpatrick

(Dublin Central): They have the luxury gaol in Arbour Hill for those.

Mr. Crinion

That is right and quite possibly that is where these wealth tax defrauders will go. But it is unfair to put the onus on another individual to inform on a client.

Acting Chairman (Mr. Pattison)

I would remind the Deputy we are dealing with section 2.

Mr. Crinion

I know that. This whole Bill hinges on section 2. Many of our economic troubles are due to this. It has driven the initiative to develop out of people. They are afraid that, if they develop any further they will only tax themselves more, not knowing if they will be able to meet those tax liabilities.

About ten years ago the Minister for Finance from this side raised the corporation profits tax from 50 to 56 per cent. The companies were very concerned about it. As far as I can remember he withdrew it after a year because it was stifling development. We could see that it would have repercussions. Here we have the 50 per cent. You may say it is only 1 per cent, but it is 1 per cent on the assets of the company——

Mr. T.J. Fitzpatrick

(Cavan): Be fair, Deputy, on the taxable assets.

Mr. Crinion

——on the taxable assets that is, what the property is worth.

Mr. T.J. Fitzpatrick

(Cavan): There are many reasons. If we were to deal with this on Committee Stage section by section, we would be able to deal with these matters as they arise.

Mr. Crinion

What most people feel about this section and this Bill is that 1 per cent of the fixed taxable assets, which can be quite substantial and would be much more than 6 per cent, is a charge for time immemorial. It was originally intended to have it at 1½ per cent, from £100,000 upwards, and 1 per cent, from £50,000. There was such an uproar that the Minister had to try before his own Ard Fheis opened, to calm the people. So he said we would have it at 1 per cent flat rate, £100,000 for a married person, upwards, and concessions for farmland and hotel rooms.

This is not an advantage. Last year was one of the worst the farmers ever had. It was a very bad year to bring in a tax on wealth and capital gains. The Minister may say that very few will be involved. When one sees what the Valuation Office are doing on the remaining death duty cases at present, one would find it hard to believe how many farms will be brought into the net. I know of a case where a small farm of 19 statute acres which was up a laneway and for old age pension purposes, was valued at £15,000 by the Valuation Office.

Mr. T.J. Fitzpatrick

(Cavan): Is the Deputy aware that there never was an appeal to the courts against the Valuation Office since 1910 on a valuation for the purposes of estate duty.

Mr. Crinion

Because one cannot do anything about it, particularly in land values.

Mr. T.J. Fitzpatrick

(Cavan): One can, of course.

Mr. Crinion

A farm beside them was valued at £15,000—I am taking the actual value. This 15-acre farm was up a laneway, and one could not even build a house on it. Within a half a mile there was slightly better land, 19 acres, with a good road, on which a house and out-offices could be built and it was bought for £10,000.

Mr. T.J. Fitzpatrick

(Cavan): What sort of a dwelling was on it?

Mr. Crinion

It was an oldish single-storey slated house with four rooms. It had been slated within the last 10 to 15 years. The out offices were old. There was a hayshed, which was well slated, but repairs had not been done for the last 20 years. When one compares the value put on the land by the Valuation Office and the actual valuation last December, it makes one think. In the case I mentioned a poor widow was looking for a pension. As a result of this high valuation, she lost her old age pension, although she was getting a noncontributory widow's pension.

Mr. T.J. Fitzpatrick

(Cavan): How can the value of the farm affect the pension?

Mr. Crinion

If the farm is away from the residence—her farm was only half a mile away but was not connected—one must take into account the capital value of the land. It was because of that——

Mr. T.J. Fitzpatrick

(Cavan): I doubt that very much, Deputy.

Mr. Crinion

I was chairman of the pension committee who heard the case. The Pension Officer presented the case there to us.

Mr. T.J. Fitzpatrick

(Cavan): You were very harsh on the poor widow.

Mr. Crinion

She was getting £3.85p, and she came out of it with nothing. There was nothing we could do. I thought it was a terrible thing to happen. But it happened because of the different ways the value was calculated. This is something comparatively new—where a holding that is away from the main holding must be charged with capital valuation.

A number of farmers will get a very rude awakening when this Bill is passed when the Valuation Office assess all the lands for the Revenue Commissioners, particularly if the Government are financially embarrassed. The Valuation Office will try to put the highest possible valuation on the land. The appeals will be made. They will not even take the £500 an acre allowed in county health by the Department of Agriculture for farm modernisation. They will be going for a much higher figure. Many more people will be caught in the net than was originally anticipated. The people have not been fooled. I know people who were thinking of buying a farm for a son, and have withdrawn from doing so, because they felt that they would be caught in the net. They intended waiting until the son reached 21 before they invested in a farm for him, even though it was going to cost more. It was better to hold back their money than to give it to the Government and the Minister for Finance.

I am continually surprised every time I come into the House to notice that since these Finance Bills have been debated, the seats on the Government side are empty. The Minister must not have any backing whatsoever. The only people I saw coming in were Deputy Dockrell and Deputy Belton, and they voted against the Bill, one more than the other. They have the courage of their convictions. There is nobody sitting beside them. The Labour Party had in their policy document for the last two elections a wealth tax. We would expect to see them coming in and giving support to the Minister who was pushing a Bill through which they supported. Members of the Labour Party have been saying down the country that the measure is too small, that they are getting the foot in the door, when the Bill is passed they will be able to have it increased every three years when it comes up for review. The House should realise that this three-year review is not for the benefit of the taxpayer but for the benefit of the Government so that they can get more money. They can leave the thresholds at the same level, increase or decrease the tax percentage.

It has been pointed out that with inflation at its present rate, to a person having £100,000—on deposit in the bank or elsewhere—in five years' time it would be worth nothing. That is why so many people have been trying to invest their money in land, to the detriment of farmers who did not want this extra competition of people putting money into something that would rise in value. This fact has been mentioned in the property pages of the newspapers recently. Government securities which looked good in 1974, in particular land bonds which were issued at 12½ per cent are down, in 16 months, to £82 or £83. We should think of the poor farmers who have to take those land bonds while at the same time the land has increased in value. The piece of paper the farmer got for the land has gone down in value by 20 per cent. That is the way inflation works. Money loses value to the same extent that inflation rises. The older land bonds are down to £30 or £40. This is bad for the Government as well as everyone else.

The Minister mentioned that somebody in my constituency who left £100,000 would be paying 4 per cent death duties.

Mr. T.J. Fitzpatrick

(Cavan): I said 41 per cent.

Mr. Crinion

Sorry. If the Minister looks back at the number of farms on which death duties were paid, it was only 4 per cent in the past ten years. I accept that it was very worrying for farmers having the threat of death duties hanging over them, particularly for young married couples who had inherited a farm but in most cases they were able to make adequate arrangements. A simple arrangement was to give half of the estate to the wife. That helped considerably or reduced liability considerably. If the farmer owned a holding some distance away he could give it to a son. The Minister saw that flaw and introduced the Wealth Tax Bill. Property owned by a family, including minors under 21, is taken as one unit. In that way the Minister is closing off any loopholes.

People are very worried as a result; they have no way of getting out of paying the tax each year irrespective of what profit is made in that year. If they have a loss in the particular year they get a slight concession. That will not be much use to the farmer. Even though only a few people will be liable to this tax at present, in a matter of ten years everybody with over 80 or 100 acres of land will be liable. At present the house and buildings are exempt, but these were also included in the original Bill. What was originally intended always has a nasty habit of becoming law in a period of time.

One of the most serious objections to this type of legislation is its timing. It can be brought in when an economy is going well, when everything is moving, but to bring it in at a time when there is an economic crisis, when firms are going on short time or closing down, is sheer lunacy. It is a disgrace for the Government to introduce legislation which would suppress confidence in industry, in family business and farms. A country cannot stand still; it must move on and expand. It was shortsighted of the Government to introduce this legislation at this time. One of the reasons for the budget on next Thursday week is the way the Government have managed the economy. Capital taxation has undermined the confidence of business people. In the main, commerce in this country has been built on family businesses which have their roots in Ireland and are the mainstay of the country.

The thinking behind the Bill is that it is literally a mortal sin to own property. Consideration is not given to the question of the income derived from property. The professional classes will not be caught by capital taxation. Solicitors, doctors, barristers earning five or ten times as much as the normal businessman or farmer, unless they are very, very big, are living really well as compared with the normal businessman or farmers.

Those people are living in the lap of luxury in palatial houses on the perimeter of the city. They will not pay any wealth tax. They will have an income far in excess of the income that can be derived from property. It is those people who have been designing this type of tax, the type of tax that would not affect them. Those people are getting away scotfree. In most cases they are in a better position to evade the income tax net. Only a certain portion of income will be declared. The businessman is caught. He has to employ auditors and all his business transactions are recorded. There is nothing he can put in his pocket. The same applies to the farmer.

This Bill is directed against one class of people, the class of people that the Labour Party want to get rid of in this country. What surprises me is that the people in the Government who have property could be completely outvoted in regard to the introduction of this legislation. Those people in the Cabinet who have a fair amount of property know the effect this type of legislation will have on the economy. If people do not invest in business, employment will not be created. We want to encourage investment particularly having regard to the fact that in the past two years unemployment has increased from 63,000 to 103,000. Investors should be encouraged.

Mr. Noonan

The previous speaker rightly pointed out that the Bill, particularly this section, like all the other taxation Bills introduced by this Government, will suppress initiative in farming and business. A person who is doing something for himself, indeed, something for his country, is being suppressed by this type of legislation. The Government have levelled all sorts of panic accusations at Fianna Fáil since we went into opposition. We were told that we did not gamble enough with the economy. On the other hand, we were told that we gambled too much with it. One favourite accusation by one section of the Government, the Fine Gael Party, when they were in Opposition, before they were lumbered with the Labour Party in Government, was that Fianna Fáil in Government were too hard on the wealthy sector of the population. How times have changed. Today the Fine Gael Party are forced by the Labour Party to turn against their own electors and to bring in this crippling type of taxation. At a time when the economy needs growth the Government tell us that because we oppose this wealth tax we are on the side of the rich. Of course, common sense indicates that this could not be further from the truth. We realise, and this is our opposition to the Bill, that at the present time it is support and incentives that are needed among our people and particularly among our business people. For some monetary gain we are supposed to forget our electorate and to speak only for the wealthy. This is strange coming from the people who made this accusation in the past. Our approach to this section, in opposition, is no different from our approach to this type of taxation if we were in Government. Our policy is to construct a solid future for our people and for our economy.

We must have balanced views regarding the growth of our economy. As a party, we represent all the people in all shades of economic circumstances. We have never believed in theoretical socialism which is the thinking behind this Bill and which says that everybody in the country must have an equal income. This is a nice theory but human nature being what it is, it is a theory that can never work out in practice.

This thinking denounces any type of incentive. Therefore, if a man builds up an industry from scratch he and his employees can expect only to be paid for the ability and for the skill they acquire in the operation of that industry. The same type of thinking prevails in farming where a young farmer is prepared to avail of the modern trends in agriculture today but who will be crippled by this tax. These people are the bed-rock of the economy—our industrialists, our farmers, our businessmen—but they will be crippled by the measures contained in this Bill and in the other taxation Bills introduced by the Government.

In the past, thanks to Fianna Fáil, our policy was to extend every possible help to those from all walks of life who wished to acquire skills. This did not amount to any type of wealth tax or of favouring any type of wealthy people.

The attitude that should be taken with regard to this Bill is that a working man is entitled to a fair income. He is entitled to be in a position that if he makes a profit from his business he should be able to put his profits back into the business, if he so wishes. This is good business. But as a result of this Bill any profits that will accrue, any incentives from initiatives, will be taken by the Government for short term monetary gain. We are not against being taxed but tax in proportion to the person's income is what we advocate. Fianna Fáil have never taken the churlish attitude that we must jump on somebody when he reaches a certain income level. This is what is being done in this Bill.

The Government should realise in human terms the net effect of this will be to discourage people with managerial ability and skills and those who are prepared to start their own businesses. This Government should not believe in favouritism for any sector. If we encourage people in the lower paid jobs, we must also encourage management. Growth cannot take place without good management. Growth cannot take place without the profits being ploughed into the business thereby ensuring that the business flourishes for the employees and for the economy of the country. The Labour members of the Government and some officials associated with them preach this theoretical socialism. Some of these are people who have got to the top quickly, who have highly-paid jobs in their own organisations. They are entitled to these jobs if they have the managerial ability to run their unions but we must avoid at all costs any hypocrisy in this field. In a sense hypocrisy alone would be easy to bear but its effects on management and on the owners of businesses are dangerous and could be the means of putting many businesses completely out of production.

We must at all times encourage all sectors of industry. At present this is needed above all else. Encouragement is now necessary more than at any other time in our history. What we are getting from the Government is the direct opposite.

During Fianna Fáil's terms in Government a policy of encouraging industry from abroad was begun. Many potential industrialists started to build up their businesses. Their businesses were thriving under the legislation which existed up to the present time when a threat of wealth tax, a threat of capital gains tax and all the other crippling taxes which the Government introduced has not alone sent money out of the country but also sent businesses out of the country.

We see today the piecemeal knocking of this type of Fianna Fáil thinking when we were in Government through this wealth tax. It might be no harm now to go back and refer to the other section of this Government, the Fine Gael Party, who, when they were in Opposition, held views not dissimilar to our views in so far as this kind of tax was concerned. The Fine Gael Party must now, in their bid to retain power, bend to and beg from the Labour Party, and what the Labour Party demand in return is money for the lads without reference to the consequential damage to the country I have just outlined. It is a frightening example of how a Government such as this one, comprised of the far Right and the far Left, can affect the economy and the future prospects of our country. There is a Labour element in this Government and, while it may be small, their insistence on this wealth tax may lead in this time of crisis to a most damaging effect which may never be repaired. It is high time, instead of leaning on any one sector to the exclusion of another, that the Government took a balanced view of what is needed for future growth and, with this balanced view, they should, before it is too late, retract on this nuisance tax, this wealth tax which will not benefit anybody but which, as I have pointed out, will destroy the economy of the country.

Mr. T.J. Fitzpatrick

(Cavan): Deputy Crinion and Deputy Noonan devoted a considerable amount of their speeches to agriculture and seemed to suggest that the agricultural industry would be crippled under this tax. It is my duty to put the records as straight as I possibly can in that respect. First of all, I want to say that for the vast majority of families death duties have been abolished. Up to the end of March last, family farms or family businesses worth £1,100 bore over £400 in death duties; a small farm or business of £11,000, or thereabouts, had to pay £400 approximately in death duties.

When the farm or business of £20,000 bore estate duty at the rate of 12 per cent and the farm, as I said this morning, or a business of nett value—including television set, motor car, the lot, money in the bank, is worth £50,000 the amount payable in estate duty was about £13,500. When it went up to £100,000, as we know, everything—the clothes the deceased had worn in life, the business or farm, the dwellinghouse, the contents of the dwellinghouse, moveable goods such as a motor car, tractor, machinery, stock, investments, everything that could conceivably be known as an asset amounting to £50,000, his estate duty amounted to £67,500, and if it amounted to £100,000 the estate duty amounted to £41,000. All that has been abolished and it has brought immense relief and immense peace of mind to people all over the country, people who were worried and concerned that on their deaths their families would be subject to this multiple taxation, known as death duty; all that has been done away with. It is necessary to replace it with some other reasonable form of taxation and I am putting to the House and to the country that the system of taxation we are introducing here is a reasonable form of taxation. It is minimal. It is only the very wealthy who will be taxed but it will not blister the very wealthy and neither will it be a hardship or a burden on the very wealthy, and I propose shortly to read that into the records of this House.

I am valuing land at £600 an acre. Some Opposition Deputies have valued it at £500 an acre and some have valued it at £700 an acre and, therefore, I think £600 an acre is a reasonable valuation. Now a farmer who owns 80 acres valued at £50,000, with machinery valued at £5,000, investments valued at £5,000, livestock valued at £16,000 and his dwellinghouse valued at £5,500, will own a total of £81,500 and will not be liable for any wealth tax. A farmer with a farm of 160 acres, the land valued at £100,000, machinery valued at £10,000, investments valued at £10,000, livestock valued at £32,000, dwellinghouse valued at £11,000, will have wealth to the tune of £163,000.

Mr. T.J. Fitzpatrick

(Dublin Central): If that is the case then the Minister is directing his fire at people who are creating employment and we are proposing he should do the opposite.

Mr. T.J. Fitzpatrick

(Cavan): I am not. I will deal with that later. I am dealing now with the case made by Deputy Crinion and Deputy Noonan and I will show the House that trading companies also are exempt, and the same generous exemptions I read into the records now are available for the farming community and that exemptions are available for factories and for the other sections. A farm consisting of 240 acres valued £150,000, with machinery valued £15,000, investments £15,000, livestock £48,000, dwellinghouse £16,500, total £244,500 is free of wealth tax. A farm of 320 acres, with a valuation of £600 an acre, of £200,000, machinery £20,000, investments £20,000, livestock £64,000, dwellinghouse £22,000, total £326,000——

Mr. T.J. Fitzpatrick

(Dublin Central): What will the man pay in capital acquisitions tax?

Acting Chairman (Mr. Governey)

The Minister must be allowed to continue.

Mr. T.J. Fitzpatrick

(Cavan):——and the tax on that is £360 or .11 per cent. A farm consisting of 480 acres valued by the same method as at £300,000, machinery £30,000, investments £30,000, livestock £96,000, dwellinghouse £33,000, total £489,000, pays .32 per cent or £1,540. A farm containing 640 acres valued at £400,000, machinery £40,000, investments £40,000, livestock £128,000, dwellinghouse £44,000, total £652,000, will pay £2,720 or .41 per cent wealth tax. A farm containing 800 acres, valued £600 an acre, total £500,000, with machinery £50,000, investments £50,000, livestock £160,000, dwellinghouse £55,000, will have a total wealth of £815,000, and will be asked to pay £3,900 or .48 per cent in wealth tax.

Let us now come to the farm of 1,200 acres, valued at £750,000, with machinery worth £75,000, investments £75,000, livestock £240,000, dwellinghouse £82,500, a total wealth of £1,222,500 and he is taxed at the rate of one-half per cent. The final figure I want to give the House is a farm of 1,600 acres, worth £1 million, with machinery worth £100,000, investments £100,000, livestock £320,000, dwellinghouse £110,000, total £1,630,000, and the rate is .52 per cent.

According to any stretch of the imagination that is a light tax, that should not frighten anybody away, that will not scare anybody out of the country, that will not make it difficult for people to reside here. It is not a hardship. I put that to the Opposition as a reasonable proposition and I appeal to them to deal with this on a practical basis.

Mr. Noonan

They are leaving the country.

Mr. T.J. Fitzpatrick

(Cavan): As against that, practically all the families of the country are being freed from death duties.

Deputy Crinion also seemed to say that it was unfair in some way or another that assets outside the country should be taxed. I am not an economist, I can see that Deputy Crinion is not an economist. The proposition Deputy Crinion seriously put to this House was that all assets outside the country, no matter to whom they belonged, should not be taxed. I seriously think he should have another think about that.

Mr. T.J. Fitzpatrick

(Dublin Central): There is some merit now, when the Minister explained the Bill last week, foreign shareholders were not to be taxed.

Mr. T.J. Fitzpatrick

(Cavan): Deputy Crinion was saying that no wealth should be kept in the country. He was advocating that all Irish people should export their wealth, should put it out of the country, should put it across the water, should invest it elsewhere, to be free of tax. That is a monstrous statement. It is a monstrous proposition to put to the House. If that system of taxation existed, if people domiciled and ordinarily resident here, wealthy people, were to be exempt from tax on their assets outside the country, it would be a virtual invitation to each of those people to house their assets elsewhere, to invest their property outside the country.

I know Deputy Crinion would not countenance that for one moment. But that is the sort of silly argument we get when the Opposition Deputies are forced to come in here to talk and talk regardless of what they are saying, as long as they are talking——

Mr. G. Fitzgerald

There is nobody forcing anybody.

Mr. T.J. Fitzpatrick

(Cavan):——regarding——

Mr. G. Fitzgerald

I will have a few things to say.

Acting Chairman

The Deputy will have his opportunity to state his views later.

Mr. G. Fitzgerald

I will be reminding the Minister of a few things he said.

Mr. T.J. Fitzpatrick

(Cavan): That is the proposition which has been put to us in all seriousness by Deputy Crinion. I said here the last day, and I repeat, that in so far as foreign corporations establish subsidiaries here, they are not liable to wealth tax or income tax. There is nothing extraordinary about this. Under the Fianna Fáil Administration, deposits in banks here by foreigners were exempt from income tax. There is a precedent for that. Irish trading companies are not subject to wealth tax. Irish trading companies, owned by foreign trading companies are not subject to wealth tax. Therefore, there is no discouragement to large foreign corporations, whether they be America owned, German owned, Dutch or British owned, establishing companies here, investing their money, bringing in their expertise and their knowhow and carrying on as they did in Europe. It is true that shares are owned by people and——

Mr. T.J. Fitzpatrick

(Dublin Central): The Minister will not fool them.

Mr. T.J. Fitzpatrick

(Cavan): I will not fool them if my namesake and members of his party go on misleading them, both by word of mouth and tactly or otherwise in correspondence but I——

Mr. G. Fitzgerald

We will not be misleading the people about——

Acting Chairman

The Minister must be allowed to continue without interruption.

Mr. T.J. Fitzpatrick

(Cavan): I would appeal to them not to do that because it is not a patriotic thing to do. I do not accuse Fianna Fáil of not being patriotic but I appeal to them not to allow their politics to blind their patriotism. It is true that shares in trading companies in the hands of people who are domiciled and ordinarily resident here are subject to wealth tax at the rate of one per cent, provided the thresholds are exceeded. But the thresholds are generous. A married man would want to have shares valued at £100,000 in the company. That is a fair share. In so far as the family company is concerned, most of them are owned by father and adult son, son-in-law, daughter-in-law. The combined threshold should be far above that.

I am doing my best to deal with section 2 of this Bill. We are really having a general debate here on it. There are approximately 60 amendments, and I think the time of the House——

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

Mr. T.J. Fitzpatrick

(Cavan): I believe I have effectively answered any arguments made by the Opposition on section 2 of this Bill. I dealt specifically with the arguments made in regard to the agricultural sector, in regard to the alleged discouragement to foreign trading companies establishing subsidiaries here and, indeed, with the Irish shareholder through the general thresholds. I pointed out that this is a complicated and complex Bill, very properly to be dealt with in Committee. Because the Opposition are availing of the taxing section too, to make general contributions which, but for section 2 would be relevant only to a Second Stage debate, they are wasting the time of the House and wasting their own time. They are preventing the House and their own experts from getting down to the nitty gritty of committee work.

There are over 60 amendments, nearly 70 I believe, put down to this measure for constructive debate I hope, on Committee Stage. Due to the tactics of the Opposition in filibustering the debate on this section, only two of the amendments have yet been reached. The people will see, and particularly the people on whose behalf they are alleged to be speaking, that they are not serving them. They are not doing anything to meet the demands and representations put forward. Indeed, the Minister has introduced about 30 amendments in relief of taxpayers under this Bill. The Minister has introduced about 30 amendments as a result of representations made to him by responsible people, and, after consultation and debate with them, he decided to introduce these amendments but the Opposition Party are preventing any discussion on Committee Stage. They are preventing the House from debating this Bill in committee. The intelligent people who are interested in clarification of many sections of this Bill, people such as the IFA advisers, perhaps, accountants throughout the country, lawyers throughout the country, who are interested in getting an intelligient Committee Stage debate and clarification——

Mr. Crinion

They want to see how much money they can earn.

Mr. T.J. Fitzpatrick

(Cavan):——will not be impressed by the contributions from the Opposition on Committee Stage, and will not be impressed by the way the Opposition are preventing an intelligent Committee Stage debate on this Bill.

Mr. Crinion

I want clarification on one of the things the Minister has said. He said I advocated that people should take money out of this country. I want to contradict that emphatically. What I said was that, as a result of the introduction of the Bill and the Capital Taxation Bill, the money flew out of the country immediately they were published. The Minister knows quite well how much money went out of the State last year when those measures were first mentioned and published.

Mr. T.J. Fitzpatrick

(Cavan): One brief reply to that. The Deputy is wrong. There is a net inflow of money into the country. The record will show that Deputy Crinion stated in his earlier contribution that it was wrong to tax the assets of people who were domiciled and ordinarily resident in the country and owned assets outside the country. He was making the case that an Irishman's assets abroad should not be taxed.

Mr. Crinion

I was distinguishing between the man who owns property here and lived abroad and the Irishman who has some property abroad.

Mr. T.J. Fitzpatrick

(Cavan): The Deputy said the Irishman who had some property abroad should not be taxed on that property.

Mr. Crinion

I said he was discriminated against.

Mr. T.J. Fitzpatrick

(Cavan): The Deputy will not get away with that. He cannot blow hot and cold. What he was advocating was that an Irishman resident here should not be taxed on his property abroad.

Mr. Crinion

I was not advocating that.

Mr. T.J. Fitzpatrick

(Cavan): I will leave it to the record. In saying that, Deputy Crinion was encouraging all Irish people to get their assets out of the country.

Mr. Crinion

I was not encouraging people to take money out of the country because I realise that is an asset.

Mr. T.J. Fitzpatrick

(Cavan): I will leave it to the record.

Mr. Crinion

I said that when the Government introduced this legislation and the White Paper on Capital Taxation, people who had money took it straight out of the country, first to Northern Ireland and then to the Jersey Islands to bank it there. Any bank manager will tell you the amount of money that went out. The reason there is an inflow of money at present is, first, foreign borrowing and, secondly, the English £ is in such a state at present that there is a rumour of our possibly breaking with sterling and up-grading the Irish £. English people are gambling in bringing money in here hoping to make money. That is hot money and it is liquid money that will flow out just as quickly as some decision is taken in England.

Acting Chairman (Mr. Governey)

The Deputy must speak on section 2.

Mr. Crinion

I know that but the Minister mentioned those things and I was replying to him.

Acting Chairman

I must remind the Deputy that we are discussing section 2.

Mr. T.J. Fitzpatrick

(Cavan): Does the Deputy propose to assist the Opposition to filibuster?

Mr. T.J. Fitzpatrick

(Dublin Central): We do not propose to filibuster, I can assure you.

Mr. T.J. Fitzpatrick

(Cavan): After this sentence, I shall not interrupt the Deputy. We have been discussing section 2 for 15 hours.

Mr. Crinion

You kept the Dáil here for 140 hours, on the Landlord and Tenant Bill.

Acting Chairman

Deputy Fitzpatrick is in possession now. He must be allowed to continue.

Mr. T.J. Fitzpatrick

(Dublin Central): To clarify the position when we are discussing the Wealth Tax Bill, first, we must not discuss it in isolation. Anyone coming into this House will see that we are discussing a Wealth Tax Bill and nothing else. But the Minister over the past ten minutes has been describing and giving examples as to how people would be exempt throughout the country as regards farms where death duties are concerned. I have mentioned on several occasions that I welcome the fact that death duties are abolished. I think everybody on this side of the House and on the far side of the House has mentioned this on several occasions. But we must be perfectly clear that when we abolish death duties they are being replaced by three capital taxation Bills, not one. We discussed the Capital Gains Tax Bill on its own merits; we are now discussing the Wealth Tax Bill and, to follow later on, will be the Capital Acquisitions Bill. It takes three Bills to replace death duties, not one. When the Minister comes into the House and says that this is what people will pay in death duties, with the examples which he has quoted over the past ten minutes, we must ensure that we take the entire package into consideration when we are discussing the abolition of death duties. Then one will see how it will affect one generally.

I believe myself that the return of revenue from wealth tax will be very small. The examples which the Minister has given as regards the exemptions are fairly accurate. This is the basis on which I am against wealth tax because it is going to be directed at a very small minority of people but a very important section. That is the important thing. We are directing it at a section of people who have invested in and built up the industrial arm of this country. We must be very careful to ensure that we do not undermine confidence in that section. There are other Deputies in the House who would be able to make the case for the agricultural sector. The Minister has made these cases as to how it could be exempt. I am concerned about the industrial sector, job creation. This is what is of vital importance today.

When we are trying to create an economic climate whereby we have an inflow of capital, whereby we will be able to curb inflation—at least let us curb it and then get a downward trend—we must bring in appropriate measures. I believe that very shortly the Minister for Finance will be coming before the House, next Thursday week I am informed, with measures intended to bring a downward trend in the inflationary spiral which we are experiencing today. But if one looks at this whole concept, do you not think that this in its own right is inflationary? I believe it is. The Minister has stated, of course, that private companies are exempt, trading companies are exempt; we know all that, but what about shareholders in companies? That is the important factor. There are many productive and expanding companies here. Perhaps 51 per cent or perhaps 70 per cent of the shares are held by a managing director or in fact by the man who started the company. Indeed, some of the most progressive companies here, quite a substantial number of them, are organised in this way. It is at these people you will be directing this tax.

If I thought for one moment—and I have mentioned this on the Second Reading—that this would bring a substantial inflow of capital into the Exchequer, if I thought it would bring in £50 or £60 million, I could certainly say that we had a reason for introducing it because we could channel this money back into industry, recycle it, and recycle it into a more productive field. Some of the logic supposed to be behind this is that it will penalise non-productive assets, more so than productive assets. That is some of the philosophy and thinking behind it. But the amount of money that will be directed, will not be very large: I think it will be infinitesimal in comparison to the current budget which went through this House in January.

Last January a budget of £1,200 million went through this House. The very maximum that can be got out of this legislation is £6 or £7 million. Any expert forecast that I have seen as to the very maximum that may be got from wealth tax, estimates £6 or £7 million. When we add that figure to a current budget of £1,200 million which it was last January—probably next Thursday it will be considerably more—we will find that it will not represent 1 per cent of the current budget. That is what we are talking about here with all this capital taxation. We must realise what it is worth—that is the important factor—from the economic point of view. Will it enrich the country? Will the amount of money which will come back into the Exchequer be deployed in building up industry, helping the weaker section of the community by being channelled into health or education? Of course not: it will be of no significance. But when you look at the other side of the coin and see the damage that this tax has done, then you will realise that it is detrimental and represents a bad decision. For the sake of the £5 or £6 million we have certainly undermined confidence, and confidence is the most important thing to be built up in any country. You might be able to increase taxation in current budgets by increasing taxes; you might be able to borrow for a capital budget to expand hospitals and provide roads, but there is one thing you cannot buy, and that is confidence. You can travel all the Arab countries or European countries but you will have to build up confidence within the country itself. It is something that cannot be bought. The people must have confidence in themselves, confidence in the future that industry is going to expand. Young people must have confidence when they are leaving schools that they have an opportunity in life afterwards. The people in international money markets must have confidence that you are able to absorb the loans which are given to you and to repay them.

This is the thing which we should be aiming at when confidence is undoubtedly at a low ebb. During this week when the Minister for Finance, whether through the European banks or through the Arab countries, is involved in negotiating a loan of any description they may suggest certain remedial action here but I bet my bottom dollar, that not one of them will suggest a wealth tax when they are lending money to this country. They may point out to the Government the actions they think should be taken to bring inflation under control; they may point out how the Government can reduce their unit costs or ways and means of reducing unemployment, but I would be amazed if the Minister for Finance when he comes back could tell me that any of those countries would say, that in a rundown economy you should introduce a wealth tax or a capital taxation package such as we are introducing at present. I do not believe that there are any financiers in Europe who would recommend capital taxation in a weak and struggling economy.

We know that countries such as America and Japan have not a wealth tax, and these are countries which we are hoping will give this country a substantial financial injection over the next few years. Coming nearer home, some of the most advanced European countries such as Belgium have no wealth tax. Belgium is a small country, probably half the size of Ireland, with twice the population. It is the headquarters of the European Community and we can imagine the amount of finance which has gone into their construction industry. There is real wealth there which has accumulated within the past ten years, since the establishment of the Community. We know it was always a wealthy little nation but they have not opted for a wealth tax.

France is another country which does not have a wealth tax. America has huge technological and electronics investments in France. They have not a wealth tax and we know they have a large tourist industry. The same situation exists in Italy where there is no wealth tax. These are major countries within the EEC which have developed their industrial arm many years before us. We know the wealth of some of these European countries. We may have the same wealth in ten years' time and then we will be in a position to speak about a wealth tax.

In the United Kingdom, our nearest neighbour, they have been talking about a wealth tax but that is as far as they have gone. In legislation before the House of Commons at present there is no question of a wealth tax. There was a White Paper circulated with regard to intentions but there was many a White Paper circulated before which was never implemented. The decision to go before the United Kingdom into a wealth tax was unwise. We could find ourselves in the position that England may change her mind about such a tax. The British economy is under very heavy pressure at present, and so is this country's. I doubt very much if England has any intention of introducing a wealth tax in the depressed state of the British economy. I do not think Mr. Wilson would be so foolish as to try to push such legislation through the House when he is trying to build up confidence, build up exports and curb inflation.

These are the fundamental aspects of the Bill. It is the philosophy behind the Bill which we are objecting to. We do not object to taxing the rich. If one reads the debate on the Second Reading of the Capital Gains Tax Bill, it will be seen that Fianna Fáil criticised the Bill because there was no limitation to the thresholds and so on. That is the kind of provision we criticised on the Capital Gains Tax Bill. The Committee Stage served a useful purpose because there were many anomalies in the Bill and the Minister saw one point of view and many amendments were made.

We favour a taxation on short-term speculation. It will be seen from the speeches of members of this side of the House on the Capital Acquisitions Bill that they welcomed sections of it. When the Committee Stage of that Bill comes before the House, I shall have no hesitation in welcoming certain sections of the Bill. Some of them I should like to see changed, and we can discuss them. That is what we should have done when we abolished death duties. If we had any common sense, we should have discussed the Capital Acquisitions Tax Bill first and it would have been through the House long ago. If we wanted to put through the Capital Gains Tax Bill, there is a certain merit in it, and it should have come next. Neither of those Bills is a direct taxation on investments.

I believe the Government should have put those two Bills through the House early in January, when they made their decision. There is plenty of time for the Wealth Tax Bill. When we build up our economy we can go after the wealth. There is no good in trying to bring in a Wealth Tax Bill until the wealth is first created. That is not here at this particular time. We know that the whole of Europe is in economic difficulties at present but we are more vulnerable than Europe. A small country such as ours must have some encouragement in order to attract investors.

If we are to have our taxation level the same as obtains in sophisticated European countries, there is no great attraction to foreign investors to come here. First of all, we must look at our geographical situation in Western Europe. Ninety-five per cent of our manufactured goods must be exported, the major part to the United Kingdom and the European Community. Any manufacturer must take transport costs into account. We must import a large part of our raw material. This is expensive as regards transportation. Then, when it is manufactured, we must export it again, either to the United Kingdom or the Community. This can be an expensive process; and unless we decide to keep our unit cost under that of the United Kingdom and the other European countries, we will have no hope of competing in the export market.

Up to now, I agree, our exports have been going well. We know that over the years we always had that advantage in the unit cost in regard to our exports. We kept that unit cost up to two years ago, but it has been diminishing since and now it is on a par with that of any of the European countries and the United Kingdom. If we reach that level, it will be very difficult to attract capital investment because manufacturers will go instead to the heart of the activities, to the Ruhr or the Golden Triangle and set up their factories where the raw material is available, where the distribution of the manufactured articles will be at a very low cost.

It is only on these two fiscal policies, two budgetary proposals, that we can hope to keep this country attractive for investors. We are evidently bent on the highly sophisticated taxation system of some of the European countries and we are not developed for it. Whether we like it or not this is the reality of the situation and it will be brought home to us very forcibly in a few years, if we continue with this policy, the particular type of person who can create jobs by expanding industry. We know too well from reading the forecasts put forward by economists that we will have to create 25,000 new jobs per year up to 1980 and, unless there is a dramatic change, there is no hope of achieving this figure; if anything, we will have a contraction in industry over the next year. We will certainly have no expansion if this policy is pursued. We could not hope to have an expansion in industry in the present financial climate. The Government should be directing their attention to trying to curb inflation. That is the greatest problem today. We have wasted more time in this House since Christmas discussing capital taxation, which will not create one job and which will certainly not contribute to reducing inflation.

An Leas-Cheann Comhairle

The Deputy will keep now to section 2.

Mr. T.J. Fitzpatrick

(Dublin Central): It is difficult to avoid mentioning the three capital taxation packages in the context of the Bill before the House but I will certainly do my best to confine myself to section 2. When discussing the fact that death duties were abolished the Minister gave examples as to how people would be exempt and I was just reminding the Minister that he would have to consider the Capital Acquisitions Tax Bill and the Capital Gains Tax Bill as replacing death duties. I certainly do not want to go back on capital taxation again. We have spent a great deal of time on that, but the fact is that these measures are members of the one family, as it were, and the three were introduced to replace death duties.

I know the Minister gave indications last week as regards thresholds in other countries. The Minister did not, of course, go into the whole taxation package from the point of view of taxation in countries like Germany and Belgium. In discussing a Bill like this there might be an advantage with regard to thresholds in other countries; but, if the whole taxation package were looked at in countries like Germany, France and Belgium, then a substantial difference would be seen. Some of the most advanced socialist countries have the highest and best standards of social welfare and some of their taxation systems are most impressive at the higher levels.

Viewing this wealth tax in isolation would be unfair because we have to consider the Capital Gains Tax Bill and the Capital Acquisitions Bill also. The Minister's examples some short time ago leave me with the impression that nobody will be subject to wealth tax. That is the Minister's point of view. Industry today is struggling on on a very tight margin. Most industries are operating on a 3 per cent or 4 per cent return on capital investment. Some highly specialised companies get a higher return.

Progress reported; Committee to sit again.