Deputy Mac Giolla is in possession.
Finance Bill, 1983: Second Stage (Resumed).
On the previous occasion I referred to the fact that the Finance Bill was not dealing with the problems of the economy and that there was no progress since budget time. It was merely dealing with the question of balancing the books. I pointed out that this was the current theory in western democracies of Thatcherism and Reaganomics.
This Finance Bill contains nothing that will seriously burden the wealthy in any way. The PAYE sector have been those people hit yet again. The fact that this Finance Bill contains no proposals with regard to existing capital taxes is testimony to the fact — as shown in the post-budget revenue yield forecasts — that little or no extra revenue is to be extracted this year from the rich as their contribution to the financing of the State's borrowing needs. The only new tax measure that might be regarded as coming on them is the new property tax which, at very best, is expected to yield something in the region of £10 million while other estimates rate the yield as low as £3 million this year. Therefore, the taxation of the wealthy has not been dealt with. There are proposals which we have had from previous Ministers for Finance going back over the last eight to ten years, to deal with tax evasion, that offenders would be imprisoned, fined heavily and so on.
It must be noted that capital taxation in 1974 constituted 11.2 per cent of total Exchequer revenue. In 1981 that figure had fallen to 4.7 per cent. Even for quite a number of years of Thatcherism in Britain, in 1981, 13.3 per cent of UK revenue came from capital taxes, three times more than the figure here. There has been a consistent reduction in capital taxation here since 1974, when it amounted to 11.2 per cent, down to 9.6 per cent in 1975, 8.8 per cent in 1976, then down to 8 per cent in 1977, 6.1 per cent in 1978, 6 per cent in 1979, 5.2 per cent in 1980 and 4.7 per cent in 1981, a consistent, determined reduction in capital taxation during all of those years.
But while we talk of evasion, of non-payment of taxes, the fact is that the general level of taxation as decided by Ministers for Finance of both Fianna Fáil and Coalition Governments over the past decade has been reduced. It has consistently been their policy and strategy to reduce taxes on capital and increase taxes on labour; labour is to be crushed all the time, to be blamed for everything and pay for everything. Indeed in a table contained in a written answer to Deputy R. Bruton of 1 March last, the present Minister for Finance showed clearly that that has been the consistent policy of successive Ministers for Finance. Indeed over the past four or five years, for the first time ever perhaps in any State, taxes were being abolished. Instead of new taxes being created — which is what has been happening over the past hundreds of years; Ministers for Finance continuously thinking of new methods of raising taxation — what has happened here consistently over the past four or five years is that capital taxation has been abolished. Nineteen seventy four could be taken as the high year in that respect and there has been a consistent reduction ever since. For instance, taxes on inheritances and gifts which yielded 2 per cent of our total revenue in 1973-74 last year, 1982, yielded 0.3 per cent, one-third of one per cent which has not been replaced by anything else. Capital gains tax, introduced some years ago, has been reduced consistently. In fact those people who have been legitimately charged capital gains tax have been refusing to pay. I am quoting from comments of the Minister for Finance who has been telling us since that there is no crock of gold out there. I am taking figures from the table furnished by the Minister by way of written answer to Question No. 412 to Deputy R. Bruton on 1 March last.
The figures for taxes outstanding for 1979-80, as at 31 December 1982, still outstanding for 1979-80, were VAT £574 million paid with a balance outstanding of £16.27 million, still outstanding in 1982. In regard to PAYE £800 million had been paid and £6.15 million was still outstanding in 1982. For PRSI £371 million had been paid and there remained outstanding £5.94 million in 1982. When we come to the income tax of the self-employed, including farmers, £113 million had been paid and there remained outstanding on 31 December 1982 £119.07 million. Yet we have Mr. Donal Cashman screaming at us telling us that the farmers are paying their taxes. The figures are down there in black and white in that table for 1979-80 and there still remain the years 1980-81 and 1981-82. Of the total of corporation tax due, £135 million had been paid, with £63.84 million outstanding. With regard to capital gains tax a miserable £5 million had been paid leaving £11.27 million outstanding, in other words, one-third only of the amount due had been paid nearly three years later.
Those figures are most disturbing and are the type of figures leading to anger on the streets and factory floors. That table shows also that there was £20.48 million under demand from the self-employed, including farmers and £23.10 million under enforcement. What does "under enforcement" mean? The Minister for Finance says now he is going to crack down on the tax dodgers. I am not speaking here of tax dodgers, I am speaking of people who are refusing to pay their legitimately charged taxes. These are only some of them. I should like the Minister for Finance to let the House know if, for instance, the people who owe those £23.10 million which is under enforcement — which means it must have gone through the law — will be put in jail under the provisions of this Finance Bill. It is my belief that nobody will ever go to jail, that none of those who owe capital tax, property tax or capital gains tax will ever go to jail. It has been made clear by the Minister and other Deputies that the people who will go to jail are those PAYE workers who refuse to pay their tax.
In his introductory remarks on this Bill, the Minister for Finance referred to the fact that he would be introducing measures to tackle evasion and so on. But, when he came to issuing threats, he issued the one only. While welcoming the new found interest in tax equity, at the same time he condemned — and expected all sides of the House to support him in this — outright the practice of withholding tax payments as a means of highlighting concern about tax levels. That was a specific reference to the workers in Waterford Glass. The Minister condemned outright the practice of withholding tax payments as a means of highlighting concern about tax levels.
It is strange that in all of his speech the Minister made no condemnation of the refusal of farmers to pay their health contributions or of the self-employed to pay either their health contributions or their youth employment levy. He has not issued any condemnation of the people who owe £119 million capital gains tax for the last three years. There was no reference to these in the Minister's speech. However, he condemns outright the workers in Waterford Glass who highlighted the two main issues of the PAYE system. They did an excellent job in highlighting the fact that PAYE workers are caught in an inescapable tax net. They have no way out of it. They never see their wage packet. They get what remains after the tax has been deducted but they never get their full wages for which they worked and which they should be duly entitled to get into their hands and then make their decisions as to what they will do first, whether to buy food for the table or whether to pay the Revenue Commissioners. They should be able to make their decisions the same as farmers make their decisions, the self-employed make their decisions, the company directors make their decisions, the banks make their decisions, as to whether they will pay the Revenue Commissioners first or last, and in fact whether they will pay the Revenue Commissioners at all. They can make a free choice and nobody says anything about it, condemns them or shouts at them. In fact, what was done last year when the farmers organised and publicly stated that they would refuse to pay resource tax the small number who did pay — £700,000 was paid out of an expected estimated revenue of £7 million — had it refunded to them in May of last year by the Fianna Fáil Minister for Finance under last year's Finance Bill. Can you imagine that happening in the case of PAYE workers who refused to pay their taxes? Can you imagine the Government saying: "That is all right. We will abolish that tax and we will refund whatever some people had paid." Is it not unbelievable?
This is the kind of decisions that are driving people almost to despair. The workers in Waterford Glass highlighted this fact. They also highlighted the fact that the Government and the State are almost totally dependent on the working class for the revenue to keep the State ticking over. That is why as soon as they took that action the whole gamut of the law was threatened on them — the Offences Against the State Act, the lot. I am not calling on workers in other factories around the country to carry out a similar campaign because it is a matter for each group of workers in their own factory, through their own trade union, to decide what type of action they will take. I would not call on workers here in Dublin to do the same as the workers in Waterford Glass. It may work in Waterford Glass, it may not work some place else. It is a bit much for any group of workers to expect their bosses to break the law for them. After all, it is the bosses' law that rules already and the bosses are the ones who are refusing to pay their taxes. It is very unlikely that they will break the law to allow the workers to get away without paying their taxes. They depend on the Government for grants, subsidies and everything else that comes from the Exchequer.
The amount of health contributions outstanding from the self-employed is £7,950,000. The amount from the farmers £8,395,000. That is over £16 million outstanding in health contributions. Youth employment levy not paid amounts to £11,500,000 from the self-employed and £6,500,000 from farmers. That is £20 million from self-employed and almost £15 million from farmers. Deputy Richard Bruton has highlighted the fact that there is a total of "only" £500 million outstanding in taxes although there is an estimate of £1,500 million. I pointed out the last day that I thought £500 million was quite a crock of gold to go after. We will be interested to see whether the Minister's actions will ensure that that £500 million is brought in this year. Much of this is overdue for two, three or four years.
Tax dodging is a social crime. It is the kind of crime which takes medicine from the aged and teachers from the schools. It erodes the social welfare services. The only thing this Finance Bill purports to do is to deal with evasion and avoidance, something that is very important, I agree. We put down proposals on this back in 1978. We proposed ways in which the system of random sampling could be introduced where you would take certain samples on a scientific basis and go through those with a fine comb and in that way catch out the tax evaders and avoiders. The Minister seems to be concentrating solely on this issue and on measures for the future. I would like to see specific measures now to deal with those people who have legitimate bills outstanding and to know what way the Minister intends to ensure those are paid.
In the November General Election the electorate turned out Fianna Fáil because of the policies they were pursuing. They had begun to pursue in the previous August the Thatcherite monetarist policies to which I referred the last day. Their election manifesto was The Way Forward in which they spelled out what they would be doing to balance the books. Fine Gael proved very evasive right through the election on what type of policy they would pursue. They came to power with the assistance of the Labour Party and all that has resulted is the re-introduction of the very worst aspects of The Way Forward with some quite new and nasty tricks thrown in like a tax of £10 on the unemployed to apply for a job. That is what it is.
The Minister said he would do differently had he had the time to design the type of budget he wanted. In other words, he is indicating that he is really only introducing the Fianna Fáil type of budget. In his recent speech at the Confederation of Irish Industry he provided some further hints of what the Government have in store after this Finance Bill. The outline of the future contained in that speech was in essence no different from the simple canon put forward and implemented in Britain under the Tory Government during the past four years. The Minister presumed in that speech that he had full backing for his strategy. He said a general consensus now exists as to the need to reduce expenditure. Where he gets the general consensus from is presumably the various Chamber of Commerce dinners he attends or the CII or the FUE. That is where he gets his consensus.
Has he found the consensus from the trade union movement? Has he found the consensus from the teachers union? Did he get a consensus from the health professions in regard to the cutbacks in expenditure? What consensus did he get from the public sector generally? His consensus is based on the tiny minority who are running him, who are organising him, who are telling him what to do and cheering him on when he does it. That is the type of consensus he has. It would appear also to be the consensus within the Government, no matter what the Tánaiste, Deputy Spring, may have to say about insensitivity and the ritual dance or the tone and timing of the remarks of the Minister for Finance in that particular speech. He did not question the content of the speech but he did question the tone and timing of the type of ritual dance common in Coalition Governments. This is the way in which the Labour Party try to make their mark and show they are still there. It is becoming less and less obvious that they are there.
According to the Minister: "It is my intention, with the assistance of the planning machinery which is now being set up, to develop for adoption by the Government an approach to public expenditure, a reduction over the medium term which would be designed to minimise the long run effects of cuts on employment and economic activity generally". The use there of the word "minimise" is highly significant. It reveals that the Government do not intend to avoid adverse effects on unemployment and general economic activity in the years ahead. He simply talks of minimising. There is no plan whatsoever indicated, either in the budget or in any of the speeches of the Taoiseach, the Tánaiste or the Minister, since the budget or in this Finance Bill that the purpose of it is a strategy for anything. Certainly it is not a strategy for employment or job creation. It does not even seem to be a strategy for minimising unemployment. It seems to be a strategy for maximising unemployment. The Minister openly accepts that unemployment will continue and grow during the period of the application of what he calls the minimum term strategy. The only surprising thing is that he made the admission. He has constantly attempted to get across the message that there is only one alternative to high level taxation and that is expenditure cuts. It seems obvious, does it not? It is not a simplistic formula. Simplistic formulas are what we have come to expect from the monetarists Milton Friedman, Margaret Thatcher and Ronald Reagan.
There is a third way. It is the way The Workers' Party set out in a very realistic document before the last general election in November of last year, called An End to Crisis. The third way is the implementation of a production plan, a plan aimed at raising output in key sections of the economy. Instead of cutting back on expenditure, cutting back all the time in order to balance the books in an negative downward fashion, to balance them in the reverse way and bridge the gap between spending and incomes by increasing incomes, increasing output, increasing wealth, increasing our national income and in that way balancing the books instead of creating unemployment and chaos down on the streets and in the factories. It is a formula for creating more employment, increasing production both on the farm and in the factory, increasing our national income overall and in that way balancing the books while, at the same time, raising the morale of the country, raising the level of employment and keeping the engine of growth growing until, finally, change comes in the recession and when that improvement takes place we will then be geared to take advantage of it immediately and go forward from there.
The current position is that even if there were an improvement in the world recession internationally this year — many say there is — it will be at least two or three or perhaps four years before we will recover sufficiently to be in a position to take advantage of that international recovery. Because we are so far down and moving further down the scale, with the constant closure of our major export industries, it will take us years even to get us geared to take advantage of any improvement in the international market. The economic strategy we offer as an alternative sees the market as the servant of the working class and of the people in general and not their masters. This is the precise opposite of what the Government believes.
The Minister made the point that one either has high levels of taxation or high levels of expenditure cuts. What the Minister is doing is in fact bringing in both, exceptionally high levels of taxation and huge expenditure cuts which will increase further over the next few months. To see how the rich will be the beneficiaries of this strategy let us examine the main cuts mentioned by the Minister. He talked of cutting food subsidies. That is next in line. Perhaps just as soon as this Finance Bill is over and done with here — certainly in the short term, at most in the medium term which he keeps talking about — food subsidies will be cut. If he has his way in this, up will go the price of bread, milk, butter, flour and most of the basic staple foods which the working class must consume in order to survive. He also talks of further cuts in CIE subsidies. Bus fares will go up. Nothing there for the owners of the BMWs or the Saabs. They will not be hit. Nothing in the cuts will affect them in any way. For the work force employed in the public sector the Minister holds out very little prospect of any increase in wages except below single figures at a time when inflation is running at about 13 per cent and this Finance Bill will add further to that inflation. Inflation will continue in double figures for quite some time to come and the Minister talks about single figure increases in wages for all workers in the private sector, because he is using the big stick on those also, as his letter to the insurance companies indicated.
To the hundreds of thousands of people dependent on social welfare payments the Minister had the following to offer: an adjustment in the basis on which the annual increase in benefits is calculated. Since the practice followed in recent years has been to adjust social welfare increases to meet or to beat inflation, the only option left here is a decrease in the real value of social welfare benefits as a result of adjustments that represent less than the rate of inflation. This is the first time this has happened.
The Minister went on to set out his plans for expenditure in the areas of health and education, the pillars of whatever element of welfare state we have, and that has not been very much. The Minister talked of the balancing of service reductions and increased charges.
This Bill is purely a taxation measure. It does not involve general Government expenditure, so I should be grateful if the Deputy would confine himself to the taxation aspect.
With respect, it refers to taxation measures and expenditure cuts.
The Bill does not extend to cuts in expenditure. It is purely a taxation measure.
I am referring to the Minister's opening statement on the Finance Bill. I submit that the argument that, if we do not have higher taxation we must have more expenditure costs, is one that I am entitled to tackle during the debate on the Finance Bill. I suggest also that the removal of food subsidies is almost the equivalent of new taxation on food.
The Deputy was in order on that point but he was not in order in his last remarks.
The 1983 budget and the Finance Bill give a fair idea of what is to come so far as the Government are concerned. The practice of a number of years of indexing social welfare benefits to inflation has been departed from, as thousands of social welfare recipients have found in the past few weeks. This year also the Government are subjecting these people to a three-month pay pause by delaying the increases in benefits.
Again, I appeal to the Deputy to confine himself to what is in the Bill. What he has just said has no relevance to taxation. He may refer in passing to other aspects of expenditure but he must confine himself to the terms of the Bill.
I am only making a reference in passing to these matters.
The Deputy has been passing a long way from what is contained in the Bill.
I was merely referring to the pay pause as it relates to social welfare recipients by way of referring to the reduced level of expenditure so far as they are concerned. Presumably this is a measure designed to avoid higher taxation in another area on the basis that, if you reduce one, you increase the other and vice versa. Therefore, it is very difficult to know the areas in mind so far as these references to increased taxation are concerned. The distaste of the Government in regard to linking the income of ordinary people to inflation is shown even more clearly in their refusal to grant any indexation of the tax bands and allowances. This is the general trend in social welfare as in all other areas, but it is a very dangerous change in strategy especially at a time when inflation is well into the double-figure area and very likely to continue at that high level.
The increase proposed in the exemption limits in respect of income tax for the lower paid from 9 per cent is another example of the very miserly approach evident in this budget, but it is a matter that will be the subject of an amendment from us on Committee Stage. It is, then, in this broad context that we should consider the entire Finance Bill, that is, as part of an overall and longer-term strategy to assault the living standards of the vast majority of our people at a time when it is becoming increasingly evident that the tax system is unfair, downright inequitable and a social scandal.
Some of the measures in the Bill are to be welcomed in so far as they represent an attempt to tackle the problem of tax evasion, but it must be pointed out that the changes proposed are very piecemeal. The real changes must be at the point of the administration of the tax system. There is no indication in this Bill of any intention on the part of the Minister to make such changes. We need a complete revamping of the administration of the Revenue Commissioners so that all forms, not only of income but of wealth will be known to the commissioners and, consequently, can be taxed in an equitable manner.
It is important to realise that tax evasion is only a part, perhaps the least significant part, of the overall problem of inequity in taxation and budgetary practices generally. The taxes themselves as well as the whole spending programme are a more serious source of inequity, in terms both of the manner in which the taxes are raised and the manner in which the moneys going into the Exchequer are expended. There has been no reference to that aspect of the whole situation in the past few months. The Minister has not told us how Exchequer moneys are to expended for the benefit of the people, whether in the areas of employment, of housing or anything else. The whole purpose of taxation is to collect revenue, but the Government must then make the decisions on the expenditure of that revenue in the various areas. They must decide the best way in which the moneys can be spent for the benefit of all the people. If the Government have any idea in this regard we should be hearing from them fairly quickly.
The ICTU Executive Council, in a statement last week on the tax campaign, said that tax evasion represents one aspect only of the Congress campaign for tax equity, that in further pursuit of their objectives, Congress are seeking a meeting with the Government with a view to getting a commitment on the broadening of the tax base, especially by way of increased capital taxation and the taxation of discretionary trusts. The Congress went on to say that they will be raising the question of tax credits, indexation and other measures for the improvement of equity in the system. They say that there will be no real equity in the tax system until such time as there are radical and far-reaching changes in the taxation of capital wealth. They say that it is in this area that the commitment of the Government and of the political parties to tax equity will be judged.
PAYE workers never objected to paying taxes. They never marched because they did not want to pay taxes and never at any time did any organised group of workers say "We refuse to pay this or that tax". The purpose of the marches over the past three years was to look for equality of taxation. PAYE workers know their obligations to the State and have always been prepared to accept them. They expect everyone else to do the same. What they were marching for was justice and equal rights. They got neither.
The biggest march in the history of the State took place in January 1980. There were about 750,000 people involved in marches all over the country and about 350,000 in Dublin. It is probably one of the biggest march demonstrations, relative to our population, held in any European country. Workers today, after all the marches, feel they are being laughed and sneered at by capitalists, property owners and their pawns in Government. Their anger is greater than ever before and is growing daily. They see other groups in society able to decide whether they will pay tax. They have seen successive Governments, whether Fianna Fáil or Coalition, fail to take any action against groups when they do not pay. That is why workers are now saying they want the same rights as others in regard to taxation. They want the right to refuse pay or else have tax deducted from everyone. It could be deducted from a farmer's creamery cheque or mart cheque or from transactions made by self-employed people, traders and companies.
People might say this could not be done because these people might not owe any tax. However, nobody asks that question in connection with a PAYE worker. A person may only work for five months every year but tax is still deducted. If at the end of the year it is decided that he should not have been paying any tax the money will be refunded to him without any interest. Why not do the same with everybody? Why not deduct the tax and see at the end of the year if it was owed? However, if too much tax is deducted from anyone else, interest of 1½ per cent per month is paid. They would not receive such a high rate of interest for investment anywhere else.
These are the inequities in the tax system and what workers now want corrected. They want everyone to be on the same taxation and deduction system. I pointed out before that this is a dangerous situation for the Government. Various groups have used the Constitution to their own advantage. Cases have been taken to the courts to decide whether, for example, the valuation system was just or against the constitutional rights of the farmers. The court found it was against their constitutional rights and rates could no longer be collected from them by the Government. The Government did not worry about that. If a PAYE worker took a constitutional case to the High Court on the basis that the only property he has is his wage packet which he has contracted with his employer to receive and that it is unlawful for tax to be deducted from it, what would happen? Perhaps the whole PAYE system would be abolished as being unconstitutional. Think what that would mean to a Government. Last year £1,500 million was contributed by PAYE workers. How would our system survive? How would any Government survive? The whole structure of society and government would collapse.
Various Ministers for Finance and this one in particular are pushing workers to that stage. The exceptional patriotism of the working class is being pushed to its limits. They do not want to be pushed to those limits. The 750,000 people who marched on the streets never pushed to the limits other groups have, but they are prepared to do so now. The Minister for Finance should look carefully at what he is doing and take action. The ICTU and The Workers' Party have been asking for that option to be taken for a number of years. Otherwise PAYE workers will push to the limits and that would bring any Government to their knees.
I am glad Deputy Mac Giolla drew attention to outstanding taxes. This is the biggest source of inequity in our tax code. Along with the situation of the self-employed paying on the basis of the previous year we have evidence that tax revenue is not coming in on time. A lot of this is due to the procedure where high assessments are sent out to the self-employed. These are followed by appeals, demands and enforcement procedures. There is no doubt that delays are chaotic, and are a major source of tax inequity.
I welcome this Bill. In five months the Government have made progress towards tackling this inequity. The Bill contains a number of very worthwhile changes which will counter tax evasion and the slow payment of tax. The Revenue Commissioners now have the ability to go in and get full disclosure of assets from taxpayers. There are new, stiffer penalties imposed by the Bill. There is a tightening up of non-resident bank accounts which I hope will be effective in preventing overseas accommodation addresses being used to abuse the system. There is a promise to reveal the names of those involved in tax settlements whether in or out of court. In short, we have a series of measures which will tighten up the procedures in force for collecting tax from the self-employed and other non-PAYE taxpayers.
This Bill is probably as welcome for what is not explicit in it and that is the clear determination of the Minister to make the administrative changes needed to see that the existing powers and penalties are enforced. To some extent, this debate has been deflected into an excessive concentration on the size of the penalties. The real problem is enforcement of the penalties, procedures and powers the Revenue Commissioners already hold.
For example, at the risk of boring the House, I will quote once again some of the obvious weaknesses in the enforcement sphere of our tax system. I should like to refer to interest on late payments. As the law states clearly, 80 per cent of a taxpayer's guestimates of the tax he has to pay must be paid on time, by the due date following the assessment being issued to him. The law also states that that guestimate must be within 80 per cent of the ultimate liability. If he does not fulfil that, interest will be paid on the balance. Similarly, interest will be paid on any late payments that he makes.
The interest rate charged by the Revenue Commissioners is 1½ per cent per month. I believe that is somewhat low and we should consider raising it, because it is 1½ per cent per month, not compounded but at a simple rate, and that works out at 18 per cent per annum, lower than would be paid on a bank overdraft. That needs re-examination in the context of current interest rates. However, the real problem is not the level of that interest rate, whether it is 18 per cent or a little higher, but the evidence shows it is not being enforced on late payments. Interest in respect of late payments amounted to less than 1½ per cent of the total tax paid late. I quote these figures from the Minister's replies to questions here on 1 March.
Equally, from those answers it is clear that the vast bulk of late payments were not one month late as has been suggested but at least two years late, perhaps even longer in some cases. I reckon therefore that the average is about 30 months during which interest should have been collected on late payments. Clearly there is power within the Revenue Commissioners to charge penalty interest for late payments which is not being properly enforced. I welcome the Minister's commitment in regard to the problem of tackling evasion because in practical terms it means these powers will be used.
Another example which illustrates failure of the Revenue Commissioners to use their powers is that penalties and interest on back payments of tax work out at only 50 per cent of the tax due and paid back. It is clear to me that many of the people who are paying back tax see that the length during which these back taxes have been outstanding is considerable and there is no doubt that the penalties and the penalty interest rate should be far ahead of 50 per cent, which would be a relatively cheap loan.
A third area in which I believe the administrative changes rather than the changes explicit in this Bill are very important. There is a need to tackle the court and the sheriff procedures for collecting unpaid taxes. The Minister in his answers to parliamentary questions revealed that this system is clearly breaking down. I will quote a simple figure, the ratio of the yield from tax enforcement procedures to the face value sought in the same year. Those figures are not strictly comparable, I admit, but there would be very little difference and I do not believe the comparability would make any great difference. The figures reveal that the yield relative to the face value three years ago was only 16 per cent — only 16 per cent of what was sought appears to have been realised.
The situation has deteriorated since then, down to 10 per cent. That is a very serious situation. Not only are we getting a small amount from enforcement but the amount itself is deteriorating. The Comptroller and Auditor General made public his discontent about this in his last annual report. He made clear his feeling that this failure in enforcement was jeopardising the whole tax system because, naturally enough, if people feel that penalties will not be properly enforced, the risk of chancing their arm becomes much smaller. As a result, the security of existing tax revenues is threatened.
That is what the Comptroller and Auditor General pointed out. He accepted that the system should be given a chance to correct itself, but the evidence shows that the problems have got greater. The system is more inundated than ever with work and a major backlog has arisen. Administrative reforms are required and I hope the Minister will bend his mind to this as a priority area. I suggest the way to tackle it is to bring in for a limited period tax consultants who know both sides of the counter in this matter. Let them report within a limited period what could be done to tighten things up and to get more revenue for the Exchequer. That probably would be the best procedure because as laymen it is difficult for us here to identify the precise problem.
Some areas stand out. One is that the sheriffs are asked to handle enforcement procedures, not just unpaid demands in cases where no appeals have been lodged, but they are asked to follow up taxes that have been confirmed by the appeals commissioners but which are still on appeal to the Circuit Court for further hearing. Clearly they cannot get their hands on that sort of money and it is therefore wrong to be referring that sort of case to them. Indeed it is misleading the public in regard to the true gravity of the situation.
In that context we welcome the Minister's changes in the Finance Bill to put restrictions on the appeals procedure. In a recent speech he drew attention to the fact that many people were playing the appeals game. Undoubtedly, that is the case. By restricting the ability of taxpayers to go on further appeal, to go on from one appeal to the Circuit Court, we will get tax in quicker and reduce much of the administration work that is tying up the system.
But there is another problem that the Minister is committed to tackling. Very often the money which sheriffs and the courts go after is from small business people. There is scope here for looking for a more simplified tax regime, particularly for small businesses. A lot will be repaid through the Minister's efforts if we examine small businesses in the tax sphere because there are undoubtedly many scrupulous small business people who make their tax returns but who get involved in enormous difficulties through massive assessments being placed on them which bear no relationship to their true liability. They are therefore embroiled in large appeals procedures. The Minister's examination of small businesses, which he has committed himself to, therefore is very welcome.
Another weakness in the system of sheriffs going to execute enforcements of tax is that sheriffs are local people who have to live in their communities. It is difficult for them to go out to seize goods from people whom they know in the course of their duty and whom they have to live with. Very often they do not find any goods — perhaps they are hidden on the day. Then they have to come back to court and the merry-go-round starts all over again. Therefore there is room for examination of whether the appropriate person to enforce seizure is a local law officer or someone of that nature. There should be some overseeing of the system if that procedure is to work.
I would also welcome something not explicitly in the Bill. That is the increase of staff that has been given by the Government to the Revenue Commissioners. One hundred and four extra staff have been allocated and that cannot but improve the administration of our tax code. Many of them are going to farming centres where this Government have succeeded for the first time to bring all the farmers into the tax net. Once and for all we will be able to work towards real equity among the taxpayers. It is important that the manpower be made available to tackle this problem.
Another area where manpower is being made available by this Government is the VAT audit. The Minister should consider making this audit more comprehensive. At present it is confined to VAT but there is no reason why it should not cover other areas such as PRSI, PAYE and so on. That would repay the effort made and would prove a cheaper way of administering the tax code.
The Minister should consider other anti-avoidance measures. It is good that the Revenue Commissioners have the power to demand a statement of assets. This will make it clear that the Minister is serious about collecting taxes due. This power might be extended to give the Revenue Commissioners the right to look at not just a trader's assets and books, but look also at the auditors' and accountants' working papers. It has been suggested that there are maverick auditors. If there are, the threat that their working papers could be examined by the Revenue Commissioners could be very effective in getting compliance more quickly.
In the anti-evasion and anti-avoidance section there is no anti-avoidance legislation introduced. The Minister probably has in mind introducing amendments on Committee Stage and he should consider a number of possible anti-avoidance measures which ought to be introduced. He said in his Budget Statement that he would be considering retrospection in the case of tax ploys which were clearly for the sake of avoiding taxes. I am not sure if retrospection would be a legitimate approach to such a problem.
However, some sort of omnibus antitax avoidance measures, such as those in force in Canada and Germany, should be considered. In essence such measures would say that anything found to be solely for the purpose of avoiding true tax liability would be ineffective and when discovered it would refer back to the date when the omnibus clause was brought into law. If in four or five year's time some loophole was discovered, the tax would be payable from that date. That would be a very effective measure to stamp out avoidance. I understand this measure is successful in Canada and the Minister might get in touch with the Canadian tax authorities on its appropriateness for Ireland.
In the last couple of years we have seen specific attempts by the Revenue Commissioners to get at particular schemes under which people are avoiding paying tax. In 1981 the Revenue Commissioners introduced a measure regarding land deals and in 1982 a measure regarding share deals, and no doubt there are many more schemes. This approach would avoid the present piecemeal method and would put the onus on the people designing these tax avoidance schemes to take care and be aware of what they are doing.
I must mention specific areas of tax avoidance which, in my view, should get immediate attention. One is the ongoing problem of what is called gilt rolling and deep discount stock, that is, the ability of investors in gilts, in non-productive and non-venture areas to avoid paying tax on income generated. This escape clause can be used because under the present law Government bonds are exempt from capital gains tax. This means that these people are able to turn what would normally be an interest payment into a capital gain by selling, just before the interest payment accrues therefore avoiding their tax liability. The Minister has said he will be looking for the disclosure of trading in Government gilts. I believe his intention to catch these people as traders in Government gilts rather than as once-off investors is the wrong way to stamp out this problem. He should take the bull by the horns and say Government stock, like any other stock, will be subject to capital gains tax.
Another area to which I would like to draw the Minister's attention is the avoidance of stamp duty by companies issuing shares. A one per cent stamp duty should apply on a company share issue. At present, by use of what is known as a renouncable letter of allotment, they can avoid that responsibility. What they do is this: if the shares are issued to A, he renounces them in favour of B, and the initial one per cent stamp duty does not become payable. I do not suggest that this is an enormous source of revenue but is an anomaly where people are avoiding tax and it should be closed off.
The Minister should look at the area where many senior company executives use scholarship trusts to get their children's education tax free. This is not available to the normal taxpayer. These people set up a trust with company directors as trustees and the moneys in this trust are not taxable. The net result is that executives and directors get their children's education at a cheaper rate than the rest of the population. That cannot but be a source of unfairness.
It is important to tackle many of these avoidance techniques because they are diverting money that should be used in productive and venture areas into the non-productive and property areas, gilts and property investments. That cannot but be seen as a bad thing for economic development because it is only productive investment which will produce employment for our work force, and this is the key aim of this Government.
I would like to mention taxation of the self-employed. The Minister has promised that the self-employed will be on the same year tax basis next year. This is a very welcome move towards making the ordinary public see that everyone is on a pay-as-you-go basis. The PAYE taxpayer has been paying along these lines for many years and I cannot see the justification for not taxing the self-employed on the same basis. Therefore, I welcome this move.
I want to draw the Minister's attention to one problem which is likely to emerge from the public's perception of what is going on. Over the last few weeks a great deal of attention has been given to outstanding demands and assessments. The reason for these outstanding demands is that our tax procedure is like a long pipe, and there is always money in the pipeline.
I am the first to say we must reduce the length of that pipeline, and that is what the Minister is doing, but I foresee a problem next year when people are on the same year basis—in other words, their tax assessment will be for the year under consideration and there will be larger amounts of taxes and assessments outstanding. There is a danger the public will see that as a deterioration in the equity of the tax system. We have there a problem of public relations. However, in the longer term we could change our system of tax collection from the present one which has a long pipeline and is bound to become fuller if you bring the relevant year closer to the time the assessments are sent out. The task we face is to abandon that for a system of self-assessment.
It is correct that the present system of the Revenue Commissioners sending out assessments, often quite arbitrarily, is confusing the public. It is a bad system of tax collection. As I have said before in this House, the self-assessment principle has great attractions. Firstly, it puts the self-employed on the "pay-as-you-go" system. Secondly, any appeals which occur—which come from the Revenue on this occasion, not from the taxpayer— find the Government not out of pocket for the tax due as at present. In other words, the Government will get the tax in very quickly with self-assessment. This could be at the end of the tax year or several times during the tax year, as under the PAYE or PRSI system.
Firstly, the self-employed will make a tax return and the Government will have that money in their coffers and then set about examining whether there are cases where the system is abused. If the penalties are stiff enough and the investigation procedures thorough enough, most self-employed will not take the chance of abusing that system.
This system also has the attraction that it simplifies greatly the job of making tax returns. People do not need to become embroiled every year in contesting excessive assessments, appealing them and employing accountants at great expense to do so on their behalf. It will relieve many of the Revenue Commissioners staff of rigorous scrutiny of the tax returns becuase they will only be looking at a sample of the tax returns made, whereas at present they try to look at every tax return and the time devoted to doing that is quite small—probably about an hour on average. The possibility of discovering abuses under the present system is small, whereas under self-assessment it would be greatly enhanced. Perhaps the most important thing is that it would bring visible equity into the tax collection system. The self-employed would be paying on a "pay-as-you-go" system and might possibly send in multiple returns rather than one.
I turn now to a number of areas where main issues remain to be tackled. I fully support the Government's commitment to tax reform and to the closing of administration procedures which is evidenced in this Bill. However, there are a number of areas still to be taken on. One is the difference between the revelation procedures and the tax arrangements of building societies compared with those other financial institutions. I know that the Minister has attempted to force the hand of building societies to reveal the true structure of their accounts, but the building societies are undoubtedly a source of stashing away hot money. Perhaps it could be argued that it is put to a good use, and I do not dispute that housing is a good use. However, I would dispute that we should accept abuses in our tax code in order to favour a use which could be encouraged in many other ways. I would see it as far more favourable to encourage housing through for example, mortgage interest subsidies and so on rather than to allow this leakage from our tax code.
One other point to which the Minister should give his attention comes back to the overriding target of the Government to create employment opportunities. In the present Finance Bill I note that the Minister has extended the employment incentive to companies whereby they are allowed to claim £500 off their taxable profits in respect of new employment. The big flaw in that system is that so many companies are at present not making profits. The net effect is that this incentive is not a real one. One of the reasons for this is that the £500 cannot be carried forward to future years. There must be a strong argument for carrying this amount forward, because we want to encourage employers, when they see a pick up in their trade, to take on new employees. Perhaps the profits will not accrue for a number of years, but they should have the maximum employment incentive. That would be a welcome change in bringing more incentive to employment rather than the excessive incentives for capital in our present tax code.
I welcome the many worthwhile changes made by the Minister to improve the administration of our tax code system, in making penalties more stringent and, even in a difficult time, finding the scope to offer separated spouses a far more fair tax system. Many of us greatly welcome this because it is a growing problem in our community that people are separated and the tax code as heretofore has been treating them most unfairly as single persons despite the fact that maintenance payments may have to be paid to support the families. Under the new, welcome system, separated spouses can have a system of either joint assessment or separate assessments, whose net effect is to give these people a higher take home pay which enables them to carry out their family responsibilities. In the case of someone earning an average industrial wage of about £7,000 or £8,000, the benefit of this is about £800 in take home pay, or 13 per cent of it.
(Limerick West): I agree with Deputy Bruton with regard to certain aspects of this Bill. That it has brought about a certain amount of equity is to be welcomed. However, I hope during my deliberations to point out that, if we are introducing equity to our taxation system, it must be done honestly not dishonestly. If one contrasts the proposals by the Minister with his party's programme for Government—and indeed the Labour-Fine Gael Programme for Government—one will see what I mean by dishonesty.
Looking at this Bill from the standpoint of agriculture is like trying to shadow-box with a down pillow. There is no substance and no train of thought in the Bill which could give the slightest consolation to that large sector of our population, the agricultural or farming sector. The only picture which comes through in the Finance Bill—and indeed in the Minister's earlier budget speech — is an obsession with bookkeeping which verges on lunacy.
There is a total inconsistency in the Minister's approach to righting the ills of our trading position. Surely any attempt to put us on the right track must include not alone the balancing of books—I accept that books must be balanced but that is not the be-all and end-all—but must also include an incentive to produce more and take a greater share of the world market with our produce. Merely to say to the agricultural community, to our farmers, that we will tax you to the hilt and give you no hope for the future is to annihilate the work of advancement of the past 20 or 30 years. Indeed, to tell them that they will have an increasing tax burden without any increase in their gross income is an unprecedented decision not worthy of a child in primary school.
I spoke earlier of the contrast between the approach of the Government now and their Programme for Government as published. In this respect I want to quote an extract from Fine Gael's policy for Economic Recovery as published in October 1982. In referring to the farming sector they say:
Our fundamental requirement is for policies which will secure a substantial and lasting reduction in both our domestic inflation rate and in interest rates. Without these, agriculture and the food industry will remain in the trap which has frustrated development over the last four years. Without such policies, farm incomes will not recover from the present depressed level which, in real terms, is over 40 per cent below that of 1978.
They continue:
The Poor Law Valuation (PLV) System currently used as a basis for assessing many farmers' eligibility for certain social welfare, health and education benefits and for assessing their liability for certain contributions must be replaced. It must also be replaced as a means of determining thresholds of liability for income tax.
This section concludes by saying:
We propose that it be replaced by a system based on standard results per enterprise and per region taken from the Farm Management surveys carried out by An Foras Talúntais. We propose also that farmers should have the option of having their liability and eligibility assessed either on this basis or on the basis of factual assessment.
I will quote also an extract from the agreed Labour/Fine Gael Programme for Government, as published in December 1982, where it refers to the replacement of the poor law valuation system and says:
The Poor Law Valuation (PLV) System currently used as a basis for assessing many farmers' eligibility for certain ... benefits and ... liability for certain contributions must be replaced. It will be replaced by a system based on standard results per enterprise and per region taken from the Farm Management surveys carried out by An Foras Talúntais. These gross results would be adjusted to take account of capital depreciation, interest payments and other factors, in order to calculate taxable income.
One sees the dishonesty if one contrasts those comments with those of the Minister in his budget speech of 9 February last with regard to farm taxation when he said:
Public perception of tax equity demands that all income earners should be liable to tax on an equal footing. Up to now, however, only one-third of the farming population has been included in the tax net. There is no longer any justification for excluding the greater number of farmers from tax liability and I believe that the farming community itself accepts this viewpoint.
I, too, agree with that. The Minister continues to say:
Accordingly, from April next all farmers will be liable for income tax. Due to the relatively low level of many farming incomes this extension of liability is not expected to lead to a substantial increase in tax yield in the short term. Because of the absence of statistics it is difficult to calculate the additional yield and the best estimate is that the removal of the threshold will result in an increase of about £2.5 million in farm taxation in 1983.
I appreciate that the extension of liability may cause problems for farmers who are brought into the tax net for the first time, particularly as many of these will have no liability because of their low incomes. The Revenue Commissioners are considering various means of phasing in this arrangement, including the provision of a simplified form for statement of the farmer's circumstances. I will return to this later.
The Minister does return to that later and I shall finish with this quotation from his remarks:
In the Programme for Government there is a commitment to establish a committee of inquiry containing representatives of small business and the Revenue Commissioners to recommend a simplified tax regime for family businesses. I will take steps shortly to establish this committee as a matter of urgency and I intend to extend its remit to consider also the scope for simplified arrangements for smaller farmers. To this end I will invite farming representatives to participate in the work of the committee.
That is all very fine, but when one contrasts that with their Programme for Government one sees the different approach being taken now. I am not saying that the present approach is right or wrong. As a party we are examining the whole aspect of farming taxation. What I am drawing attention to is the dishonest approach of this Government to farming taxation, when they outlined in their Programme for Government that they would adopt a certain system, put that to the farming community, and now in this Finance Bill adopt a different approach altogether. On that basis this approach is dishonest.
The Government must devise a proper taxation system for all our farmers, seeing that they are now all included in the tax net. I would hope that agreement would be reached between the various farming organisations, the Revenue Commissioners and the Government to adopt a policy which will lead to a taxation system for farming acceptable to all concerned. Ever since farming taxation was introduced many years ago by another Fine Gael/Labour Government we have had a sort of "stop-go" attitude. We have had the notional and all the other systems. I hope we shall have now a system adopted that will be acceptable to all persons concerned in this farming taxation.
I want to take a look at the overall situation of our farmers at present. In this respect we must bear in mind that this is the base on which we are going to tax them further. It must be borne in mind also that indirect as distinct from direct taxation has as great an impact on the farmer as on any other sector of the community. I would like to remind people who say that farmers are not paying their fair share of taxation that indirect taxation takes no account of the farmer's decreasing income. A farmer's car is used for far more than joyriding. It is an essential part of his everyday business. One does not see many farmers' cars without a trailer hitch on the back. It is used for almost all the farm work and yet it is taxed more and more heavily. There is 23 per cent VAT on machinery repairs. The drop in the sales of agricultural machinery indicates the farmer's inability to replace his machinery at current income levels. He is, therefore, left with the task of repairing his existing machinery. As the machinery becomes more obsolete the repairs become more frequent. Where is the justice in a 23 per cent VAT rate on these repairs and where is the hope for the future of the agricultural community?
In the field of income tax it is worth noting that the Minister for Finance introduced a divisive element into the relationship between the various sectors of the community when in his early speeches he deliberately set the PAYE workers against the self-employed by stating, on incorrect figures, that there was a vast hoard of money being retained by the self-employed and that this hoard of money would greatly reduce the impact on the PAYE sector. This imposition of notoriety on the self-employed was a dangerous attempt to lessen the impact of the pressure from the PAYE workers. In order to carry that bluff further he now tells the PAYE workers in this Bill that he is going to include a far larger number of farmers in the taxation net than hitherto. This is a dangerous and a costly exercise. There is no great increase in taxation to be got from the farming community. There is no crock of gold hidden away. This is a myth and the sooner the Minister and his colleagues in Government get away from that idea the better we can realise a greater equity in taxation.
The Minister should know that the farming community at present have an inadequate income, and certainly it is not stable. The Minister should realise that unless he devises a simple method of assessing a farmer's taxable income he is imposing on the section of the farming community who do not have a taxable income an auditing expense of sizeable dimensions which the farmer can ill afford. Surely there must be somebody in this Labour-Fine Gael Government who can devise a fair share of taxation for farmers with an added incentive for production. Are this Government so far beyond hope that they cannot wait, in their panic, to see what the overall situation will be in putting the country back on its feet? The farmers form a very sizeable section of the self-employed. The idea that they are retaining some vast hoards of money that could be put to Government use is stupid. To have that used as the butt of a Government's bluff is spurious.
I should like to refer to the section in last year's Finance Act — and I hope to tie it up with this year's Finance Bill — which allowed a qualified farmer to take over control of land free of stamp duty. This was a worthwhile progressive provision. However, I believe a number of changes should be included in these arrangements. I presume I am in order in proposing changes?
The Deputy may comment on them.
(Limerick West): I would like to see that a transfer on sale to a trained farmer should also be free from stamp duty. By a “trained farmer” I mean a farmer who has completed a 100-hour EEC course and the other aspects as laid down by the Finance Act, 1982, namely, that the young farmer is the holder of a certificate issued by ACOT certifying that he has satisfactorily completed an agricultural training course of a duration of not less than 100 hours, or the Farm Apprenticeship Board certifying that he has satisfactorily completed the course under the Farm Apprenticeship Scheme or the Trainee Farmer Scheme, or under the Minister for Agriculture or a committee of agriculture established under the Agriculture Act, 1931, being a certificate issued before the 1st day of December, 1980, certifying that he has satisfactorily completed a course equivalent to that referred to in the paragraph mentioned and also that he is the holder of a university degree, or equivalent university qualification, in agriculture and that the property will be used for the purposes of agriculture. That was a worthwhile section in the Finance Act, 1982. I am glad the Minister saw fit to have this continued in this Bill but there is another aspect in section 10 being removed.
I believe the transfer on sale to a trained farmer should also be free of stamp duty. At present a trained young farmer can take over the family farm free of stamp duty but has to pay 6 per cent stamp duty if he purchases additional land in order to make a viable holding. That is an area that should be examined. Under existing legislation a person must be a qualified person on the date the transfer of land takes place. This provision should be changed to allow a young farmer a period of, say, three years from the date of transfer in order to complete a 100-hour course or, indeed, to qualify under the 1982 Act. This would have the dual advantage of allowing the immediate and significant transfer of land to young people and also it would encourage greater involvement in those courses.
I believe the wife of a qualified person should automatically be deemed a qualified person for the purpose of stamp duty. We are encouraging joint ownership between husband and wife. As the law stands, if a son on receiving a family farm from his father wishes to place his wife's name jointly on the deed she is liable for stamp duty on half the market value of the farm even though the son is qualified and exempt from stamp duty. I should like the Minister to look into this.
Given the high priority and apparent emphasis placed by the Government and their predecessors particularly — I said last week in another debate that I doubt if this Government will carry out the commitments made and the promises given — on early land transfer, there is no valid reason to discontinue the relief from stamp duty where land has been transferred in consideration of marriage. The provision in the stamp duty law should be allowed to continue unamended. Section 81 provides for the withdrawal of the relief from stamp duty in respect of a conveyance or transfer of property where marriage is a consideration therefor. That was provided in the previous Finance Bill for very good reasons. If this Government are committed to greater land mobility and the transfer of farms from fathers to sons, repealing this section will be detrimental to what we are all agreed is essential, namely, the greater utilisation of land to its full potential.
I should like to see a provision in the Bill to encourage the long-term leasing of land. Outright purchase is today too costly. With long-term leasing a trained farmer should be exempt from stamp duty on leases. The current rate is 1 per cent of the annual rate. If we are sincere in our desire for greater land mobility and earlier transfer we should ensure exemption from stamp duty.
There is a lack of direction in the Government's aimless stumbling about and this lack of direction has become terrifying in the extreme. Farm Modernisation Scheme grants have been suspended and the annual cost of that suspension to the agricultural community is £146 million. This removes any possibility of further development on the farm, such as drainage, and it also removes the possibility of purchasing up-to-date equipment. It debars the farmer from improving his holding and increasing production and that at a time when increased production is vitally essential, particularly for the small farmer on whom income tax has been imposed for the first time. If we are to have a proper approach to farming taxation we must also have a proper approach to farm development and the suspensions by this Government——
This is purely a taxation Bill. It does not involve land improvement and so on. I appreciate the Deputy's concern but I would like him to keep to the Bill.
(Limerick West): I certainly shall but I presume I can talk about production from the point of view of the adverse effect of the imposition of taxation.
This Bill deals purely with Government expenditure.
(Limerick West): The suspension of these grants will mean another imposition of tax on people generally because the suspension of these aids——
The Deputy is wandering into another field again.
(Limerick West): If you will allow me to develop my point. This Bill will mean a further imposition of taxation because of lack of revenue from the EEC and so next year the Government will have to look for still further areas of taxation on the farmer and on the public generally. The PAYE sector is taxed to the hilt. Such taxation will, of course, have a long-term effect on agricultural industry generally.
The suspension of the Euro loan at fixed interest rates is certainly not an incentive to greater agricultural production. Instead of treating our farmers as second-class citizens we must give them high priority. I should like to speak also on the question of the financing of agriculture but, again, I will be guided by the Chair in this regard.
I am sorry but we are talking about taxation and not about Government expenditure in any Department. The Chair will appreciate the Deputy's co-operation in confining himself to the question of taxation.
(Limerick West): May I refer to a matter mentioned by the Minister during his Second Reading speech?
Only in so far as it relates to taxation.
(Limerick West): The Minister said that the Bill deals with the taxation of farming profits but I would remind him that, if he is to have farming profits on which to collect taxation, he must also provide greater incentives by way of the availability of cheaper finance to farmers.
Will the Deputy please confine himself to the question of taxation?
(Limerick West): The Minister went further and said that the extension of the income tax liability to farmers who up to now were excluded because of low rateable valuations represents the principal change in this matter of taxation. He referred to the liability to income tax and said that a farmer's personal circumstances and the details of his business will have to be outlined in a farm profile form and that this will be with a view to the identification of those who would have taxable income. The Minister went on to say that this form will be a relatively simple document and that its completion should not present any undue difficulty. He said that he could not think of any good reason for a farmer having to engage professional advice in regard to filling in the particulars that will be required.
I should like the Minister to tell us if these forms will be accepted by the local inspector of taxes in the context of assessing a farmer's liability to tax. We should like to be given a legal definition of "simplified accounts". Perhaps the Minister would be prepared to produce a set of these accounts. To date I have not been able to find any such accounts that would be accepted by a local tax inspector.
On the question of the taxation of farmers it is important also to make the point that these taxes must be considered in the light of bringing about equity in the entire taxation system and that farmers will play their role in bringing about that equity, but the State must bear in mind the matter of incentives for production. A failure to provide incentives for the expansion of agriculture would lessen the importance of agriculture to the Irish economy. Down through the years agriculture has maintained its place of the utmost importance in terms of our industrial output. The Government must take great care to ensure that this Bill will not have the effect of undoing the good work that has been done in this area.
In relation to the whole question of taxation we must show an aspect of leadership. Agriculture must not be allowed flounder as a result of the misdirected panic of one or indeed of many Ministers in this Government because of the imposition of taxation. I appeal to the Minister to listen to the problems that are being outlined in terms of the taxation of the farming sector, to listen especially to the problems that are being outlined by the farming organisations. I doubt if the agricultural sector can be considered in selfish isolation. They must be regarded as the largest sector in industrial output. Therefore, the downward trend in farming must be reversed. I appeal to the Minister to discontinue this dangerous over-emphasis on book balancing and to bear in mind the overall good of the country. I should like to refer also to Government expenditure, if that is all right with the Chair.
It is not.
(Limerick West): I bow to the ruling of the Chair and I accept the fact that Government expenditure cannot be discussed within the terms of this Bill but in any approach towards reducing taxation we must bear in mind that if we cut Government expenditure we can cut taxation also. This is an area the Minister must look at. There is an over-emphasis on balancing the books. This cannot be done overnight, as the Government seem to think. To follow my point——
Has it to do with taxation?
(Limerick West): Yes. If we cut Government expenditure we can cut taxation.
An Leas-Cheann Chomhairle
That is an adroit point.
(Limerick West): Which the Chair will allow me to develop?
On taxation, but not on Government expenditure.
(Limerick West): The policies of seeking additional taxation will not work. The country is being pushed into a state of anarchy. We cannot afford additional taxation. Our productive base is too small to provide the level of taxation required to run the country. Consequently, there is no alternative but to reduce Government expenditure.
The Deputy has made his point.
(Limerick West): It must be appreciated that reduced Government expenditure means a decrease in services provided. We must look seriously at the question of cutting Government expenditure. Our heavy taxation is hitting every area of production. The Government must place less emphasis on balancing the books and concentrate on increasing production. We can then move forward. On Committee Stage I shall be making further points on the matters I have raised.
I hope some kind of agreement will be reached between the party Whips so that we will have an opportunity of going through the full Bill on Committee Stage. I have been a Member of the House for a number of years and have found that we tend to become bogged down in the early sections of the Bill. There is usually a long, wrangling debate dealing with a number of early sections. The remaining sections are unfortunately never fully touched on. There are many items in the Bill which will not be reached. I hope there will be some agreement between the Whips so that there will be a certain time span allocated to the different sections which comprise the Bill. There are seven Parts in the Bill and a number of Schedules. The Whips should decide on the time that will be provided and provide for a debate on all sections of the Bill.
The first few sections in the Bill deal with income tax. There is a great deal of uneasiness, dissatisfaction and unrest among the people who are paying PAYE and PRSI. In drafting the Bill the Government made a genuine effort to try to bring about tax equity. This is highly desirable and something which will be achieved over a period. The comments I will make are reasonable and fair and I hope they will be listened to. I wish to be objective in what I say.
Section 8 of the Bill deals with interest on deposits. The explanatory memorandum refers to the fact that exemption applying in the case of interest on deposits with certain commercial banks is being reduced from £70 to £50. I will not argue the merits or demerits of that. A lot of the money invested in banks is invested by small investors. This money is utilised for industrial projects and so on. Building societies have a higher exemption limit and money invested with them is used for housing. The people referred to here are small investors on low incomes who have saved some money. I am sorry to see that there will be some curtailment of the right to save of such small investors. Personally I regret this change for the reason that it will possibly cause serious concern to people who are inclined to save. I hope it will not act as a disincentive but it is very likely it will and I should prefer to see the Bill without it. I understand this section will be retroactive to 9 February 1982. This alone will cause some problems to quite a number of people. I do not suggest that its effects will be breathtaking but it will cause worry to many.
The next section I wish to touch on deals with non-residents who invest here. Up to now such people simply went into a bank or to the ACC or to a building society and identified themselves as being on holidays but who were residents in, let us say, London. The manager of the institution then got them to sign a certificate that they were living in England or elsewhere. His account was then determined and he did not have to go through the Revenue Commisioners. Such a person under this Act will have to sign an affidavit. I am anxious to find out—I have been asked by a number of people— when this section will become law, whether it is on the date of the signing of the Act or on the passing of the Bill. I would be happy if the Minister would let me know. Section 9 deals with appeals and the explanatory memorandum, at page 3, states:
Hearings, after the passing of the Act, by the High Court and Supreme Court of cases stated will no longer be held in camera.
This section is of importance because it involves a difference between the dismissing of an appeal and the determination of an appeal. It is a new provision. If a person applies for an adjournment of an appeal by the Revenue Commissioners the present procedure is that the commissioners will grant the appeal if it is made within nine months of the date on which assessment was given. Under this section, if the appeal is dismissed there will be no right of access to the Circuit Court. If it is determined, the position will be that persons can proceed to the Circuit Court and the cases will be reheard. If a person wants to take an appeal it will be to the Revenue Commissioners only and this will cause quite considerable problems. I should like the Minister to deal at length with this matter when he is replying because of its importance to people who would have their appeals dismissed and who for one reason or another would wish to appeal to a court.
My reading of the section leads me to understand that the person's right of appeal is to the Appeal Commissioners. The only case where he could go to the High Court or the Supreme Court would be on a case stated, that is a point of law as distinct from a point related to his income tax affairs. It is a departure from existing procedures when a person goes before the Revenue Commissioners for a further determination of his tax. Under this Explanatory Memorandum if these cases go to the High Court they will no longer be heard in camera. If a person tries to pull a fast one on the Revenue Commissioners he could be regarded as trying to defraud the Revenue Commissioners. It is essential that the affairs of such a person be made public.
I am concerned about the person who has made every possible effort to pay his tax, to keep his income tax affairs in order, who has kept his accountant fully informed and whose accountant submitted the documentation to the Revenue Commissioners. If he finds himself in the Supreme Court his case will not be heard in camera. That is not fair because all his personal and intimate financial arrangements will be disclosed and this could have a detrimental effect on him. Every person should have the right to have his financial affairs treated in confidence. It is essential that this matter be teased out fully on Committee Stage. I ask the Minister of State to bring this matter to the Minister's attention because it will cause many headaches over the next number of years. Up to now our legal system has been held in high regard but if we bring in a section like this, where a person's financial affairs will be heard in public or where a matter is determined by the Revenue Commissioners most people will find it very worrying. Matters of that nature should not be decided on by the Revenue Commissioners.
I turn now to the section dealing with taxation of farming profits. This is very important in a large agricultural constituency like mine. All farmers have come to the conclusion — against their will — that it is in their interests to have their tax assessed on the same lines as other sections of the community, and this is desirable from an equity point of view. It has been said that a simplified method of assessment for farmers with valuations under £40 would be introduced. What is the position with regard to these simplified farm accounts? I was under the impression farmers would make a very simplified form of returns and there would be very few problems completing the necessary forms. I was happy to go along with that and most farmers agreed to fill in the forms and pay their accountants to complete their tax forms. It was expected the amount charged would be minimal — not in excess of £100. I read an article in a recent issue of the Irish Independent— I am sorry I do not have it with me — written by Paul Drury which referred to the type of farm accounts to be submitted and completed. I was worried about his reference to farm buildings erected over a ten year period and other items over a five-year period. I have not seen these farm accounts and do not know if this article is correct. However, I wish to know if people will have to go back over that length of time. This would be totally unnecessary. It should be sufficient to complete the previous year's and penultimate year's statements. I question if any Member of this House could give concise and accurate information about extensions to their houses dating back five or ten years. They would certainly have great difficulty in searching through records, trying to produce receipts and give details of the money spent.
I agree with Chapter 2 which brings in people under £40 PLV. I have had many letters expressing reservations and opposition to this but in equity, for everybody's sake, the farming community would be wise to accept inclusion in the income taxation net and co-operate to the best of their ability. I hope that the Revenue Commissioners and the Department of Finance in their turn, would be equally co-operative with the farming community and would be as helpful as possible in presenting simple forms which can be satisfactorily and easily completed, without the necessity of researching records for many years. The Revenue Commissioners and the Department of Finance need the co-operation of farmers but will not get it if the farmers are asked to make returns on what happened seven, eight or ten years ago. That would raise strong opposition and the matter would be a hot potato for a long time.
There should be a common sense, definite and clear-cut approach by the Revenue Commissioners in this matter. Also, the Revenue Commissioners, in attempting to check over these records of many years would be involved in a mountainous and expensive load of work, much of which would be unproductive. On the other hand, farmers would be compelled to spend a lot of money engaging accountants, thus causing hassle and upset in the farming community. Under a simplified method, quite an amount of money would come in, but otherwise we will run into considerable difficulty.
A very important measure included in the Minister for Finance's early 1982 budget allowed farmers exemption from stamp duty when transferring a farm from father to son, where the young farmers involved had completed a course lasting 100 hours which was certified by the local committee of agriculture or, as at present, ACOT. In fairness, this worthy legislation was implemented later by Deputy MacSharry when Minister for Finance. It has brought about a tremendous increase in volume of transfer of farms from fathers to sons, expediting the handover to many young farmers. This has been of considerable assistance to the whole farming community and of benefit to our agriculture. That scheme continues to the end of this year, when it will not be renewed. There was no promise of renewal. However, I asked the Minister to look at the whole situation in regard to transfers of family farms. These transfers will be on the ad valorem value next year but this value will be halved in transfers of farms between families. I would prefer, if we cannot continue with the original scheme, that we revert to the 1 per cent stamp duty which had obtained for many years before the 1982 legislation. With regard to transfers on marriage, prenuptial settlements and so on, the present system, which is very necessary and desirable, should also be retained.
The next section deals with corporation tax and income tax. I see Deputy Kelly, who is more expert on these matters than I, coming into the House and do not propose to dwell on them. This Bill deals with taxation and its collection. Some of the charges will have an effect on the whole taxation system.
I should like to comment on the way some of these items are being introduced. For example, with regard to An Bord Pleanála there will be increased charges for the granting of planning permissions. At the time it was set up it was necessary but it has become totally politicised and one must now question the wisdom of its cost and continuance. In fact a lot of people are expressing dissatisfaction with it.
An Bord Poist and An Bord Telecom are two other items I should like to comment on. A sizeable amount of money has been expended to date on partially setting them up. Indeed, I question the wisdom of setting up those boards at all. I noticed reading in the Irish Independent recently reports of a huge office lying empty, which is a total waste of money.
But, sure, we had to do it. The English did it, so we had to do it.
I feel it is a total and absolute waste of money——
Hear, hear.
——and I question the wisdom of setting these bodies up.
Nothing wrong with good, old fashioned P & T, if they do their job properly and could get their industrial relations into order.
Can we not improve on existing structures rather than building up totally new ones?
The question is whether it is relevant to this debate.
It is absolutely necessary because in the different Finance Acts — and I can go through them because I have quite a number here——
The Deputy might keep to this year's.
——we deal each year with the cost of postal and telecommunications services and increased revenue——
That is not part of this Finance Bill.
I have last year's Finance Act here which dealt with increased charges for postal services.
It concerns me that so much money is being spent on bodies such as An Bord Poist and An Bord Telecom. We are talking about appointing an ombudsman. He has not arrived yet. In my view we have no need for an ombudsman. We are talking about a Garda Authority at present. I do not see any need for a Garda Authority here because there are people elected to do a job and it is absolutely essential that they do so.
The Deputy is certainly on policy of some kind now because there is nothing in the Finance Bill about a Garda Authority.
There is being introduced now a necessity to complete forms and so on and sentences being imposed on people who fail to do so.
The Deputy has been talking about a Garda Authority which does not exist and, as far as I know, is not on the way in any Bill before the House.
I will bow to your ruling, Sir, and will not argue any further. We are talking about taxation and the collection of taxes and I shall adhere to that. I did, however, question the wisdom of spending some money on the collection of those taxes and I shall not dwell on the matter any further.
Sections 84 onwards deal with the new residential property tax which, as the House is aware, is a self-assessment tax. This is somewhat similar to the way wealth tax was assessed. The House will be aware also that under this Finance Bill a person must complete his returns and the actual return must be furnished with an accompanying cheque before 1 October next; otherwise a person may become liable for a penalty of heavy interest.
I have reservations about this tax and fear it will cause enormous problems. I have seen wealth tax come and go — that was one of ours. Then Fianna Fáil introduced the resource tax which I saw come and go. I remember going to Dublin Castle at the time of the introduction of the wealth tax where there was a large area provided for the huge staff who would collect that tax. At the time Deputy B. Desmond, now Minister for Health, asked about the amount of money collected which was, as far as my memory serves me, less than £750,000. This new residential property tax presents a legal minefield on the one hand and luscious green pastures for accountants on the other. The other people who will benefit from this tax will be auctioneers and valuers.
We want tax equity, but with common sense. PAYE workers want to see the yield of their taxes spent wisely. They do not want to see an army of civil servants trying to collect money bogged down in legal and other technicalities, bringing the whole system into disrepute. Inevitably that kind of exercise winds up with a marginal amount of tax being collected and the cost of collection renders it useless. This residential property tax will pose enormous problems yielding minimal amounts. I fear also that in a few years time it may be necessary by public demand to have it altered or withdrawn altogether. If I might give one example of some of the problems I foresee in its enforcement. Take the example of a man, a widower with three daughters. He has quite a good job, he has a large house costing £100,000 on which he has a mortgage of £75,000. His three daughters are working, be they three civil servants, three teachers, or two teachers and one a civil servant. That man dies without a will, his wife having died earlier——
Would the Deputy please move the adjournment of the debate?
Debate adjourned.