Before this debate adjourned for Question Time I was speaking about farm taxation proposals. I said that rates credit which is now to be allowed as an instalment of tax was a considerable concession to farmers, but I ask the Minister to incorporate in his Finance Bill a provision whereby farmers whose rates will be greater than their tax burden will be allowed the additional rates to be carried forward against the following year's tax. For example if a farmer's rates bill is £600 and his calculated tax is £200 he would pay no tax in that year; he would have only to pay rates on £600. But there would be £400 there and I ask the Minister to incorporate a provision in the Finance Bill which would allow this to be carried forward to the following year.
We have also restored under the notional system, if a farmer opts for it, contractor's charges and also wages. The Minister said in his statement that he is going to agree with farming organisations on a system of averaging profits because of the cyclical nature of farming. He has also said that he will allow one payment day for payment of tax by farmers.
Some anomalies in the farmer taxation code would more properly be dealt with on the Committee Stage of a Finance Bill, but I would like to underline one of them. It is the matters that arise out of the difference between a farmer who carries on another trade or profession and people whose income is from sources other than farming. Under present legislation, which has existed since the enactment of the Finance Act, 1974, it is possible that a farmer who has income other than from his farm does not pay tax on the profits of his farm. But the allowances which he has to offset against his other income are reduced in one of three ways, and the Revenue Commissioners would give the best option available to him. Therefore anyone owning land of valuation greater than £20 and with other income may have his tax allowances to be set against his other income reduced by halving his allowances. His allowances may be reduced by 80 times the difference between £20 and his rateable valuation and subtracting that figure from his taxfree allowances, or his allowances may be reduced by the amount of his farm profits.
This gives rise to an anomaly for people who might have a small amount of land, say £10 valuation, and a small business like a little shop, for instance. Such people would pay tax on the profits of the farm and on the profits of their business. A person with £10 valuation and a small shop will pay a lot more in tax than a person with £59 valuation who is also, say, a Minister of State or in some employment. I ask the Minister to incorporate in the Bill a provision whereby people who have another trade or profession and who have land of under £20 valuation will be put in the same position as people who have other income and greater than £20 valuation. If I speak on Committee Stage of the Finance Bill I intend to raise this matter again.
Certain newspapers seem to try to create the impression that there should be division between the farming community and the working community, and this does no service to the long-term interests of the State. I know from meeting farmers and members of the IFA that they are quite perturbed that there seems to be a campaign carried on by certain newspapers to imply that there should be friction between the farming population and people on PAYE. If we wish to create the jobs which we all hope to get for our young people we must all pull together. The farmers are willing to pay their fair share of tax, and this budget goes a long way towards satisfying their demands and future budgets might increase the multiplier or lower the threshold. However, once farmers have come into the tax net— and I know some farmers who have been in it since 1974—they have found that the system is not too bad, they have got used to it, and they are willing to pay their fair share of taxation.
We have removed tax from agricultural co-operatives but we are not going to exempt sales into intervention. Representations were made to me by meat factories that sales into intervention should qualify for export sales relief. While there is some justification for their argument that if people selling to Bord Bainne are regarded as exporters then people selling into intervention should also be recognised in this way. I am not convinced that this would be in the long-term interest of the factories and of the meat-processing industry. The working of the intervention system has made some factories very lazy. If we all come to Leinster House day in and day out and sit down in the bar and do nothing for our constituents and contribute nothing to the House we know we will get our come-uppance at the next election. A factory which has not to compete in the open market or strive to get new markets and can sell all its products into intervention will have no interest in expanding the industry. Meat factories should be looking at processing because in this field a great number of jobs could be created. If we help to make factories lazy by giving them a system of selling into intervention which causes them no difficulty, we are not doing them a service.
While I agree that some factories which sold into intervention in 1974 should be allowed tax reliefs on those sales, I agree that the Minister should not exempt those sales entirely from taxation. He probably looks at it from another angle. My angle is that, for the long term benefit of the agricultural industry, it is better to have factories striving on the open market to get new markets and to go into processing, and not have the fall back position of being able to sell into intervention. It would be far more attractive if intervention were not tax free. It provides an incentive for them to do a little better.
The farm modernisation scheme has been referred to. There is something drastically wrong with the scheme as only a small percentage of farmers can qualify for development status. I would ask the Minister for Agriculture to try to have changes made in the directive at EEC level.
I referred to the urban-rural rift. If more farmers are incorporated into the tax scheme, and it can be seen that they are contributing their fair share of the national income, and contributing to revenue, the urban and rural dweller will be able to say: "We are all producing our accounts: we are paying what we should be paying": the threshold might be dropped a little further and all farmers might pay on the accounts system. The urban dwellers would then be able to see that farmers submit accounts and know what money they are making. There is a great deal of make believe about the vast profits in agriculture. Many people do not know what goes on beyond Newlands Cross. A lot of hard work goes on. When all farmers with valuations of over £50 or £60 are sending in accounts and what they are actually making can be proved, many myths will be dispelled.
We all know some farmers are doing very well. We also know some industrialists are doing very well. In our society there are very wealthy people, but there are very poor people also. The same is true of agriculture. People in Dublin may get the impression that the odd farmer they see driving a Mercedes is an indication of how well off the farming population are. Nothing is further from the truth. In that regard I see a system of farmer taxation as a good thing. The sooner more farmers are on the accounts method the better.
I was disappointed that the Minister did not raise thresholds on interest allowable from £2,000 to a much higher figure. The allowability level of £2,000 was introduced in the budget of 1973 when there was no capital gains tax in operation. The idea behind that level at that time was to prevent a very lucrative evasion method under which people could avoid paying a lot of income tax on their current income and make a capital gain. This was well known in the accountancy profession and the Minister was justified in introducing that threshold at that time. Since then a capital gains tax has been brought into existence and the threshold still remains at £2,000. The Minister could have gone a step further than he did in the budget and raised that level to a more realistic figure, say £4,000 at least. He raised the limit for interest on borrowed money to purchase shares in a private trading company. He should have gone further and allowed it for all income tax payers. When the Finance Bill is introduced he might consider that.
I was glad to see the turnover tax threshold increased by 50 per cent for small businesses. A small shop-keeper has to spend at least three nights a week writing up invoices for the Value Added Tax return at the end of two months. The turnover limit at the moment is only £2,000 for a grocer, a butcher, or a publican. In a grocery business there is an interminable number of invoices because it involves so many small items. The amount of VAT collected at the end of two months on a turnover of £20,000 in a grocer's shop could be as low as £20 because of the 0 per cent on grocery items. A lot of effort and time goes into this on the part of the businessman, and also by the Revenue Commissioners in checking and making assessments. That has been increased to £18,000 for most retail businesses and in other service industries it will go up to about £450 for two months. I should like to see these figures increased even further. I can speak from vast experience in this field, and I know the amount of money collected is very small, and the cost of book-keeping and record keeping far outweights the amount of money collected. I am glad the Minister has given this increase and that there will be a simpler method of calculating Value Added Tax at the end of a two month period.
The Minister has also tried to alleviate the iniquitous benefit in kind legislation which was in operation for the past two years. Before the former Minister, Deputy Ryan, introduced a new system of assessing benefits in kind, you had to prove to the inspector of taxes the amount of benefit in kind you got from the use of a company car. In a budget introduced by the former Government it was provided that it would be 15 per cent of the value of the car or a minimum of £300. For many company representatives this was a gross hardship because on that system of calculation the benefit in kind on which they were taxed was far greater than the benefit in kind they actually enjoyed. I am glad the Minister has reduced that.
I would ask him to do something about travelling allowances for people at work. There is a big anomaly in the income tax legislation in this field. A person who has a business of his own is allowed travelling expenses if they are proven to be wholly and exclusively for the purpose of that trade. For a person in employment the relevant rule is that it must be wholly and exclusively and necessarily in the conduct of the business. There have been various tax cases on this and the definitive one is one in which a teacher was involved who had a horse and cart. It was proved that, although he could not get to work unless he provided the horse and cart, he did not need a horse and cart in the performance of his duties. That is a 1925 tax case. It is the definitive case and that is why people in employment are not given travelling allowances.
