Dáil Éireann díospóireacht -
Thursday, 26 Jun 1975

Vol. 282 No. 9

Financial Resolutions. - Financial Resolution No. 1: Income Tax.

Minister for Finance (Mr. R. Ryan)

I move:

(1) That section 3 of the Finance Act, 1974 (No. 27 of 1974), as amended by section 10 of the Finance Act, 1975 (No. 6 of 1975), shall have effect, in relation to the charge to income tax for the year 1975-76 in respect of so much (if any) of the taxable income for that year as exceeds £1,550 of an individual (other than an individual acting in a fiduciary or representative capacity) who is chargeable to income tax for that year, as if each rate of tax referred to in paragraphs (b) and (c) of subsection (2) were increased by ten per cent of that rate.

(2) That each reference to the standard rate in section 127 (1) (e), the proviso to section 143 (3) (b) (inserted by the Finance Act, 1975), section 153 (1) (dd), section 233 (2) (b) and section 525 (1) (i) of the Income Tax Act, 1967 (No. 6 of 1967), shall, in respect of the standard rate of tax in relation to the year 1975-76, be construed as a reference to the standard rate increased by ten per cent of that rate.

(3) That section 497 of the Income Tax Act, 1967, shall have effect, in respect of repayments of income tax falling to be made for the year, 1975-76, as if "at the standard rate, at that rate increased by ten per cent of that rate or at one or more of the higher rates increased, in the case of each such rate, by ten per cent of that rate, as may be appropriate" were substituted for "at the standard rate of tax or at the higher rate or rates, as the case may be".

(4) It is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the Provisional Collection of Taxes Act, 1927 (No. 7 of 1927).

This Resolution provides for an increased charge to income tax for 1975-76 in the case of individuals who are liable to income tax at the 35 per cent or higher rates. The 26 per cent rate which applies to the first £1,550 of taxable income—that is, as I explained in my Financial Statement, total income less personal allowances and reliefs—is not being altered but the 35 per cent and higher rates are being increased by 10 per cent. The yield to the Exchequer from this increased charge will be £14 million, of which £8 million will be the yield in 1975.

Mr. Molloy

It is very difficult to hear what the Minister is saying. Might I ask him to speak more slowly and distinctly, when we might all hear what he is rushing over there.

Mr. R. Ryan

If we had the decorum from the Opposition they are supposed under the rules of order to observe and remain quiet, I am quite certain my voice would be clearly heard.

(Interruptions.)

An Ceann Comhairle

Order.

Mr. R. Ryan

The additional charge will apply only in the case of individuals with total incomes exceeding £2,125, in the case of a single person, £2,470, in the case of a married man and £3,160 in the case of a married man with three children.

Mr. J. Lynch

I shall not go over the ground just covered by my colleague, Deputy Colley. We find ourselves in this House today trying to deal with a drastic situation. But the drastic situation did not arise only today. As has been pointed out, we knew—and the Government should have known—that such a situation existed many months ago. We not only urged the Government to take action but pointed out the type of action that should be taken. Having gone some of the way to taking some of the action that might be expected of an Opposition in trying to support a Government in such a situation, unfortunately the action, as we have indicated, is too late. Unfortunately also those who are less able to bear the brunt of that action are again being asked to pay. The only section of the community asked to make any sacrifice immediately—a sacrifice imposed by this House—are the people in the 35 per cent income tax waveband.

According to the Minister's Estimates, the value to the Exchequer is £8 million. The cost of the whole package is something in excess of £20 million. The budget deficit, estimated at some £116 million in January of this year, is now double, bringing it to something like £240 million which will have to be found by borrowing.

Nobody else is asked to make any contribution to today's package, or to the £240 million deficit, except those least organised and who are always called upon to make contributions when the Government look for some input into the economy. People now with an income rate of £1,500 to £4,300 per annum will be called upon, this year, to pay an increase of anything from £1 to £100. These are the people on whom the Minister relies to give new impetus to the manufacturing industry by reducing the rate of VAT, that is the rate of VAT on clothing and footwear. These are the kind of people on whom the Minister can depend to give that impetus. But he is going to take the kind of impetus that they could give, through enjoyment in the reduction of the VAT rate from them in this fashion.

Apart altogether from registering our protest about the imposition of this tax by voting against it—as we propose to do—we intend to register our protest at the ineptitude and tardiness of the Government in handling this problem; in making a bad situation, bad as it was in the winter of last year and spring of this year, worse by their tardiness, their lethargy and ineptitude in the handling of the whole economic spectrum. For those two reasons we propose to vote against this Resolution.

Mr. Haughey

Might I ask the Minister a question on this Resolution? The Minister referred to the fact that approximately 100,000 new persons will be brought under the PAYE system. Is it intended that that change will be applicable during the course of this income tax year?

Mr. R. Ryan

No, it is unlikely that the arrangements necessary to bring them under the scope of PAYE will be completed within the current tax year.

Mr. Haughey

When the arrangements are made will the changeover involve these 100,000 people paying, in the one year, income tax in respect of their earnings in the previous year and PAYE in respect of their earnings in the current year? Can we have a categoric assurance from the Minister that that will not happen?

Mr. R. Ryan

The Deputy can be assured there will be no double payment. He will recall that, when PAYE was introduced in 1960, there were certain adjustments made to avoid that situation. The circumstances are not entirely comparable. The different categories are not treated precisely the same even under existing practices. Some pay within a financial year; others have an entitlement to pay in arrear beyond a tax year. These are some of the matters of detail that will have to be worked out. But the Deputy may be assured that appropriate adjustment will be made to avoid the possibility of double payments having to be made.

Mr. Haughey

The question I am asking is capable of a very clearcut and categoric answer. These 100,000 people at present are on a system under which they pay income tax, this year, on the basis of last year's earnings. When the changeover occurs—in whatever income tax year it happens —can we be assured they will not, in the same year, be paying income tax on their previous year's earnings and PAYE on their current year's earnings?

Mr. R. Ryan

Yes.

Mr. Colley

Will the 100,000 all come in together, or will they be phased in?

Mr. R. Ryan

Together.

Mr. O'Malley

How does the Minister seek to justify the fact that income tax, deductible at the standard rate of 35 per cent, for example, from company dividends will continue to be deducted at 35 per cent in respect of dividends payable to companies and, in particular, holding and investment companies for wealthy people; but, where the dividend is paid to a private individual, who has a family to support, the rate of tax to be deducted will now be 38.5 per cent?

Mr. R. Ryan

The Government are satisfied it would be wrong, in existing economic circumstances, to charge the higher rate of tax or to impose this surcharge on the profits of companies, and that to do so would only have the further effect of dampening the possibilities and prospects of employment.

Mr. O'Malley

Therefore, individuals pay higher taxation on their dividends.

Mr. R. Ryan

I hope the Deputy will support the approach of the Government not to impose higher taxation on those entities which provide employment?

Mr. O'Malley

If you are wealthy enough to have a holding company or an investment company you pay 35 per cent tax but if you are a private individual trying to support a family you pay 38½ per cent tax. Thank you.

Mr. R. Ryan

If you want to maintain employment you do not impose more tax on companies that provide employment. If you want to be reckless and mischievous you suggest that the Government's aim is to provide excessive profits for the wealthy.

Question put.

The Dáil divided: Tá, 71; Níl, 67.

Tá

• Barry, Richard.
• Begley, Michael.
• Belton, Luke.
• Belton, Paddy.
• Bermingham, Joseph.
• Bruton, John.
• Burke, Dick.
• Burke, Joan T.
• Burke, Liam.
• Byrne, Hugh.
• Clinton, Mark A.
• Cluskey, Frank.
• Collins, Edward.
• Conlan, John F.
• Coogan, Fintan.
• Cooney, Patrick M.
• Corish, Brendan.
• Cosgrave, Liam.
• Costello, Declan.
• Coughlan, Stephen.
• Creed, Donal.
• Crotty, Kieran.
• Cruise-O'Brien, Conor.
• Desmond, Barry.
• Desmond, Eileen.
• Dockrell, Henry P.
• Dockrell, Maurice.
• Donegan, Patrick S.
• Donnellan, John.
• Dunne, Thomas.
• Enright, Thomas.
• Esmonde, John G.
• Finn, Martin.
• FitzGerald, Garret.
• Fitzpatrick, Tom (Cavan).
• Flanagan, Oliver J.
• Gilhawley, Eugene.
• Governey, Desmond.
• Griffin, Brendan.
• Harte, Patrick D.
• Hegarty, Patrick.
• Hogan O'Higgins, Brigid.
• Jones, Denis F.
• Kavanagh, Liam.
• Kelly, John.
• Kenny, Henry.
• Kyne, Thomas A.
• L'Estrange, Gerald.
• Lynch, Gerard.
• McDonald, Charles B.
• McLaughlin, Joseph.
• McMahon, Larry.
• Malone, Patrick.
• Murphy, Michael P.
• O'Brien, Fergus.
• O'Connell, John.
• O'Donnell, Tom.
• O'Leary, Michael.
• O'Sullivan, John L.
• Pattison, Seamus.
• Reynolds, Patrick J.
• Ryan, John J.
• Ryan, Richie.
• Spring, Dan.
• Staunton, Myles.
• Taylor, Frank.
• Thornley, David.
• Timmins, Godfrey.
• Toal, Brendan.
• Tully, James.
• White, James.

Níl

• Allen, Lorcan.
• Andrews, David.
• Barrett, Sylvester.
• Blaney, Neil T.
• Brady, Philip A.
• Brennan, Joseph.
• Breslin, Cormac.
• Briscoe, Ben.
• Brosnan, Seán.
• Browne, Seán.
• Brugha, Ruairí.
• Burke, Raphael P.
• Callanan, John.
• Calleary, Seán.
• Carter, Frank.
• Colley, George.
• Collins, Gerard.
• Connolly, Gerard.
• Cronin, Jerry.
• Crowley, Flor.
• Cunningham, Liam.
• Daly, Brendan.
• Davern, Noel.
• Lynch, Celia.
• Lynch, Jack.
• McEllistrim, Thomas.
• MacSharry, Ray.
• Meaney, Tom.
• Molloy, Robert.
• Moore, Seán.
• Murphy, Ciarán.
• Nolan, Thomas.
• Noonan, Michael.
• O'Connor, Timothy.
• de Valera, Vivion.
• Dowling, Joe.
• Fahey, Jackie.
• Farrell, Joseph.
• Faulkner, Pádraig.
• Fitzgerald, Gene.
• Fitzpatrick, Tom (Dublin Central).
• Flanagan, Seán.
• French, Seán.
• Gallagher, Denis.
• Geoghegan-Quinn, Máire.
• Gibbons, Hugh.
• Gibbons, James.
• Gogan, Richard P.
• Haughey, Charles.
• Herbert, Michael.
• Hussey, Thomas.
• Kenneally, William.
• Kitt, Michael P.
• Lalor, Patrick J.
• Lemass, Noel T.
• Leonard, James.
• Loughnane, William.
• O'Kennedy, Michael.
• O'Leary, John.
• O'Malley, Desmond.
• Power, Patrick.
• Smith, Patrick.
• Timmons, Eugene.
• Tunney, Jim.
• Walsh, Seán.
• Wilson, John P.
• Wyse, Pearse.

Tellers: Tá, Deputies Kelly and B. Desmond: Níl, Deputies Lalor and Browne.

Question declared carried.