Dáil Éireann díospóireacht -
Tuesday, 27 Mar 1979

Vol. 313 No. 3

Private Members' Business - Taxation Policy: Motion

Mr. Cluskey

I move:

That Dáil Éireann—

Aware that the Government's income taxation policies have resulted in wage and salary earners contributing 87 per cent of income taxation;

Aware that the returns from income tax will increase by one third in this year;

Aware that the abolition of the Wealth Tax by the Government, together with the virtual abolition of the Capital Gains Tax and the Capital Acquisitions Tax by the Government have caused further inequality in the system;

Aware that the process of abolishing the food subsidies has increased inflation and added to the injustices of the taxation system; and

Noting that these regressive policies have resulted in massive demonstrations and work stoppages throughout the country by tens of thousands of wage and salary earners in recent weeks;

Calls on the Government to—

(i) provide substantial relief in the Finance Bill 1979 to the PAYE sector,

(ii) radically reform the present system of income taxation,

(iii) ensure that all sections of the community pay their fair and just share of taxation,

(iv) introduce an economically efficient and socially just system of capital and wealth taxation.

We have tabled this motion with a view to directing the attention of the Government and the House to the totally unjust form of taxation we have had for a considerable number of years. Our motion calls on the Government to do four things, and I will spell them out. The first is to provide substantial relief in the Finance Bill 1979 to the PAYE sector. We believe that the Finance Bill, which of necessity must come before the House in a reasonably short time, is the vehicle the Minister for Finance can use as an interim measure for the introduction of some degree of alleviation of the very substantial tax burden that falls on the PAYE sector.

In the period immediately before the budget, the ICTU made a submission to the Government in which they asked that at least £100 million relief would be given to the PAYE sector. The Minister and the Government saw fit, apparently, to give them relief of £27 million. This sector, who have no way of escaping even a halfpenny of their tax liabilities, are contributing 87 per cent of the total income tax collected in the State, and on the Minister's figures they will pay approximately one-third more, without any adjustment, in the current year.

The taxation system here for a long time has been weighted against people who are least able to pay, and that approach has been accelerated by the policies which have been and are being pursued by the Government since they came back to office in June 1977. It has been said that in our appeals on behalf of the PAYE sector we have concentrated on the farming community, that we have been engaged in farmer bashing. If one looks at the record of this party, at the pronouncements of our spokesmen over the years, one will find that at all times we have had it as a fundamental principle that the only criterion for the paying of tax is ability to pay. We are not asking that people would be liable for tax by virtue of their occupations, only that they would be liable for taxation according to their incomes, and that there is a direct responsibility on the Government to ensure that every citizen in the State would pay according to his income.

The Minister and the Government have tried to pull a con-trick on a number of people, particularly the urban dwellers. At the moment, in the comments of members of their party, particularly prominent members, the Government are trying still to confuse the issue regarding their attempt to impose a 2 per cent levy on farmers. They were somewhat surprised that this party totally and unequivocally opposed the introduction of that levy because its effect would have been to impose an additional layer of social injustice on the whole tax structure which could be described only as socially unjust. That levy proposal did not take account of ability of farmers to pay. The Government were trying to use the levy for application against any farmer, no matter what his circumstances, in order to cushion the effect of not demanding proper income tax returns from wealthier members of the farming community.

This party are not interested in farmer bashing. We are interested in social justice, which is one of the most fundamental principles of our party, and we are not selective regarding its application. We are concerned about ability to pay and responsibility in accordance with that responsibility to pay to the Exchequer what is necessary so that the State can maintain its services.

The most encouraging thing about the recent marches and meetings that have been held to protest against present application of PAYE has been the consistency with which every speaker, whether at meetings or on radio or TV, has stressed that it is not a question of urban versus rural Ireland, not a question of looking for cutbacks in public services, but a question of a fair and equitable collection of the taxes neces sary not only to run the services at their present level, but to improve them substantially. Various speakers have rightly said that if we had a proper and equitable taxation contribution from all sections we could improve our services substantially. No one could justifiably say that our services do not need improvement. What has been the policy of the present Government with regard to taxation since June 1977? When we joined with Fine Gael in a Coalition Government we made some attempt to restructure the tax code. I would not say, nor would anybody else from these benches, that at the end of four-and-a-half years we managed to do so in a really substantial way, but a genuine start was made. We introduced the wealth tax and for the first time we introduced farmer taxation based on ability to pay. The tax code is the foundation of many of the social injustices that go right through our economic and social system. The system must be radically changed, not just fiddled with.

Although this protest focused on PAYE one of the things that has come from it is the knowledge that it is a much wider protest against the kind of society that Fianna Fáil have imposed on the country. From the early 1930s to the middle 1960s Fianna Fáil could be described as a radical party that got the support because they were believed to be concerned with social justice. From the middle 1960s on they changed, but not as swiftly, as dramatically or as blatantly, so far as the electorate are concerned, as they did over the last 18 months. How could any Government in a civilised State remove a wealth tax which would affect approximately 5,000 people and give them a gift of £2,000 per year? To be affected by the wealth tax these people would have had to have a minimum of £850 million. Last Saturday morning two elderly sisters came down to my clinic in Camden Street. They were old age pensioners who had worked in a certain confectionery firm in the city for 42 years. They had contributed towards their old age pension week after week and after 42 years service in that private company they each received the princely pension of £5.40 per week.

The total income of each of them was £21.45 and out of that they have to pay £1.15 every fortnight to the Exchequer. That might seem a trivial sum but in 1979, did anyone ever try to live on £21.45 per week, to pay rent, to pay for food, for light, heating and clothing, and still keep any sense of human dignity? These two ladies had contributed to the building up of the State and had worked for 42 years and this is their position but the Government saw fit to give a gift of £2,000 per year to the 5,000 people who would have been covered by the wealth tax. The only reason for this inequity, the only justification that was given was that if we did not cater for them they would not invest and produce jobs here and that under the Fianna Fáil grand scheme of what they described as job creation, it was essential that these people be enticed back into the country to provide the jobs. What jobs have the private sector provided? By Fianna Fáil's publications, despite their gift of £2,000 plus, the other benefits given through the capital gains tax, and the capital acquisition tax, what Fianna Fáil described as incentives, Fianna Fáil had to cut back on their job expectations from the private sector by no less than 10,000 over a period of three years. This gift of £2,000 was described as incentives for this category but for a social welfare recipient it would be called a handout.

How in a civilised community that calls itself Christian could the Government, that removed the wealth tax, remove food subsidies? The removal of the food subsidies has had little effect on the wealth tax category and it would not be felt by Members of this House and their families, but it has been badly felt by those two ladies that I met at my clinic last Saturday morning and by tens of thousands of others in our society. Short term social welfare recipients were given an increase of 12 per cent in the budget, and long-term recipients were given an increase of 16 per cent.

The consumer price index recently published shows that, under this Government who got into office to some extent on a commitment and a pledge to bring down prices, and food prices in particular, food prices increased by 18 per cent. Some people and some organisations talk about State involvement, State grants and State subsidies and condemn them if they are going to people in need or to low or middle income groups. If we really examine State involvement, State subsidies and State grants, we find that some of the people who are most vocal in condemning them are the greatest beneficiaries. They are not called grants in many cases. When given to this class they are called incentives.

I understand that in 1981 corporation profits tax will be limited to 10 per cent. Before they reap the benefit of that change in our taxation code, is there any obligation on any company or any firm to create jobs? Massive grants are given by the IDA for job creation. They are given for factories and equipment and then foreign industries get a 20 years' tax free holiday. No one is suggesting from these benches that we do not need foreign investment. Do the Government realise that by the mid-1980s over 60 per cent of Irish manufacturing jobs will be outside Irish control? They will be controlled by foreign interests. Unlimited money is being poured out in this direction. We all know we need jobs, but there are other ways of providing jobs and of ensuring that they are Irish jobs under Irish control and that they will contribute to the building up of our commercial and industrial sector. We could also reap the benefits of many of the social aspects of Irish jobs under Irish control.

Originally the Minister announced the 2 per cent farm levy. He was very definite that there would be no change in it. At the Fianna Fáil Ard-Fheis as announcement was made that there would be a modification in its implementation, that it would not apply to certain produce and certain types of farmers. I understand that modification would have cost the State approximately £4 million. On RTE the Minister stated categorically that there would be no further negotiations on the implementation of the 2 per cent levy. He said there might be a meeting with the farmers the following week where they could state their case, but there would be absolutely no concessions.

Minister for Finance (Mr. Colley)

No further "modification" was the word.

Mr. Cluskey

I would hate to misquote the Minister.

Mr. Colley

That would be a change.

Mr. Cluskey

He seems to be prone to it, particularly with the press. I was addressing a Labour Party meeting in Cork when I got a note telling me the meeting between the farming organisations and the Government had taken place and that the farmers' levy had been removed totally. I was asked had I any comment to make. I would not comment because I found it difficult to believe, even coming from the Minister for Finance, he would say on the national radio, and that he would tell members of the media, that in no way would there be any further adjustment, or modification, or whatever word the Minister cares to use—and the next thing we heard was that it was gone.

I was opposed to that tax and I stated my opposition to it. I am still opposed to it because it has no element of social justice in it. It is an attempt by the Government to collect money from the farming community indiscriminately without taking into account what should be the fundamental principle of any Government in collecting taxation, the ability of the person to pay. They thought they would be able to avoid facing up to their responsibility in relation to those members of the farming community who are able to pay and should be made to pay.

The Minister has been making other noises suggesting that on 1 May there will be an acceptable form of taxation for the farming community which will ensure that they will pay what he describes as their just contribution to the Exchequer, or that the 2 per cent levy will be reimposed. When the Minister talks about the reimposition of the 2 per cent levy on farmers if they cannot devise a tax system which will yield what they should pay to the Exchequer, does he mean the 2 per cent levy announced in the budget or the 2 per cent levy modified at the Fianna Fáil gathering in Ballsbridge? We would not like to misquote him or do him an injustice between now and 1 May.

The Government should wake up to the fact the 250,000 people approximately who walked through the streets of our cities and towns recently had as their focal point the PAYE system. That was the issue that sparked it off. The real issue is much wider. There is a rejection, a clear shout to this Government from the ordinary people that they do not want the kind of society that the policies of this Government are creating here. They do not want the rich made richer at the expense of the poor and underprivileged. They demand that in this Christian country the Government should start behaving in a fair, just and equitable way towards every section in this community and not behave as they have been behaving; by responding only to organised groups because they have political muscle, as they had out in Ballsbridge over the 2 per cent levy, because they have economic muscle, as have some of the organisations here. There are other sections in Irish society. Although they apparently have no voice, no political muscle, no organisational muscle, no economic muscle, expression has been given to their views by the tens of thousands of marching feet in the cities and towns of this country on two occasions over the last fortnight. I believe that was a clear cry from the people to Fianna Fáil to call a halt, that they have had enough.

I believe that this Government have very considerable electoral debts to pay off to the rich sections in this country. I believe that there were very well-positioned, well-financed groups—small but powerful—who supported this Government in the last electoral campaign; and the Government are using the taxation code, among other things, to pay those sections back. Even up to now they have been paid back very handsomely indeed. But at whose expense have they been paid back? Look at the state of social welfare recipients. Look at Government policy with regard to the lower and middle income groups. Read through the Green and the White Papers. There have been cutbacks in public housing, cutbacks in education and in practically every aspect of local government expenditure. Every facet of national policy that affects the lower and middle income groups has been cut back. In fact, it had to be done to allow the Government to pay back the wealthy sections for their support in the last general election.

Let us make no mistake about it. The wealth tax was not a popular measure among those small, well-off and very powerful groups here. It was a most unpopular measure among them. They saw that the only way it could be abolished was to get a Fianna Fáil Government back who would abolish it. They have played ball with the Government and the Government have played ball with them. There is no other logic to the situation. I have thought long and seriously about it. How else could 15 men sit around a table and, after careful and long deliberation, make two decisions: (1) to remove the wealth tax, giving back more than £2 million to a millionaire class; and (2) to cut food subsidies? Is there any other reasonable explanation for it? The present Minister has tried valiantly to put forward as a reason the need of job creation by the private sector. I have said before, and I say again, that that myth is exploded by their own published documents.

An Leas-Cheann Comhairle

The Deputy has five minutes.

Mr. Cluskey

What this party are seeking in this motion is that the Government:

1. First, and as an interim measure, provide substantial relief in the Finance Bill, 1979 to the PAYE sector.

2. Radically reform the present system of income taxation.

3. Ensure that all sections of the community pay their fair and just share of taxation.

4. Introduce an economically efficient and socially just system of capital and wealth taxation.

Can anyone say that any of these four demands is unreasonable? There cannot be another country within the European Community, and probably outside of it, who would not say, if these four demands were read out to them, that such policies had been in operation in their countries for decades. These just and necessary demands would be the beginnig of the road—and it will be a long road—towards the creation of a just and equitable society here. I knew, even before I read out the demands, that the Minister and other Fianna Fáil speakers would get up and waffle about social partners, consultations and so on. No one is suggesting that the tax code can be radically restructured over night, but something can be done in the immediate future. Steps can be taken in the Finance Bill, which will come before this House over the next few weeks, to give at least some measure of alleviation to the PAYE sector.

The PAYE sector are in revolt against two things—the intolerable burden of taxation being placed on them, and the realisation that there are other sections of this community who are better able to pay and who are not paying their just and fair share of taxation. The wealth tax, if it were still in operation, would yield in excess of £25 million per year. The food subsidies cost £22 million. According to an official of the Revenue Commissioners, who probably gave a very conservative estimate, professional people are evading their fair share of income tax up to and probably in excess of £50 million per year. This comes from a man who is in a position to know or at least to make a reasonably well-educated guess.

It is common knowledge that our whole tax code needs to be radically restructured in order to give it even a semblance of social justice and equity. In the forthcoming Finance Bill the Government have the opportunity of taking the first step towards the radical reform that is necessary. In the interest of social justice and in the name of the people who walked the streets of our cities and towns on two occasions during the past week the Government should avail of that opportunity. Though focused on the PAYE question the protests were a condemnation of the policy that this Government have been pursuing, the policy of blatantly favouring the rich at the expense of the lower-paid and middle-income groups. The Government should take what could be their last opportunity to deal with the situation and that opportunity is afforded by the Finance Bill.

Minister for Finance (Mr. Colley)

I move amendment No. 1:

To delete all words after "Dáil Éireann" and substitute the following:

"—takes note of the Government's active and continuing concern for equity in the tax system as evidenced in the Government's actions to date including action to increase substantially the personal tax allowance, raise significantly the farming sector's contribution to the cost of public services and strengthen considerably the campaign against tax evasion,

—appreciates that long-standing features of tax code can be changed only over a reasonable period of time, given that the Government's programme of economic and social advance has to continue to be financed, and

—welcomes the Government's intention to continue to pursue actively their policy of promoting the maximum degree of equity in the tax system".

In moving this amendment to the motion tabled by members of Labour, it might be useful for me to begin by tracing the actual pattern of developments in taxation generally in recent years. But, first, I thank Deputy Cluskey for drawing our attention to the opportunity the Government have of doing something about the problem of taxation. I hope to show the Deputy that we do not need him to draw our attention to the situation. We have been doing something about it, but I expect that most people would prefer to ask what Deputy Cluskey and his colleagues were doing in this regard when they had a chance to do something about it.

Duputies

Hear, hear.

Mr. Colley

When the motion refers to the "regressive policies" of this Government, one would imagine that we have been responsible for massive increases in taxation, particularly for the lower-paid, while the previous Government had been reducing the burden of taxation. This is of course totally false, being the exact opposite of what has happened.

At the time the Coalition Government took up office the overall level of taxation in this country, including all forms of taxation, represented about 40 per cent of national income. By 1976, in their last full year of office, the tax level had shot up to almost 46 per cent of national income. This was a massive increase, particularly during a time of very low economic growth when real national income was itself growing at a very slow rate.

We were well aware at that time of the public dissatisfaction which this massive tax hike was causing and, from the beginning, we set out clear and farreaching plans for reducing the tax burden in various ways. As a result of these plans the overall tax burden is expected this year to represent about 41 per cent of national income, so we have more or less relieved the taxpayers of this additional taxation which was imposed by the Coalition Government.

The change effected by the present Government can perhaps be best expressed in actual money terms. Taxpayers would be paying some £300 million more in tax this year but for the tax changes made by the present Government. The reliefs given by this Government have been widely spread throughout the community, covering income tax, rates, motor vehicle duties, corporate taxes and capital taxes.

We recognised the dissatisfaction under the Coalition Government with the growing burden of taxation, particularly on the PAYE taxpayers, and we undertook to provide substantial reliefs. Of course we did not simply adopt a cavalier attitude of giving tax reliefs without worrying about how expenditure could be financed from other sources. We drew up a detailed plan of action designed to get the economy moving again from the stagnant position it had reached under the Coalition. We saw that the momentum generated by a growing economy would ensure that Government expenditure could be financed without requiring a crippling level of taxation.

Let me put on record what we have done to date, particularly on the income tax front. From the outset, we promised the biggest ever increase in personal income tax allowances—an increase of £200,30 per cent, in the single person's allowance and £630,57 per cent, in the married person's allowance. This shows that as far back as early 1977 we were already showing practical concern for the difficulties of those paying income tax. Our record since then shows that we are turning that concern into concrete action. This commitment was implemented in the 1978 Budget. In my recent budget further increases were given of £250 for a single person and £500 for a married person. Thus, in two years we have increased the value of the single person's allowance by 68 per cent and the married person's allowance by 103 per cent. This is well ahead of the rate of inflation.

It is useful to relate these personal allowances to the level of industrial earnings. Between 1974-75 and 1977-78, the final year in which the previous Government introduced a budget, the value of the allowances fell considerably when compared with the average male industrial wage—from 21.4 per cent to 16.5 per cent in the case of a single person and from 34.3 per cent to 27.2 per cent in the case of a married person. We have reversed this trend in our two budgets. On the basis of the estimated present average male industrial wage, the single person's allowance now represents almost 24 per cent and the married person's allowance almost 48 per cent. Not only has the fall been redressed but significant further increases have been made.

When we look at the proportion of income which is being taken in income tax a similar pattern is evident. The proportion has fallen considerably since our return to office. For example, a married person with no children earning the present average male industrial wage would pay only about 16 per cent of his earnings in tax compared with almost 22 per cent in 1976-77. A married person with two children on the same income level would pay 12.7 per cent of his income in tax at present compared with 16.6 per cent in 1976-77. These are very significant improvements.

Two other measures, which show the particular concern which we have for the lower-income groups, are the large increase in social welfare children's allowances this year and the introduction of fully pay-related social insurance contributions. In my recent budget I made provision for an average increase of 28 per cent in expenditure on social welfare children's allowances. The changeover to pay-related contributions for financing social insurance benefits will bring relief to the lower-paid workers. The relief will be greater the lower the income level. Again, concern for the burden on persons of low incomes and on reduced incomes such as pensioners lay behind the Government's action in ending domestic rates.

If we take account of all these changes which will have effect this year—the changes in income tax allowances and bands, the increased social welfare children's allowances and the changeover to pay-related social insurance contributions—it is clear that the Government are making a significant contribution to increasing the take-home pay of all employees, particularly those at the lower end of the scale. For example, a married person with two children earning £60 per week will have his net income increased by over 6 per cent. A similar person earning £50 per week will have his net income increased by almost 8 per cent. These are very substantial increases indeed, by no means excessive in the case of people on those incomes but far removed from the picture painted by Deputy Cluskey and his colleagues of a Government concerned with the rich.

The Labour Party motion states that the returns from income tax will increase by one third this year. This would seem to imply that everybody will be paying one third more in income tax, which indeed was the interpretation which Opposition speakers in the budget debate were trying to put on it. I will be dealing more specifically tomorrow in my reply to the budget debate with the allegations made by Deputy FitzGerald and others during that debate about the income tax revenue forecasts. However, I have already indicated, in reply to various parliamentary questions, that the expected percentage increase in receipts from the PAYE sector this year is smaller than that expected from the farmers and other Schedule D taxpayers. I have also mentioned that there are a number of special factors affecting receipts from individual groups within the PAYE sector this year.

No matter what way people try to misinterpret or distort my budget, there can be no question but that the measures which I introduced will free some 21,000 married and 19,000 other taxpayers completely from tax liability. In addition, in the case of married taxpayers without children whose liability is not removed completely it will be cut by amounts ranging from £100-£135 a year depending on income. The effects for married couples with children will be somewhat similar, but here it is also necessary to consider the effects of the changes in Social Welfare children's allowances and the child tax allowances. For those who are not removed completely from tax liability the combined effects of the alterations in the tax and social welfare system will be to benefit married couples by amounts varying upwards from £100 per year in cases where the children qualify for children's allowances.

In the case of single taxpayers or those widowed without children, most of them will experience a reduction in their liability by varying amounts. For those of them who are not entitled to any allowance other than the single or widowed person's allowance and whose incomes exceed £7,715 or £7,785, as appropriate, there will be tax increases not exceeding £15 a year. Moreover, if these taxpayers are entitled to any additional allowances, these income points will be higher.

So far I have concentrated my remarks on the steps we have taken to reduce the overall burden of taxation and in particular the burden on PAYE taxpayers. In addition, we have of course been making strides towards a more equitable distribution of the remaining income tax burden.

Both budgets introduced by this Government have marked considerable steps forward in the matter of farmers' taxation. The Government have already publicly committed themselves to devising a system of taxation which will put farmers in a position comparable to other sections of the community. Discussions are being held with the farm organisations and if before 1 May the farm organisations publicly accept a tax system that will bring in a yield from farmers in line with that of other sectors, then the Government will not proceed with the 2 per cent levy on farm produce which was announced in the budget; but the revenue foregone will be recovered by the Exchequer through the VAT system. The Government's commitment in this area could hardly be more unequivocal.

Turning to the other self-employed people, my income tax revenue forecast for this year projects an increase in receipts from this sector of a massive 44 per cent. One reason for this is that the income of this sector tends to fluctuate quite a lot, being far less stable than that of employees, and the small increase in tax receipts from this sector last year is expected to be more than offset this year. In addition, the intensification of the campaign against tax evasion, which I announced in my budget speech, is expected to show results during this year. I should of course make it clear that tax evasion is not confined to the self-employed and all categories of tax evaders can anticipate vigorous action by the Revenue Commissioners.

During the budget debate, Deputy Horgan said that he failed to see how I was going to tackle tax evasion, apart from appointing extra people to the Revenue Commissioners. I would remind the House that, in addition to the 500 new posts which I have authorised for the Offices of the Revenue Commissioners, I announced that particular accounts would be examined in depth, where there were indications of evasion, in order to see if the accounts could be reconciled with the state of the business or the life style of the taxpayer. At present substantial penalties may be imposed in respect of tax evasion. I also announced in the budget that in future more emphasis will be placed on legal proceedings rather than compromise action. Information about such tax evaders would of course be made public in the case of their being prosecuted through the courts. In addition, I am examining the possible usefulness of the publication of information concerning the returns of certain classes of taxpayers, without of course disclosing details concerning individual taxpayers.

As regards the reference in the motion to the abolition of wealth tax, the Government abolished wealth tax because it was a disincentive to investment and enterprise and thereby militated against job creation. Deputy Cluskey completely overlooked the fact that we had repeatedly stated that the Government were putting a very special effort into job creation in the first year of office which they could control through the introduction of a budget because it would take at least a year for the private sector to perform. I cannot blame Deputy Cluskey; it is not unfair that he would overlook this, given the rules of debate in this House. In the budget speech I indicated that this is the year the private sector have to perform fully, the year in which they are being tested. Nobody need try to condemn their performance until we have seen what it is. The indications from last year are very clear, in the form of investment and any other test which can be applied, that the private sector are measuring up; but the real test will not be possible until the end of this year.

We believe that unemployment is one of the major causes of poverty and inequality and we introduced in 1977 and 1978 a series of measures to boost job creation. The success of these measures, which included the abolition of wealth tax, is borne out by various economic indicators. As I mentioned in my budget speech last month, 23,533 jobs were created in 1978 under our job creation programme and after allowing for redundancies, the numbers at work are estimated to have increased during that year by 17,000, which was the largest year-on-year increase on record. I might add that the average annual yield from the wealth tax during the three years of its existence amounted to only £5.3 million. It is very easy to mislead people in regard to the wealth tax, but the abolition of the wealth tax was an important part in the creation of a climate of confidence by this Government. Deputies know this, as do the public, and they have seen the results in the jobs created, especially for our young people.

The changes I made in the capital gains tax last year were economically efficient and socially just. Under the capital gains tax code brought in by the Coalition no distinction was made between real gains and paper gains resulting from inflation, which means that a person could be taxed on a purely nominal gain when disposing of an asset whereas in real terms he had made a loss on the disposal. I remedied this inequity by introducing into the tax code an adjustment for inflation. I also introduced an arrangement whereby a speculator would be taxed at a higher rate than previously while a genuine shopkeeper, businessman or farmer who had put time, effort and money into improving and expanding his business over a period of perhaps 15 or 20 years would be taxed at much lower rates.

Deputy Cluskey talks about wealth tax and capital gains tax as though they were examples of social justice tackling inequity. I have already dealt with the inequity produced by the wealth tax combined with the other things that Government were doing. I wonder does Deputy Cluskey still try to justify the application of a wealth tax to Irish people and not to foreigners operating in this country. I wonder does Deputy Cluskey still try to justify the taxing of people who have spent their lives building their businesses at the same rate as a man who makes a quick profit over a month or two. We do not approve of that. If Deputy Cluskey and his party do, let them say so clearly and not be pretending that they are interested in social justice.

The main change made by the Government in relation to capital acquisitions tax was the doubling of the threshold for three of the four classes of beneficiaries. I believe that these thresholds were originally fixed at too low a level. I also believe that the one threshold which I did not change was fixed at too high a level and I said so at the time. Again, Deputy Cluskey and the Labour Party may think that it was right to provide, as they did, under the capital acquisitions tax that a wealthy man could dispose of his property. If it was agricultural property, he could dispose of it in slices worth a £¼ million each, one to his wife, one to whatever number of children he had up to the limit of his assets and pay no capital acquisitions tax. That may be their idea of social justice but it is not ours.

The capital acquisitions tax yielded £5 million in 1978 and is expected to yield £6.5 million this year. In view of that, I find it hard to understand the reference in the motion to its virtual abolition. As recently as the 13th of this month we discussed food subsidies in this House and I do not intend to go back over all that again although Deputy Cluskey tried to do so. I would point out once more that food subsidies operate to the benefit of the rich rather than the poor and that the case for introducing the food subsidies was put in this House by the former Taoiseach. I quoted him at some length when we discussed the matter. The case made was reasonable but he pointed out that the time when we got back to single-digit inflation was the time to start getting rid of food subsidies. He pointed out the drawbacks of it operating for the benefit of the rich rather than for the poor and that it inhibited job creation. I agree with what he said; so did the Deputies opposite because they supported him. The real point in what we are doing is to try to use the money saved on food subsidies this year to help the less well-off and to help job creation, which is the most important way in which to help the less well-off. As far as we are concerned, we recognised that the time had come to initiate the first stage of a phased and gradual reduction in the subsidies. The timing of further reductions will always depend on the circumstances of the economy.

In regard to social welfare, we are proud of our record despite all the talk, particularly from the Labour Party and Deputy Cluskey. When Fianna Fáil were in office between 1967 and 1972 and since we came into office in 1977, the real value of the increase in social welfare has been three times greater than under the Coalition. All the talk about being in favour of the rich and not caring about the poor can be tested against these facts. We have tackled the problem of taxation on a comprehensive basis. We have tried to tackle income tax under three main heads, easing the overall burden of taxation, particularly the burden placed on the PAYE sector. I have shown how much we have done in that area as compared with people who now have the nerve to come in with this motion. We have tackled in a real way the problem of getting an adequate yield from farm taxation and we are mounting a vigorous and unprecedented campaign against tax evasion. In view of the progress we have made in less than two years, particularly in the light of the actions of the Coalition Government, we have substantially reduced the burden of inflation. In those circumstances I find it difficult to understand the criticisms of Deputies as set out in the terms of this motion. A great deal more has to be done before a fully acceptable and fair system of taxation is established, but it is not possible for all the necessary and desirable changes to be made at once while sustaining the Government social and economic programme. The speed of reform must take account of what can realistically be achieved. We must ensure that we are not sacrificing the interests of the less well off and the unemployed. They must be catered for in the areas of health, education, social welfare and job creation. We cannot sacrifice the interests of these areas in a mad scramble to reform the tax system.

The Government have been very open and frank about their proposals in regard to taxation and other matters. We believe that the best way of making progress is to engage in wide-ranging and detailed consultations with representatives of the trade union movement, the business community and the farmers. We have at all times been ready to have detailed discussions with representatives of these groups. Following the Taoiseach's call for a national understanding on wages, taxation, jobs and so on, we met the ICTU and a working party are now examining the wide-ranging issues raised. At the same time discussions are also taking place at working party level with employers. As I have already indicated, we are also proceeding with discussions with the farming organisations in regard to taxation. As I said, tax reform is only one aspect of these discussions. It is very important to view taxation in the wider context of the overall management of the economy, particularly the overall management of the public sector. This is a complex problem and the level of taxation cannot be dealt with in isolation. We must have regard for the need to maintain and make advances in social welfare, health, education and job creation, which is the Government's first priority. This can be done, but it cannot be done simply by cutting taxation without regard for the consequences or by engaging in massive borrowing. We would not wish our children to remember this Government for the legacy of a national debt with no assets to show for it.

This Government have been making very strong efforts to ensure that schemes of expenditure which have achieved their original purpose would be reviewed and pruned, and this process has gone on and has shown itself in the Estimates this year, and will continue. Simply to reduce taxation at the expense of impeding social progress or slowing down the growth of the economy because of the State's lack of revenue would not be the right course for this country.

I would not wish to anticipate the Government's action on foot of various discussions that I have referred to which are being held at present, but I assure the House of the Government's continuing concern about the tax situation and of their anxiety that progress be made as quickly as possible towards a system which will prove suitable to all taxpayers. We wish to achieve in these discussions a common understanding and a sense of direction over time on the many issues which affect the community as a whole, including earnings, taxation, social welfare benefits, employment, growth and inflation. These issues are both complex and long-standing. An undue emphasis on short-term solutions and cures cannot be fruitful. We want to ensure that a common and universal effort is made by all sections, including farmers, to continue the economy along the path on which we have managed to set it since mid-1977, a path marked by rapid growth, substantial increases in employment and a marked reduction in the rate of inflation. That should be the aim of all sides in this House. If it is not, it is going to remain the aim of this side of the House.

Deputies

Hear, hear.

Mr. P. Barry

This is the fifth, sixth, seventh or eighth time I have heard the Minister making exactly the same speech over the last 18 months.

Mr. Killilea

We did not hear one at all from the Deputy's side.

An Leas-Cheann Comhairle

Deputy Killilea should let the Deputy start, please.

Mr. P. Barry

It is customary when Fianna Fáil are on weak ground for them to bring in Deputy Killilea to try to deflect some of the attention. That has been going on now for 18 months and I am sure that is the reason he is here again. We have not heard the last of him tonight and we will hear him again tomorrow.

An Leas-Cheann Comhairle

The Chair will try to deal with Deputy Killilea. He will please let Deputy Barry speak.

Mr. P. Barry

As I have said, this is the fifth, sixth or seventh time I have heard this speech from the Minister for Finance in the last 18 months. It is a justification of Fianna Fáil's stance in reducing, according to the Minister, the level of taxation. It is a justification for their abolition of the food subsidies and the usual defence for the abolition of the wealth tax. I will come later on to what I want to say about that. Despite the fact that in this House a number of times I have explained our attitude to the wealth tax, the Minister continues to misrepresent our position on it.

If all that the Minister says is correct, if his party have made such a good job of running the country and if the people are as satisfied as he seems to think—he refers to people outside this House recognising these facts—why did a quarter of a million people march last Tuesday? What were they marching about if they thought the system of taxation was as just as the Minister would lead us to believe here tonight? Is it that they do not believe what the Minister is saying? Do they believe that the words spoken do not match up to the reality of their pay packets at the end of the week and that they are now worse off than they were before this Government came into office? I think they believe that the Government are serious when they say they are going to collect 36 per cent more tax from the PAYE payers this year than they did last year. Is that the reason they took to the streets? Did they feel that the 87 per cent they are being asked to pay is an unjust burden on them when they see that other sections of the community when asked to make a contribution appear to be able to bully the Government into dropping the proposal against them? Do they feel that they should have the same rights in this regard?

I am sorry that you, Sir, shut up Deputy Killilea before he started because I am sure he would have looked for a pair and gone home before now only that he was asked to provide some means of deflecting the attack from the Government by kicking up a row. You silenced him successfully.

An Leas-Cheann Comhairle

I think, Deputy, we should forget about Deputy Killilea.

Mr. P. Barry

I agree.

Mr. Wyse

He might come back.

Mr. P. Barry

The Government's amendment to the motion states, and I quote:

"—takes note of the Government's active and continuing concern for equity in the tax system as evidenced in the Government's actions to date including action to increase substantially the personal tax allowances, raise significantly the farming sector's contribution to the cost of public services and strengthen considerably the campaign against tax evasion.

We were told today that it would raise considerably the farming sector's contribution to the cost of the public services. We endeavoured to find out from the Minister at Question Time today exactly how much he expected them to contribute but he was not able to tell us, nor was he able to tell us when exactly this contribution would be made. The only thing we know is that the proposal in the budget was for a 2 per cent levy on all farm produce at the point of sale or export. At the time of the budget, and since, we on this side of the House labelled this as an unjust and unfair tax because it sought to treat all farmers alike whether they were one-cow farmers or 200-cow farmers. At the time of the Ard-Fheis of the Government party there was considerable protest from members of the farming community and the levy as proposed was modified to the extent that certain goods, such as sheep, were excluded from it and farmers supplying beet to the Tuam sugar factory and certain other categories were relieved of the proposed payment of this tax on 1 May. The Minister for Finance at the time of making these announcements said that these were the final concessions which he would make and there would be no further relief in the amount of levy to be paid. Yet within 48 hours —on Tuesday 28 February—the farming organisations met with the Taoiseach, the Minister for Finance and the Minister for Agriculture, and a statement was issued saying that the farming levy would not be imposed on 1 May unless there was public agreement to a system of taxation before that date; that unless there was public agreement by the farming organisations to a system of taxation before that date, they would bring in an equal amount of money, provide just and equitable taxation, or some words to that effect.

Since then the Minister for Finance has described that document as the most misinterpreted and misquoted in the history of this country. Yet the whole problem about the document was the comments of the Minister for Agriculture at the press conference. I have checked all of the papers in this regard, and at that time he was quoted as saying exactly the same thing in each of them. In The Irish press the Minister for Agriculture was quoted as saying that he was pleased that the farming organisations expressed their willingness to work out an income tax system which would be equitable. In the Cork Examiner the Minister for Finance was quoted as saying after the meeting that the proposals had evolved from ones put forward by the farming organisations to the Taoiseach, the Minister for Agriculture and himself and that Deputy Gibbons, who was present with Deputy Colley at the meeting with journalists, was quoted as saying that he was pleased that the farming organisations had expressed a willingness to work out an income tax system that would be equitable. The Irish Times said that Deputy Colley said he was pleased—exactly the same as The Irish Press, and the Irish Independent.

If that document was so misinterpreted by the press, as the Minister for Finance now wishes to suppose, how did he sit and allow the Minister for Agriculture, when sitting next to him with the press listening, put that interpretation on it? If there has been a misinterpretation of this document, if the rest of the population think that the farming community are being allowed to write their own taxation system, then the responsibility for that lies with the Government because they endeavoured to placate the farming community by allowing that interpretation of the meeting to go into the press, that farmers were going to be allowed to work out their own taxation. It was pointed out to the Minister for Finance at the time that the budget was in the process of being debated in this House, that the Financial Resolutions had been voted on and that to have any one sector of the community appear to dismantle part of that budget in their favour and write their own system of taxation was bound to provoke a backlash from the PAYE sector who, on the estimate of receipts for 1979, would, according to the Government, contribute 36.7 per cent more in income tax this year over last year. It was bound to provoke that backlash and it did. If the Government stop to think about it, if they think that discussions with various groups, that appearing now to be chasing tax evaders in a public way, of adopting—as probably they will do now—a tough stance with the farmers will placate the PAYE payers at this stage, they were totally wrong.

Mr. Wyse

That was announced in the budget long before the remarks.

Mr. P. Barry

What was?

Mr. Wyse

What the Deputy is talking about, tax evasion.

Mr. P. Barry

I am saying that the Government are talking about tax evasion and chasing people who are allegedly evading tax. I hope that does not mean ringing up unfortunate small shopkeepers down the country and asking them if the petrol they used going to the match on Sunday was paid out of petty cash or out of their own pockets. That is unfortunate, because those are not the people the Government need to get after. There are far more blatant forms of tax evasion going on here than that. If the Government think they can now placate the PAYE sector by their discussions with ICTU, by adopting a hard stance against the farmers, by chasing tax evaders, if they think that will be sufficient, I warn them they are doing grave damage to our economy. It will be detrimental to our economy also if they do not treat seriously the complaints, the sense of bitterness and the sense of unfairness in the way they are being dealt with, of the 750,000 taxpayers who are the main economic pillar for the support of the services being provided by the Government.

To talk as the Minister for Finance did a moment ago about equity in the tax system as introduced by them and the unfairness of the Coalition system points to the fact that the Minister for Finance appears to have forgotten that he was the Minister for Finance who raised the level of taxation here to 80 per cent. He appears to have forgotten also that it was the Coalition Government who made the top rate of taxation payable here 60 per cent and who introduced a 20 per cent band of taxation. Where now is that 20 per cent band which was of direct benefit to the lowest taxpayers? As a result of the action of the same Minister for Finance, the same Government who seek to pull the wool over the eyes of the ordinary taxpayer that 20 per cent band has been abolished. This means that every single taxpayer meets a higher band of taxation at a level of £400 less from next Friday week than he does this week.

Dr. Woods

Except those who are left out.

Mr. P. Barry

Is this the equity about which the Minister for Finance talks? He reduced the child allowance and says this is because of the increased children's allowances he has granted. They are two entirely different things. The children's allowance is given to help the worst off section of the community, who perhaps do not pay tax or if they do are on the lowest level, to ensure that their children are fed.

Dr. Woods

Forty thousand more people will pay no tax.

Mr. P. Barry

The child allowance within the concept of the tax code is entirely different. The Minister appears to be working on the assumption that people who pay no tax, who have no children, should pay as much tax or as little tax as those with six children. Within the tax bands he is deliberately operating the tax system in this year's budget against those people with families and the increased children's allowances do not compensate.

I want to turn now to the matter of tax evasion and the wealth tax and what the Minister for Finance said about them. There was a summary of an OECD report published in yesterday's Financial Times showing that virtually the only two countries in Europe without a wealth tax at present are the United Kingdom and Ireland.

Mr. Colley

Surely they have not one in France.

Mr. P. Barry

I think they have, yes.

Mr. Colley

The Deputy may be right, but I did not think so.

Mr. P. Barry

Well there is a list of them in yesterday's Financial Times as a result of an OECD report. The interesting thing about this is that Switzerland, a country which we are told attracts great quantities of money for various reasons, has a wealth tax down to canton level.

Debate adjourned.