Vol. 342 No. 13
I move amendment No. 91:
In page 67, subsection (1), between lines 7 and 8, to insert the following paragraph:—
"(c) Chapter I of Part IX of the Income Tax Act, 1967,".
The purpose of this amendment is to secure that a spouse's income will not be taken into account as such for calculating that person's income for the purposes of—
It is very difficult to hear.
Would the Members not wishing to remain please leave the House quietly and would those who wish to have a chat please also leave the House?
Sometimes we feel it would suit the Chair if we all remained completely quiet.
I do not think it adds either to the dignity of the House or does any good to democracy to have these sniping remarks at the Chair. It ill becomes the Leader of the Opposition.
It was meant in good humour.
It did not sound that way.
I apologise profusely if my attempt at humour went astray.
I notice during the last couple of days that Deputy Haughey does not seem to be very good-humoured. That is meant as a joke, too.
Deputy Haughey takes it, you see.
I will attempt to be benign for the rest of the day.
The purpose of amendment No. 91 is to secure that a spouse's income will not be taken into account as such for calculating that person's income for the purposes of the residential property tax. The spouse's income will, however, usually be included as the income of a relevant person under section 91. The amendment therefore proposes the insertion of an additional exclusion in the definition of income. Chapter 1 of Part IX of the Income Tax Act of 1967 contains the provisions relating to the taxation of married persons. It provides that a husband shall in certain circumstances be assessed and charged for tax, not only in respect of his own total income but also in respect of the total income of his wife.
Part 6 of this Bill, as amended, will not aggregate the spouse's income as such with the assessable person's income. However, a spouse's income is likely to be aggregated under section 91 of the Bill for the purpose of the income exemption limits because the spouse would usually be a relevant person for the purposes of section 91.
It is only a draft anyway.
The Minister has read the brief diligently. Could the Minister tell us now, in plain man's words, what exactly are the consequences of this? There will be a lot more like it. Does it mean that the wife's, the spouse's income will or will not be included for the purposes of reaching the aggregate figure of £20,000?
It will be.
The spouse is one of the people who will be included as a relevant person. It is on account of the spouse being relevant that his or her income is included in the aggregate of the income. It is not on the head of the fact that that person is a spouse as such.
It is only the normal income tax of husband and wife. It is a special inclusion under the relevant person's provisions in this Bill.
Those few words explain it a lot more clearly. We will have a lot of these — if you like — amendments. It would help if in addition to referring to sections and subsections of previous sections of Bills, the Minister would tell us precisely in normal language what exactly is involved in most of these 84 amendments. We do not have the facility on this side of the House, nor has the press or anyone else, of going back to read these subsections. In addition to reading the actual formal brief, could the Minister tell us exactly what the impact is? If he wishes to take a number of these amendments together and tell us the total impact, that would also be helpful.
It is good to know that the Minister is not moving some of his amendments but this is one that was brought in during the week while we were here debating the legislation and now it is not being moved. Can the Minister give us the reason for this so that we might have some notion of what we are at on this Bill. Why was the amendment put down in the first instance and then withdrawn? There should be some degree of consistency in this regard.
The purpose of amendment No. 92 was to substitute a reference to section 11 of the Finance Act, 1967 for a reference to section 12. We find the reference to section 11 is correct and consequently, should not be changed.
This demonstrates more than anything else that this part of the Bill has not been properly examined and that the consequences of it cannot be ascertained. No matter how much time we give to this part of the Bill we cannot discharge properly our responsibilities in these circumstances of amendments being withdrawn or amended. There is no possibility that the people who are meant to be liable as a consequence of this tax will have any idea what their liability is. The matter is very serious and by the time we have got through this day we will realise even more just how serious it is.
I strongly support Deputy O'Kennedy's viewpoint. In discussing this residential tax it is important early on that apart from opinion that has been given to me the measure could be proved to be unconstitutional. For a variety of reasons it is totally unworkable. I regard it as an out-of-the blue, smash-and-grab taxation. What next may we expect?
I would remind the Deputy that we have disposed of amendment No. 92 and must now move on to the next amendment.
But we did agree that within the context of amendments we could discuss this tax.
We are talking about non-amendment No. 92. This is a unique situation.
It is not.
I am calling on the Minister to move amendment No. 93.
Would the Minister accept that this is the first time in the history of this parliamentary assembly that a Minister for Finance has put an amendment on the Order Paper but was then not in a position to move it because it was erroneous in the first place? What a mess this is.
It is interesting to see Deputies Haughey and O'Kennedy working up a head of steam about drafting amendments. This is completely out of keeping with the remarks made earlier by Deputy O'Kennedy about the amount of time we have to debate the substance of the provisions.
In the interest of business, we should move on to the next amendment.
On a point of order, we were given to understand that we would be allowed speak from amendment to amendment within the framework of the residential property tax. The debate last evening was conducted on those lines by both sides. I am not going to be steamrolled on this.
If the Deputy would bear with the Chair for a moment, he might understand the position. Amendment No. 91 was moved this morning and disposed of. Amendment No. 92 was called and not moved. We now go to amendment No. 93 and get on with the business in an orderly way.
Will I be afforded any opportunity of expressing my views on the residential property tax?
The Deputy will have that opportunity when we come to the section.
The Chair will appreciate that it is impossible to create order out of chaos.
On a point of order, the situation may be clear to yourself but I must appeal to you for guidance rather than wait for you to wave your hand and I may speak. When we have disposed of the amendments and come to the section, will I be afforded the opportunity of putting my views?
Of course.
I move amendment No. 93:
In page 67, subsection (1), to delete lines 19 and 20.
The Revenue Commissioners have decided that the residential property tax should be administered by the capital taxes branch of their office rather than by the inspector of taxes. Therefore, it is proposed to substitute references to the Commissioners in Part VI of the Bill for references to inspector of taxes. A definition of "inspector" is also no longer required.
There is a myriad of amendments to this effect. Perhaps we could dispose of them all now? The Minister made the point this morning that many of these amendments are consequential on each other.
I understand that it would not be convenient to discuss together all the remaining amendments to the section.
There is a series of amendments here which substitute commissioners for inspectors so perhaps we could deal with those now.
Sometimes instead of simplifying matters, that approach confuses them. Perhaps if, when I call out an amendment, the Minister were to explain it very briefly, that would help the situation.
To take the point raised by Deputy Haughey, it might be of assistance for me to indicate those amendments that we could take in groups.
Normally the Chair would have those.
If the Chair had them he would give them.
That is the point. It is standard practice in this House that if there are amendments that are considered to be cognate, a list of those would appear first thing in the morning on the Chair's desk. In this instance it seems that even the Chair has not been facilitated.
The Chair has no objection to amendments being taken together if the Minister so wishes.
We must deal with this now.
If I do not get co-operation I will proceed in my way, in accordance with procedure.
I am more interested in the Chair's way than in your personal way. May we have some idea of what the procedure is to be?
I am calling the amendments as they are before me.
The cognate amendments will be indicated together in relation to each section. The one we have just dealt with is the only one relating to this section where that particular wording arises. If it is convenient for Deputies, I can indicate now those amendments I propose to take in groups right through this part of the Bill.
I have a note of those here. When we come to No. 97, for instance, it will be proposed that about ten others will be taken with it. If Deputies would leave the matter to the Chair business could proceed in an orderly way.
If we are to leave everything to the Chair what is the point of us being here at all?
The Chair tells us he has a list of amendments that will be taken together but then tells us to leave matters to him. Will we not know what amendments are being taken together? You might have circulated the list to us this morning.
May we get back to amendment No. 93, please?
On this amendment the Minister has indicated that he simply proposes to delete the definition of "inspector". That is all it proposes to do. On the face of it that is all it does.
Conditions can change and the definition becomes surplus. The definition is no longer required.
It is nice to have the view of Deputy Taylor, which I appreciate. I am not questioning what Deputy Taylor said.
That is exactly what I explained.
I move amendment No. 94:
In page 67, subsection (1), to delete lines 25 and 26, and substitute the following definition:—
" `market value exemption limit' has the meaning assigned to it by section 90;".
This amendment arises from the requirement for a change in the definition of "market value exemption limit" which is necessitated as a consequence of the substitution of a new section for section 90. Amendment No. 126 proposes a new section for section 90. That new section will employ a different method of calculating the market value exemption limit and it will be necessary accordingly to amend the definition of the term included in section 84 (1).
We are now coming to something very substantial. This arises because of the proposed deletion of section 90 which deals with the market value exemption limit. This is an essential section of this tax. After whatever consideration the Minister and his advisers gave to it — and I do not know how much consideration that was — they introduced during the course of this week what we were told is a technical amendment to get rid of section 90.
We are substituting for it.
I know. A substitution for market value exemption limit is not technical by any means. We now have a consequential amendment. This demonstrates more clearly than anything else could that the whole purpose of this Bill was confused before it came into the House. It is getting more confused all the time. We are now getting rid of a full section and we are substituting some other section or subsection. We will be doing that a few more times and, unless the Minister tells us right now — and he should tell us now because we cannot begin to discuss this amendment until he tells us — we will have no idea what the purpose is of the new provision which is to be substituted for section 90. If he tells us this is consequential on the deletion of section 90, he should at least tell us now what will be put in the place of section 90 so that we can begin to understand what the consequence will be. He should tell us in straight terms what we will have instead of section 90.
What we will have in place of section 90 is a new section 90 which is proposed in amendment No. 126. The market value exemption limit which is to be deducted in ascertaining the net market value of the property on which the tax will be calculated would normally be £65,000 adjusted in subsequent years by the application of the new house price index number. This figure will be reduced where some or all of the assessible person's property is owned jointly or in common with another person or persons. Amendment No. 126 sets out the new text of section 90 and sets out that the tax is to be charged on net market value, which is to be arrived at by deducting from the gross market value an amount known as the market value exemption limit. This section defines the market value exemption limit. Normally it would be £65,000 this year, adjusted in future years by reference to the new house price index number.
What is the difference between the old section and the new section?
It is a re-definition—
What is the difference?
——of the market value exemption limit——
Has it any practical effect?
——to take account of the fact that the value of the property would be attributed to a number of persons.
That was always the way.
That has been clear from the start.
All the relevant persons.
The intention is to ensure that the same amount of tax will be paid on the property whether it is owned solely by one person or jointly or in common by two or more persons. That is the intention of the new section 90.
That has been clear from the start and the Minister's explanatory memorandum says that. Will the Minister please tell us what is the difference?
What is the precise reason for substituting the new section for the other?
It is all right for the Minister to read the words in the brief supplied by the Department. Could we know what exactly this is about and why the change is necessary?
The market value exemption limit is crucial to this whole section. It will decide how much tax people will pay. The Minister is changing one definition of it for another. We want him to tell us what is the difference between the two definitions, if anybody knows over there. Perhaps Deputy Doyle knows.
The new section 90 provides for a somewhat different method of calculating the market value exemption limit and it is for that reason that we have to make the change covered in amendment No. 94.
What is the difference?
We can discuss the new section 90 when we come to amendment No. 126. It provides for a different method of calculating the market value exemption limit.
That is going too far. The Minister tells us it provides for a different way of evaluating the market value exemption limit. That is as far as he is prepared to go and when we get to the amendment he will tell us. We insist that he tells us now, if he knows. If he does not he should admit that.
Or withdraw the whole damn thing.
That is what I said this morning. The thing is crazy. The Minister can read from a brief which gives all the gobbledygook about sections and sub-sections, but he does not know what this is about, and if he does not know how can we?
I want to add to that by suggesting that this whole absurdity should now be withdrawn. The man in the street who owns a house does not know whether he will be liable for this tax. On the one hand the Taoiseach said it would be the income of the principal owner of the house, and this was subsequently contradicted by the Tánaiste who said it would be the income of everybody in the house. We know now that the second explanation is the fact.
The public are confused. They do not know what the exact implications of this tax will be. We do not know either. We are trying to tease them out. It is now becoming crystal clear that the Minister does not know what the implications are, or what the meaning of "market value exemption limit" is. In the interests of sanity and commonsense, apart from justice to the taxpayer, the Minister should take this rubbishy absurdity away and bring back something else.
I am not so sure what is the direct relevance of those remarks on this section. We have here a provision which introduces a new tax. In the definition of the provisions governing that new tax we want to achieve certain objectives, including the objective of clarity. Deputies on the other side of the House are aware that, as we work out the application of these measures, certain nuances will become clearer, certain nuances will be required to be clarified, and that is the purpose of this amendment.
Nuances.
The Minister just said something very interesting — as this starts to operate certain nuances will become clear. Have we ever heard a statement like that from a Minister introducing a new tax? On Second Stage I said that this new tax would be dealt with appropriately in a separate and distinct piece of legislation. It is becoming quite clear that that is what we should do. Last night Deputy Mitchell and others spoke of the need to look at these matters properly. Obviously they are complex and the Minister has not mastered their complexities. We do not claim to have mastered them either because the amendments have been changed as they have been introduced. The only co-operation the Chair will get through this will be silence from all of us. As Horace used to say, favete linguis, favour us with your silence. That is the only co-operation we can give the Chair to get this nonsense through. In the absence of that, surely it is reasonable to resubmit this thing to a committee under a different Bill. The Minister said, in reply to some of his colleagues last night as well as to Deputies on our side, that he does not know exactly how much it will bring in this year.
We cannot have Second Reading speeches on every amendment, which is what we are having.
The Minister does not know exactly how much it will bring in this year and he did not know how much the cost of our amendment would be.
The Deputy will come to amendment No. 94.
I plead with the Minister, his colleagues and the whole House — we will give him all the co-operation we can — to put this thing out to a special committee. Let us look at it calmly over the next three or four weeks, let us go through it in that detail and not have amendments on amendments being withdrawn and resubmitted. Unfortunately, some of the people outside the House are bored by what we are doing here. When you are on committee it is not really a circus and we are not entertainers. I apologise to those who think we should entertain. It is very important that we discharge our responsibilities, boring though it may be and unentertaining though it may be. We cannot do it the way the Minister is now introducing amendments. It may not be pleasurable for anybody. Members of the House, the press or anybody else.
The Deputy must confine himself to amendment No. 94.
It may not be entertaining but it is deadly serious. We cannot make any sense of this nonsense and neither can the Minister. If he wants us to help him in any way will he introduce a separate Bill or give us a committee where we can look at this over a period of three weeks because we cannot do it today?
A bit much has been made of this particular point by Deputy O'Kennedy. The substitute section 90 is set out, as the Minister pointed out, in amendment No. 126. There has been ample opportunity to study the replacement section. Of course, it is complex but will the Deputy show me a section in any Finance Bill which is not, even the one Deputy O'Kennedy brought in when he was Minister. Any section of any Finance Act to any layman is a matter of intense complexity. This one is precisely as complex as any other, no more and no less. It has been set out for some time. I fail to see exactly the point the Deputy is making.
Will the Deputy tell us what it is about.
It is set out in amendment No. 126. If there is some particular point in the amended section that requires clarification I am quite certain the Minister will be able to clarify it. The section is set out in detail with its definitions.
We have asked the Minister that very specific question. We have asked him what is the difference between the old section 90 and the new section 126, which he proposes to put in its place. We have asked him to tell us what is the difference between the two and he is not in a position to do so. That is our simple and very reasonable complaint. We know the sections are complex but it is the function of the Minister and his advisers, when they bring an amendment like this before us, to say why they are making the amendment, what was wrong with the first section 90 that it has to be discarded and this new section 90 put in its place, what difference does the new section make. Is that unreasonable?
It is not. It is essential.
The Deputy said that the new section is not complex.
It is complex.
I do not know if Deputies on the other side are interested in looking at the provisions or making points about the number of amendments that are here. We have set out very clearly in the Bill, as circulated, a particular approach to the matters dealt with in section 90. We have set out in amendment No. 126 the new revised approach to dealing with that. Let me give an example. The essential difference between the two sections is this. Let us take a person who is the sole owner of a property worth £100,000 and jointly owns another property worth £50,000; the original text of section 90 would spread the £65,000 figure over the total figure of £150,000. As the market value of all the relevant properties now is only £125,000, the £100,000 owned solely and £50,000 owned jointly with another person, the £65,000 exemption limit is reduced proportionately.
While what the Minister has just said is reasonably welcome news it demonstrates precisely that he does not know what the amendments are about. He can tell us after all this, that it reduces the liability in respect of property jointly held to ensure that instead of having a total assessment on property jointly held with another property you now reduce the property that is jointly held. The Minister could have told us that in very simple terms, instead of giving us the gobbledygook and we might know something. We have to take the Minister on trust at this stage.
I do not believe it.
The Minister was not able to tell us earlier if it is like that. I do not know if we should be simply asked to take him on trust. Deputy Taylor said it was not really complicated and we have had the amendment.
I said it was complicated.
The Deputy said we have had the amendment and we have had time to study it. I have responsibility as spokesman for Finance for my party, as Deputy Taylor knows, and this amendment came in on Wednesday. I invite the Deputy or anybody, if we could get a photostat to the press and the public outside, to see how complex it is. I have been on my feet from morning to night every day this week and I take it that Deputy Taylor will acknowledge that neither I nor anybody else here who has been involved in this, could have had any time to study that. Therefore, it is quite unreasonable for the Minister to bring in such a number of amendments this morning without him even fully understanding what he is asking us to do.
Could the Minister give us an indication of how many people have houses valued £100,000?
That figure is not readily ascertainable because that kind of information is not now collected in any central way. There is no register of that kind of property values.
When the Minister refers to properties jointly held does it mean that the home owner, who jointly holds his property with a mortgage company, who would have a mortgage on 50 per cent of the property, gets the credit for that in the assessment?
No.
If the Minister does not know the number of houses involved how did he work out the yield of £3 million this year?
I said I expected the yield to be somewhere in the region of £6 million.
The Minister has not answered my question.
I answered the question put by Deputy Burke in relation to the mortgage. It is no. With regard to the point made by Deputy Brennan I made the point last evening that the expected yield from this tax would be in the region of £6 million. That has been calculated by deduction from the original form of the tax, as we had envisaged it, and the revenue that that would have produced, judging it on various indicators that are not directly relevant now and working back from there. It is an estimate.
Does the Minister not need to know the number of houses over £65,000 to work out that figure?
We would need to know the exact number of houses over £65,000 and the way in which they are held in order to make a precise forecast of the yield of the tax——
So that figure has been taken out of the sky.
But since we do not have that kind of information, we are not in a position to make a precise forecast.
The Minister will not get £2 million out of it.
Amendment number 95 in the name of the Minister. I should say that amendment No. 101 is related. Therefore, amendments Nos. 95 and 101 may be taken together by agreement.
I think it would be helpful if we resorted to the normal convention here, that if they are strictly technical, drafting amendments, if the Minister would say so, we can let them go at that.
I move amendment No. 95:
In page 67, subsection (1), to delete lines 27 to 29.
Amendments Nos. 95 and 101 are consequently on the deletion of section 87 of the Bill.
That is all right: They are only consequential drafting amendments.
I move amendment No. 96:
In page 67, subsection (1), in the definition of "net market value", line 31, after "excess", to insert ",if any,".
This amendment is necessitated by the fact that in some cases there will be no excess of net market value, that is there will be no excess of net market value over the £65,000 exemption limit. Section 85 of the Bill charges residential property tax on the net market value of the relevant residential property on the valuation date. In the case where the relevant residential property is a house, for example, currently valued at £100,000, the net market value is ascertained by deducting £65,000 from the £100,000, leaving £35,000 net market value on which the tax is assessed. In the case where the market value of the residential property is less than the market value exemption limit, of course, a nil liability arises. This amendment is designed simply to make that clear.
Amendment No. 97 in the name of the Minister. Amendments Nos. 103, 104, 105, 106, 107, 109, 111 and 112 are related and may be taken together by agreement.
I move amendment No. 97:
In page 68, subsection (1), line 11, to delete "the occupation of".
The two circumstances which render a person taxable in respect of a property under the definition of "relevant residential property" are, first, that he is the owner and, secondly, that he occupies the property as a dwelling. As the two conditions are distinct it is considered undesirable to use the word "occupy" in the definition of "owner" and the word "holds" is proposed to be used instead.
I move amendment No. 98:
In page 68, subsection (1), lines 12 and 13, to delete "that subsection" and substitute "subsection (2) (c) (iv)".
Amendment No. 99 has been discussed with a previous section.
I move amendment No. 99:
In page 68, subsection (1), line 14, to delete "that subsection" and substitute "subsection (2) (c) (iv)".
I move amendment No. 100:
In page 68, subsection (1), line 18 after "dwelling" to insert "or dwellings".
It is a drafting point, is it?
It is a drafting point to insert the words "or dwellings".
I move amendment No. 101:
In page 68, subsection (2), lines 34 to 37 to delete paragraph (a).
I move amendment No. 102:
In page 68, subsection (2) (c), line 46, after "person", to insert "beneficially, whether solely, jointly or in common".
The purpose of this amendment is to ensure that, first of all, trustees and others who are the legal but not the beneficial owners of residential property would not be liable to the tax and, secondly, that a person would be treated as the owner of a residential property even if he has a share only in the ownership of that property. The proposed addition of the word "beneficialy", is consequential on amendments Nos. 103, 104, 105 and 108 which will have the effect of defining the owner of a residential property — in section 84 (2) (c) — as a person who holds property instead of a person who owns or occupies it. It is not intended that a trustee of property should be an assessable person but, since a trustee may also hold property in the sense that he is the legal owner but not the beneficial owner, the word "beneficially" has been added to the definition of "owner" to make it clear that an assessable person must be a beneficial owner of property, as distinct from an owner, such as a trustee, who is not a beneficial owner.
The proposed addition of the words "whether solely, jointly or in common" is to make it clear that a person will be treated as the owner of a residential property even if he does not hold it solely but holds an undivided share of it as a joint tenant or as a tenant in common. If he holds a share only in the residential property and also occupies the property as a dwelling then the property forms part of his relevant residential property and is subject to tax.
Under section 89 of the Bill where a residential property is comprised in the relevant residential property of two or more persons the amount to be taken into account in ascertaining the net market value of the relevant residential property of each person is the market value of the property divided by the number of persons.
I might just ask the Minister — this is not a point which occurred to me but rather to somebody who drew it to my attention — it would appear to be something that in practice would fairly rarely happen but it is not beyond the bounds of possibility. Suppose two persons — or more than two persons, but the simplest case would be two — own a property in common but in unequal shares, suppose they also have uneven incomes but incomes such that the accumulation of the income brings them over the limit at which this tax plugs in, so to speak, is it not the case — or, if not, I should be glad if the Minister would deny it — that they would be chargeable to the tax in equal amounts notwithstanding that the degree of their interest in the property is perhaps very different?
In those circumstances the persons concerned would be chargeable to the tax in equal amounts, as the Deputy says.
Notwithstanding that the extent of their interest might vary very considerably?
They would be liable to the tax in equal amounts being, if you like, joint occupiers, I would presume, in those circumstances, where it was felt by the persons concerned that the distribution of the tax between them was unequal, having regard to their interest in the property, it would be up to those persons to apportion between themselves the liability to the tax.
I do not want to labour the Minister about this — I know perfectly well that his heart is not in this job — but surely that is a hopeless situation? The State says: "We wash our hands of any obligation to an equitable application of this tax; it is up to yourselves to fix it up between yourselves; all we want, like the Roman Republic used to say to tax farmers, is to extract X£s; how equity requires you to sort it out between yourselves is a matter for yourselves." If the Minister had been in legal practice he would not have been there very long before knowing that, very often, tenancies in common arise, in fact almost always arise, in family circumstances. There is no more common matter over which brothers and sisters fall out than property. The Minister's optimism that a brother and sister who find themselves being charged equal sums of residential property tax, in a case where perhaps one of them owns 10 per cent, or has an interest of 10 per cent and the other an interest of 90 per cent, his optimism that they are necessarily going to adjust that between themselves, I think, does the Labour Party credit. It is as nonsensicial as a lot of the rest of it.
I move amendment No. 103:
In page 68, subsection (2) (c) (i), line 47, to delete "owns" and substitute "holds".
I move amendment No. 104:
In page 68, subsection (2) (c) (ii), line 48, to delete "occupies" and substitute "holds".
I move amendment No. 105:
In page 69, subsection (2) (c) (iv), line 4, to delete "occupies" and to substitute "holds".
I move amendment No. 106:
In page 69, subsection (2) (c) (iv) (I), line 15, to delete "occupation" and insert "lease, agreement or licence".
I move amendment No. 107:
In page 69, subsection (2) (c) (iv) (I), lines 24 and 25, to delete "occupation of the premises" and substitute "lease, agreement or licence".
Amendments Nos. 108 and 110 are related and may be taken together.
I move amendment No. 108:
In page 69, subsection (2) (c) (v), lines 32 and 33, to delete "occupies the property at the will or sufference of any other person and in respect of such occupation—" and substitute "holds the property at the will or sufference of any other person, or under any trust, and in respect thereof—".
The purpose of this amendment is to use the word "holds" instead of the word "occupies" to describe a tenancy at the will or sufference of any other person and to ensure that the definition of the owner of a residential property will include a person holding property under a trust. Amendment No. 110 is consequential thereon. In section 84 (2) (c) (v) an owner is defined as including a person who
occupies the property at the will or sufference of any other person and in respect of such occupation—
(I) pays no rent, or
(II) pays a rent of such amount that, if it were paid under a lease of a kind mentioned in subparagraph (iv) granted at the time the person commenced to occupy the property at the will or sufference of that other person, the first-mentioned person would, under subparagraph (iv), be the owner in relation to the property;
Does it include a trustee?
No.
I move amendment No. 109:
In page 69, subsection (2) (c) (v) (II), line 38, to delete "occupy" and substitute "hold".
I move amendment No. 110:
In page 69, subsection (2) (c) (v) (II), line 39, after "person," to insert "or under the trust,".
I move amendment No. 111:
In page 70, subsection (2) (d) (iii), line 3, to delete "occupied" and substitute "held".
I move amendment No. 112:
In page 70, subsection (2) (d) (iv), line 5, to delete "occupies" and substitute "holds".
The definition "occupied", in relation to residential property, means having the use thereof, whether actually used or not, and cognate words shall be construed accordingly. If I understand the mechanics of this part of the Bill there will have to be an operable date and it is difficult to imagine a Bill of this kind working otherwise. What about the case of property which normally is let and which may have been let to tenants for 20 to 25 years but which happens on that date through a quirk of the market or through neglect not to be occupied? The owner may have the key and the property may be on the books of a house agent but suddenly the owner becomes chargeable for this tax because in theory, even though he has no such intention, he could march in and occupy it as a second dwelling if he wished.
I wish to lodge a strong protest against this section. The effect of fluctuating market trends and inflation make a mockery of this measure. It is unworkable and will be impossible to operate. Deputy Kelly traced the history of this taxation last night and I will not go over it now but if the Minister allows his Department to become involved in trying to operate this tax the Revenue Commissioners, already hard pressed, will become further bogged down. This is something we should try to avoid. There are so many permutations and so many cases that can be argued against this taxation that it would be better to do as Deputy O'Kennedy suggests and let a committee discuss whether it can work. The Revenue Commissioners produced a property tax, a job they were given to do, but it is obvious that the hearts of the Minister and his party are not in it. We are to be saddled with a tax which will probably be thrown out by the courts in any case. Why not have a tax on fresh air or on staying alive?
Deputy Brady is making a Second Stage speech.
I am dealing with the market value.
Will the Deputy bear with the Chair for a moment?
I will do my utmost in every respect.
The Chair is of the opinion that Deputy Brady has been making a Second Stage speech.
My point is that the fluctuation in market trends make it impossible on a yearly basis for an individual to give an estimate of the value of his property.
This is a definition section and the Deputy should deal with the section.
I am doing that.
A stranger would not recognise it.
This is very complicated. We must be given some opportunity to talk on it. I should like to refer to the question of income and how this is to be defined. It is divisive to try to calculate the income within households and I am not happy about the information the Minister has given. It will force children to live apart from their parents to keep down the aggregate income. It is very anti-social. The Chair will agree that this is strictly within the terms of the definition.
I am very interested to listen to Deputy Brady on the section.
Deputy Brady is always on the section.
This section will tamper with the family unit within a household. There may be two houses side by side and the owner of one may always have been prudent and houseproud, putting every penny into that home which is valued at £100,000. The person next door may not have bothered, even though enjoying the same income, but the first person will be penalised for having had a prudent attitude. This is wrong. This property tax is moving against the essence of home ownership.
We all know that because of the escalation of market values this tax will involve a much greater percentage of people within two or three years. Despite what Deputy Taylor said, it is a heavy tax. How is the person to pay this tax to be picked from within a household if the father or the mother is not earning any money? There will be absolute confusion.
There would have to be at least £20,000 a year coming into the house.
There are people struggling to earn less than that but it will be aggregated and Deputy Taylor, as a lawyer, will see the inequity of it. We are directly hitting at the elderly. Deputies may laugh but there are a great many people, and I have had many representations about this, who are well into their seventies and eighties who now be saddled with this tax because they happen to be living in the home in which they have spent practically all their lives and their children are living with them. The only thing they can do is to tell the children to leave so that they will not be subject to this tax. This is socially wrong and Fine Gael know that. This is a sop to the Labour Party. It should not be passed by this House.
I cannot compliment the Department on producing a highly complicated form of residential property taxation and I doubt very much if anybody could possibly subscribe to the view that taxing the home in which he or she is living is right or equitable.
I am someone who is a dealer in capital taxation, someone who believes we do not have the type of capital taxation we should have. I have reservations about this section in the context in particular of the definitions in a number of areas. Reference has been made to this being capital taxation of people who live in houses worth in excess of £65,000 who should pay tax. Possibly that may be the case but the problem is that on the basis of the concept of net market value—the Minister could well explain the meaning of this—an illusion is created because the amount referred to on the basis of valuation indicating a house is worth a particular sum does not necessarily mean that the individual occupying that house has capital worth that particular sum in the context of a residential property tax. That is an anomaly.
Deputy Taylor referred to this tax yesterday evening but he avoided dealing with this anomaly in the context of this tax. I represent the same constituency as Deputy Kelly and in that constituency there are many people who own houses in a particular part of Dublin which, on present day values, would be worth in the region of £70,000 because of the area in which they are situated but they are relatively modest houses, semi-detached, three or four bedroomed houses, and these people will now have to pay tax on foot of this provision regardless of whether or not they have a mortgage. The anomaly is that, if we are going to tax people on the basis of their capital, let it not be an illusory capital or a notional capital. It should be real capital. The person who has a house worth today £70,000 with a capital mortgage of £30,000 whose real capital in terms of residential property would be £40,000, will be paying the same amount of tax as the person who owns the house worth £70,000 and does not owe one halfpenny by way of mortgage or loan to anybody. I appreciate the necessity to some extent to provide a tax which is simplistic, designed not to make life any more difficult than it is, I do not think anyone could describe this tax as simplistic. In ideological terms it might appear to some Deputies that that is an anomaly and this is something that should be borne in mind. We are here to legislate whether it is produced on this side of the House or suggested on the far side of the House and, if there are anomalies, then we have a duty to comment on them.
Hear, hear.
This is an anomaly to which Deputy Taylor certainly did not advert. The problem is that the definition does not take that anomaly into account. Again the definition of the relevant residential property which brings someone within the context of this tax leaves many who could well afford to pay capital taxation, and should be doing it, outside the net. I refer to the person who is paying £20,000 a year to live in a luxurious penthouse in the centre of the city and owns a yacht worth £100,000 in Dun Laoghaire harbour. Possibly he has an income of £50,000 a year. He can laugh all the way to the seaside in regard to this tax. It is not effective. I would like to see the yacht in Dun Laoghaire harbour, worth £100,000, coming within the tax net and not have this distinction here.
I am not criticising the Minister for this because this tax has been designed in this way to catch in effect one type of wealth or capital and ignore other types. In the context of the definition again—the Minister might correct me on this one—the person who lives in a house that is worth only £40,000 or £50,000 but has £200,000 worth of jewellery stashed in a bank or somewhere else is also unaffected by this tax. In the context in which Deputy Taylor put this tax last night I really must protest. This tax does not and will not do what it was intended to do. It is based on an illusory definition of the capital available or the capital value of someone's house and takes no account of the capital mortgage outstanding. Equally if one looks at the definition of income there is an illusory notion of income of members of the family household. Everybody knows that the income available to the family is the net income after deductions. Deputy Taylor kept on referring to people with incomes in excess of £20,000 who own mansions worth in excess of £65,000 and we should not be weeping crocodile tears for people in that situation who could make large capital contributions to the State. If one takes into account a husband and wife and two or three children whose education has been completed they might have gross incomes at that level and they might live in a house they purchased ten years ago for £11,000 or £12,000 but, due to inflation now and the scarcity of houses, the house now has an inflated value but not all of them are rich, not all of them have capital and not all would be regarded as wealthy. Speaking for a Dublin constituency I can say that many of them are a good deal poorer than the farmer living outside Dublin whose house on a valuation basis would come within this, who owns 200 or 300 acres of land, which land is irrelevant in the context of this type of taxation.
This tax should be put in a proper context. It is an attempt to introduce capital taxation which in a sense ignores many who could be regarded as truly very wealthy and could make a contribution. I hope there is still some possibility of dealing with this in a more rational way and I would be abrogating my function as a Deputy if I did not at least point out the anomaly and discourage Deputies from suggesting that people with houses which are valued at £65,000 are living in enormous mansions and dripping with wealth because many of my constituents with that type of house carrying a mortgage of £30,000 in the present economic climate are finding it very difficult to make ends meet. I am delighted Deputy Taylor claimed the honour for this type of tax. It was a welcome admission from my point of view.
I am in agreement with a number of the points made by Deputy Shatter in regard to the manifest anomaly involved here. I want, however, to confine myself to a particular small point at this stage. I am going on the assumption that we will have this tax anyway even though it is misconceived and wrongheaded, as pointed out by Deputy Shatter. I want to concern myself with the implementation of it. In practical terms, it has been pointed out, it will present many problems. In the definitions section under "market value" we find that the market value means:
the market value thereof ascertained in accordance with section 88.
Section 88 refers to:
the market value of any property shall be estimated to be the price which the unencumbered fee simple of such property would fetch if sold in the open market.
Would the Minister explain to us the thinking behind this. I hope he will not say it is simply a convenient way of getting a figure. If he wanted that he could take the PLV. It would be no better but no worse than the method employed here. The implication in all this is that you are taxing people on wealth which they possess if they have an income above a certain level. The fact is when you talk about an unencumbered property you are talking about a property on which somebody has no mortgage or there is no other interest except his own. Of course, many of the properties which will be coming under the requirements of this tax will be encumbered properties. Nevertheless this definition proposes to introduce this totally artificial concept of an unencumbered property to arrive at the value which the Minister presumably would have us believe and certainly some of the people who support this tax would have us believe represents a method of arriving at a person's wealth. Of course, if he owns a property which is encumbered then the wealth which he owns in relation to that property is the market value less the amount of the encumbrance.
Therefore we have this built-in pretence when we say "encumbered" and then we say "fee simple". Of course most of the properties will not be held in fee simple so we will have a second leg of this pretence which is being added to define the market value of the property. It would be equally logical and reasonable for the Minister to provide here that it would apply to all properties the front doors of which are painted green. It would be equally logical to provide that in a section. I think the Minister would fancy himself as a person who would prefer to adopt a logical rather than an illogical course. If so would he explain to the House the logic behind producing a definition to arrive at the market value of property for the purpose of assessing the tax, a definition which is demonstrably false, which is going to produce a figure bearing no relation to reality. It is the theory behind that on which I would like to know the Minister's thinking.
Given that the tax is to be applied one can certainly see the logic — I am leaving aside the income and dealing only with the question of the value of the property for the purpose of assessing tax — of saying take the market value, what it would achieve in the market if it were sold and what the man who owns it would get into his hand when he sold it, in other words when he paid off a mortgage which would be the case in many instances, if the Minister were to say the net value of the property in such a case will be the basis for arriving at an assessment of tax, but that is not done. I want to remind the Minister again that he has built into the definition two totally false assumptions — that all the properties concerned will be unencumbered and all the properties will be held in fee simple. I do not want to labour this point but I would be very interested to know the Minister's logical, theoretical reasoning behind this definition.
I agree with every word Deputy Colley has just said and I would like to add a few words to what he has said because he stopped a little bit short of getting to the core of the objection which every rational person must feel to this part of the Bill. It is this: on what principle, acceptable to people in this country, is this form of tax being applied? There is not an unlimited number of principles on which a tax can be invented and applied. Deputy Colley in an attempt to demonstrate the theme by the use of the absurdity mechanism spoke about taxing people with hall doors of a particular colour. That is a clearly unacceptable form of tax. If asked to say why, admittedly it is quite difficult to marshal and deploy objective criteria which will be always unchangeable which will show the green door tax to be on the far side of what is permissible. It is difficult to draw a theoretical line but reason tells me that in a country like this a tax like that is unacceptable. Equally a tax related to the way somebody looks, the colour of their skin, are outside the line of what is permissible. There is only a certain range of things which have been traditionally understood here to be legitimate attracters of taxation. Income is one of these, rationally and reasonably so because the State has to live and breathe and function the same as individuals who compose it and who shelter under its wing and who have to contribute year by year. That is an intelligible form of tax.
Wealth, I also think, though I seem to be in a tiny minority here, is an intelligible target for tax also not, I want to make it absolutely clear, in a spirit of vindictiveness, not in a spirit of supposing that the amassing of prosperity or substance is a crime for which one owes a social debt, not that, but simply as a contribution, a social contribution, if you like, to people who are less well-off. There are things like the use of forms of national wealth, the use of the roads, which can attract a rationally defensible tax.
Will the Deputy come to the section as soon as possible?
I am trying to complete the thought which Deputy Colley embarked on. There are some forms of taxes which can be related to intelligible criteria——
Deputy Colley introduced his remarks by acknowledging that this was the Committee Stage debate and he kept reasonably within that. You are following a hare raised by Deputy Colley and you have followed it into the realms of a Second Reading.
It is not a hare.
Deputy Colley fastened on the market value thing and what he said about it is absolutely true. We are piling hypothesis on hypothesis here in order to get at the way this thing works and we are then striking out by the use of the word "encumbered" the element of equity which might lead somebody to see a bit of sense in this legislation.
I agree that in an extremely crude, primitive, erratic way which has not been taken seriously by serious people for 200 years one can regard somebody's residence as a rough index to his wealth or the visible parts of his wealth. It is a crude erratic way and I would not support it in any shape or form if it were proposed on that basis. What can be put up by the taxpayer and established by the Revenue is to what extent that pile of bricks and mortar really represents wealth because in every commercial and fiscal context of every other kind the net value is what is regarded as the wealth. I could sell everything I have and buy a castle and live on orange boxes in it. I could beggar my wife and children in order to do it. My wealth of course is not simply the notional unencumbered fee simple of Adare Manor or wherever it is. It is an extreme degree of poverty caused by my own recklessness and prodigality. In every other commercial and fiscal context what I owe on this heap will be taken into account before anyone comes to a conclusion on what I am worth, what I can leave behind, what I have succeeded in amassing in life.
This item has no regard to that. All forms of taxation are potentially discriminatory and we live in a State in which year by year more and more standards are being set up in regard to equality before the law and outlawing discrimination. The law on that subject has hardly moved into the field of tax but it will move quickly and far into that area. I would like to know on what basis the kind of person Deputy Shatter was talking about, about whom neither he nor I feel any vindictiveness, the penthouse dweller who runs a yacht, can be exempt from this form of taxation while somebody else who does not own a yacht and does not have any other assets or substance can be charged this tax. These two citizens are entitled to the benefit of equality before the law but they are not being treated equally. You can discriminate against citizens, and every State does so, but to be within its own law the State must do so on a principle which is intelligible, rational and bears an intelligible relation to the object which the Act seeks to achieve. There is no such relation here.
The people who thought up this tax do not give a damn whether it is workable. There was only one thing in their minds and that was to apply a crude punishment to the middle classes, to the residents of this road or that road in Deputy Shatter's constituency and mine and many others throughout the country. They would like to hear them squeal. There is somebody to whom the standards of the middle class appear pathetic, pitiful, who would not know where Deputy Shatter's constituency was or mine, and he is laughing but it would take a bit of thought, principle and intelligible reflection to get at him and that is beyond the capacity of the gentleman who thought up this measure.
It seems to fall on me always to follow the best act in the House. I say that with respect to Deputy Kelly who made a very cogent argument against some of the inequities, injustices and anomalies in this Bill. The points made by Deputy Colley and Deputy Shatter, both of whom have considerable legal experience, are right on the button and go to the root of the inequities and anomalies.
I have put down amendments to this market value definition in so far as it relates to section 88. They deal with almost all the points raised by Deputy Colley, Deputy Shatter and Deputy Kelly. My amendments try to get rid of these anomalies, inequities and injustices which exist in this Bill — the deletion of the unencumbered fee simple in section 88 and the guarantee that the valuation of the property will be limited to valuations for residential use. This will always be affected by developments and the sales of properties nearby which might not have been used for residential use. My third amendment will ensure that mortgages will be taken into account. Those are three key amendments dealing with market value. Each reflects the objections expressed this morning on all sides of the House. These anomalies and inequities were so obvious that we had to submit these amendments.
Let me discuss the unencumbered fee simple of the property. Most lawyers, particularly solicitors, will recognise that an unencumbered fee simple is a rare animal in property title, and Deputy Taylor acknowledges that. Nonetheless, every property covered by this is to be valued as if it were that rarest of rare animals in the property title — an unencumbered fee simple. That is asking us to engage in an outrageous fiction and in respect of all householders to ignore those realities whether there are charges in respect of the family mortgages or other encumbrances, because every title in all our towns is now an unencumbered fee simple.
It is crazy to ask us to pass this section as if it were the norm. I put down my amendment to section 88 to delete that nonsense and I hope I will have the support of all the Deputies who expressed their reservations on it. That is the first fiction we are being asked to enact and it is asking too much of this Legislature, to discuss in a couple of hours a new tax which should take a couple of months. In the limited time available to us since publication, we decided that that fiction was nonsense and this section must be amended and I hope I can rely on the support of the House to have that done.
We put down an amendment to cover the second fiction: after line 21, page 71, section 88, to ensure that the market value is the best price for the property for residential use. We are talking about a residence which people have built, looked after and developed. It is their home. It may be that because of potential development in the area, or houses near the area, the actual value of the property as a residence is less than it would be if they decided to vacate the property and sold it to a property developer in the area with planning permission. Unless the Minister adopts our second amendment, these people are likely to be penalised as their homes might fetch more on the open market because of property or office block development in or near that area.
The valuation commissioners could compare the valuation given with double the price got for a neighbour's house and say that the valuation for property tax reasons was under-estimated. They could claim that that property owner owed them the difference between those two house prices plus the interest over the intervening period. We on this side have an amendment to deal with that matter. We must have finality in this area. Hopefully, we may not get to the point where people have to submit valuations but we want those submitting the valuation to know that on that valuation submitted on the best possible advice — and incidentally they are not selling — they will not be penalised because some neighbour sold his property for twice as much to some developer two or three years later.
I am very pleased that Deputies Shatter, Kelly and Colley, people with experience of dealing in this area, apart from their representative capacity in this House, and Deputy Mitchell before me, have also said that this is no way to discuss this new tax. The least the people out there are entitled to have from us is that we have the time and opportunity to use our professional, practical and business experience and our role as legislators to examine this section in detail in a special committee. New taxes normally come in in the form of separate legislation which we can examine properly.
Preceded by a white paper.
Deputy Kelly is quite right. Preceded by a white paper explaining to us and the public what it is about. It is quite clear this morning — and quite frankly I do not blame him — that the Minister himself does not fully understand this section. How can we expect the public between now and October to understand what their liability and responsibility are? If they do not understand, some may be accused, under section 83, of being guilty of Revenue offences which may make them liable to fines of up to £10,000 or five years' imprisonment. That is the other fiction we are being asked to enact.
I could put down 20 amendments, but one must concentrate on four or five, picking the obvious ones. We are being asked to assume that every house is free of mortgage. There is a very considerable difference between the exceptional house which is unencumbered and in fee simple, perhaps valued at £85,000 or £90,000 and the house valued at that price on which the couple have a mortgage of up to £70,000. Deputy Taylor and Deputy Shatter know that because they are solicitors, and also Deputy Kelly. We are also being asked to enact the fiction that they are not in any way different. The person buying that house will tell you fairly smartly that they are not the same. We are being told, however, to value them as if they were and as if the person living in that mortgaged house wants to sell it, which he has no intention of doing.
It would have been better if it had been put on a much broader basis like the wealth tax which the Deputy's party abolished.
If the Labour Party are saying that they would have liked something better——
Deputy Taylor does not believe in that amendment, either. He has too much sense.
I can speak for myself on this subject. I do not require Deputy Kelly to speak on my behalf. He does not speak for me, judging by his comments here.
Deputy Taylor apparently now sees all the anomalies, inequities and injustices and recognises that what they insisted on as the price for their being together, in a manner of speaking, because they are not together on this issue clearly, was too much to pay, that the wealth tax would have been better. That is a matter for Deputy Taylor. That is not our fault.
The Fianna Fáil Party abolished the wealth tax.
Let us keep out of the political hassle and keep to the relevant issues. We are also told that it would be the price which the unencumbered fee simple property would fetch if sold on the open market on the valuation date. Even though the owner has no intention of selling on that day and intends with his children and his grandchildren after him, to live in that house we are to engage in the fiction that he is selling on that date. The only definition of market value in the law—and it is a fairly good guide—is what a willing purchaser will give to a willing vendor for a property which they both have agreed that one wants to sell and the other to buy. That is a precise factual situation which enables one to say on this day that A wants to sell to B his property C and they both know what they are doing. Then one gets the market value. Here we are talking about a market value which would be notional, as if the owner wanted to sell on that date subject to such conditions as might reasonably be calculated to obtain for the vendor the best price for the property — whatever that might mean in the circumstances. The man does not want to sell it, anyway.
I have put down all my amendments to get rid of all the anomalies, inequities and injustices which are so obvious in this section. I particularly support what Deputies Kelly, Shatter, Colley and Brady have so forcefully said. The amendments which I put down a few days ago cover most of the points but I acknowledge to each of these Deputies that they cannot cover all the inequities. That would not be possible. If we were to make any attempt to discharge our responsibility to the taxpayers, and even to the Revenue Commissioners, we should do as I and so many have suggested: take this section quietly away. The Finance Bill without it will not suffer any great loss. We should examine the section for three or four weeks calmly, in detail, and give the benefit of our objective views on it. We might then begin to ensure that not only do we discharge our responsibilities but that nobody outside this House will be liable for a tax about which he or she knows nothing because we know nothing about it.
There are two elements in the definition of a person who is liable for residential property tax — the capital side when one must own property above a certain value, and the income side on which one's income must exceed a certain amount. Deputy Colley, in particular, but also Deputies Kelly and Shatter, have ruthlessly exposed the artificiality and anomalies which exist on the capital side. I want to point out the artificialities which exist on the income side.
Many forms of income which are exempt from tax for many good reasons are treated as income for the purposes of determining whether somebody has income in excess of £20,000 and is therefore liable for residential property tax. Many forms of allowances and exemptions which are given against income for tax purposes are not given in calculating a person's income for liability to residential property tax. I want the Minister to clarify whether the following is the position. Take the case of a sole trader who carries on two businesses. In the current financial year he makes a profit of £25,000 in one business and in the second business a loss of £20,000. His net income is £5,000. Is it a fact that his income is treated as £25,000 and that therefore he is liable for residential property tax? Could the Minister please clarify that point.
Deputy Brady make some remarks about fluctuating market trends and inflation. It is because of the difficulties and of the particular circumstances which have to be taken into account in view of those two factors that we have provided in the Bill that the property values to be taken into account would be adjusted by reference to the new house price index and fluctuations therein and that the income limits would be adjusted by reference to changes in the consumer price index. Therefore, the concern that led Deputy Brady to make those remarks is covered in the Bill. Deputy Kelly asked a question in relation to the definition of "occupied" in the context of residential property. The Deputy should read that definition together with the definition of "relevant residential property" which, as defined in the section, means, in relation to any person, any residential property in relation to which he is the owner and which is occupied by him as a dwelling. In the case raised by Deputy Kelly, the property would not be occupied by the person as a dwelling.
Deputy Shatter referred to incomes which would not be covered by this tax. There is a good deal in what he says so far as the scope of our taxation system as a whole is concerned. On the other hand it is unreasonable of Deputy Shatter to suggest that we should resolve all the problems and the lack of coverage in our tax system by way of one new tax measure. I would point out to him also that even those who have purchased yachts would normally have paid VAT on them here, but if the Deputy thinks that is not enough perhaps he would suggest ways in which further contributions might be got from those people.
Does that not apply to building materials, to windows, doors and so on?
It is not reasonable to make the point that because there are deficiencies in the coverage of our system we should hold that against any new tax measure to come before us.
There has been much discussion about the question of unencumbered fee simple and market value. Rather emotional terms have been used during that discussion which has been all on the basis as if a tax were to be charged on the unencumbered fee simple or on the market value and therefore would be subject to the criticism that has been adduced in relation to those concepts. But the tax is not being charged on either of those figures. It is being charged on the difference between them and the 1½ per cent — in other words, the tax is not relating to the total of the figures being talked about.
Of course it is.
It is being charged on the difference between the market value exemption limit and the market value of the property.
The Minister can do better than that.
I suggest that there is no inequality so far as this property tax is concerned between a person in an unencumbered-fee-simple situation and one whose interest in a property is under lease for a term of years or for a short term letting. Basically, the tax attaches to the right of enjoyment or use of the property and not to the extent of the person's interest in the property.
Deputy O'Kennedy talked about the estimation of the market value. I would remind him that there is a section in the Capital Acquisition Tax Act which deals with the market value of property. This is section 15 (1) which provides that, subject to the provisions of the Act, the market value of any property for the purposes of the Act shall be estimated to be the price which, in the opinion of the Revenue Commissioners, such property would fetch on the open market on the day on which the property is to be valued in such manner and subject to such conditions as might reasonably be calculated to obtain for the vendor the best price for the property.
There is a difference.
The notion that we are bringing into this Bill is not without precedent and is one which has shown a certain value and effectiveness in the operation of that particular tax.
There are other provisions in that Act that relate to provisions we do not have here.
That is a different question. I am addressing the point raised by Deputy O'Kennedy on the question of deciding on the market value of a property. For those reasons, while recognising the concern of Members of the House regarding the introduction of a new tax, I would make the case that this new tax is not open to all of the criticisms that Members here have put forward. In many ways those criticisms are exaggerated having regard to the way the tax will operate and given the definition we have.
I should like an answer to the question I asked.
Many people have pushed themselves to the limit of mortgage finance in order to provide for themselves the best houses possible. In my constituency there are many young people who are living in what can be described only as very modest homes but because of where the houses are located they have a market value in excess of the £65,000 limit we are talking of. This is a far cry from what the Minister described last evening as the purpose of this tax — to extricate a contribution from the owners of better-than-average type residences. Indeed, local authority houses in the area I represent are costing £50,000 per unit. However, the people I am talking of will now have to meet this additional burden of the residential property tax after paying their mortgage repayments and also the increases in PRSI and so on.
People have made it clear to me that they are not against paying a tax provided the tax is fair, but the tax we are talking of is anything but fair. The move today is towards introducing equity in to the tax system so that people with similar incomes pay the same amount of taxation. The effect of the residential property tax will be to introduce significant and in some cases violent inequities into the system. It will mean that people with similar incomes but living in different parts of the country or perhaps even living next door to each other will be faced with different taxation bills.
Yesterday when dealing with the section relating to VAT we spent a good deal of time debating the reduction from £15,000 to £12,000 and from £30,000 to £25,000. This was by way of attempting to remove the anomaly that existed. We are doing the reverse here. The inequity of the tax can be demonstrated further by taking the case of a person who has a whole portfolio of property and who may live in a luxury penthouse. He would not have to pay the tax.
I have to comment on the Minister's replies to the points made. The Minister has not dealt with those points satisfactorily. He is not prepared to allow any distinction to be made between types of property. Once you have the bricks and mortar you apply the same norm to all, irrespective of mortgages and so on. The Minister must know there are considerable distinctions. If that is the basis on which he is asking us to pass this Bill, let that be known. This is a basic principle of the tax. There is no distinction. We are to adopt the fiction that properties are all unencumbered, fee simple, and that is the end of it.
For the purpose of calculating the value.
For the purpose of calculating the tax liability. We are being told we must adopt the fiction that they are all unencumbered, fee simple, and there is no distinction between them. That is too much to ask of us, irrespective of party whips or anything else. This is the craziest nonsense we have ever been asked to adopt. I do not think any one of us personally wants to be a party to that.
It is just as well that the Minister's position has been exposed for what it is. I am not saying it is a personal position. I do not know where this nonsense derived from, but it is sad that the Minister should ask us to pass legislation on the basis of that fiction. We will not, and we will not make a great political point out of it if others feel they cannot pass this kind of nonsense either. I am glad Deputy Colley is still here. He has much more experience of this in practical terms than I have. The Minister referred to capital acquisitions tax. Understandably his officials drew his attention to the appropriate section.
The Deputy raised it and I had to reply.
The Minister did, and I will reply to him now. There is a very clear distinction.
We all come across these things frequently.
The words the Minister drew on are in the existing capital acquisition tax legislation. Agreed. That is where the analogy has to end. There you are talking of capital acquisitions. You are talking about a change of ownership, a realisation of wealth on which a liability occurs under that legislation if a person acquires from somebody else something one did not own before. There is an identifiable date on which a change occurred in ownership, user, or whatever else.
Without necessarily coming on the market.
How else do capital acquisitions arise?
Inheritances.
There is a change of ownership.
Without coming on the market.
The Minister has not listened. There is a change of ownership. There is an identifiable date. It is an acquisition. We are not arguing the rights or wrongs of that here this morning. There is an identifiable date on which there is an acquisition and you can say: "That is the date from which it has to be valued". There are different views here about property and capital taxation but, if you are in favour of it, it is feasible and sensible to work it on that basis.
Here it is not that way at all. There is no point in the Minister drawing terms from the capital acquisition legislation and saying: "We had it before and it is the same here". Here we are being asked to assume the fiction that people who intend to live in their house, and whose children will stay in the house, will be selling the house on some date, when they have no such intention. That is very distinct from what the Minister is drawing from the capital acquisition legislation. The difference is so obvious that, if the Minister suggests there is no difference, that further underlines how untenable his case is. I do not think I should proceed any further. I am beginning to wonder whether we should go ahead and vote on the sections and the amendments. It is quite clear that a number of Deputies have reservations. Deputy Taylor is now developing reservations.
Not true.
He wishes we had a wealth tax at this stage instead of this nonsense. We will see if the Deputy can make something of this nonsense. We are trying to get rid of the inequities and the injustices and anomalies. I do not think we can do that in another two hours.
What the Deputy is trying to do is to scrap this small measure of capital taxation.
If it were that it would not be objectionable.
I hope the Minister will deal precisely with my arguments and not try to draw a veil over the matter by saying: "We have these words somewhere else. There are no distinctions". Clearly there are distinctions. I have given the reasons for our amendments but, even if we put down five more amendments, we could not get rid of all the inequities and anomalies. We have done our best. This should be taken out of the House for a month or five or six weeks. There is a measure of agreement on this which I have seldom seen in this House. Perhaps we can help the Minister and help ourselves too and the public will see that we are not a circus all the time, or entertainers at any time, and we can be serious and do something useful. This might be the day on which we could start to give that example to the public.
Listening to what I can only describe as the howls of anguish arising from this very modest measure in this tax Bill one would assume that outside this House an immense protest was going on about the suggested imposition of this tax. Such is not the case at all. People who will be affected by this tax fall into a rarified category. I have spoken to many of them about this. Nobody has protested about this tax to me. The comments I got from people who recognise that they have a liability to the tax are that this cannot be faulted, that it is reasonable and modest enough.
People said to me: "I live in a very substantial house. I have a good income." What is the amount involved here? About £100 or £200 in the overwhelming bulk of the limited number of cases involved. People outside say it is reasonable enough and cannot be faulted. In this House we hear howls of anguish which are very different from the response outside. In my constituency people live in houses worth £70,000 or £80,000. That is modest and not excessive. Perhaps the income into the house is £25,000 or £30,000. In this day and age that is modest. That argument has been put forward on my right and on my left.
It has not.
"These are hard-working people and this is modest enough, nothing exceptional, not unusual". When you describe something as modest — and that word was used — you must realise that "modest" is relative. The overwhelming bulk of people — perhaps 95 per cent — do not fall into the category that the value of their house is £70,000 and the income coming into the house is upwards of £20,000. Some might qualify on one count and some might qualify on the other count. The numbers that qualify on both counts are very rare. I know a lot of them are concentrated in the constituency of Dublin South with perhaps a few in Dublin South East but there are not too many of them in Dublin South West.
Deputy Taylor without interruptions.
We come now to the rarified category who are affected. What is the effect? One would think, to hear the howls of anguish here, that the amount of tax involved was draconian, that this was — I cannot remember the words used by Deputy Kelly — an intensive attack on the major standards, either capital or income, of the people involved. This is not the case. The amounts involved are modest in the extreme. One could reasonably bring forward a criticism that capital taxation should produce an appropriate amount that would at least make some visible easement of the tax paid by the PAYE sector in relation to the income side. I believe Deputy Kelly, to some extent, is making that valid criticism. I agree with him in relation to that. Of course, the £100,000 yacht in Dún Laoghaire should be taxed in some way. It would have been until Deputy O'Kennedy's party laid their hands on the wealth tax. It was at that time, but they got rid of it quickly enough when they got their hands on the reins of power. The fact that this measure, limited though it is, modest though it is, does not tax the £100,000 yacht in Dún Laoghaire should not be a reason for saying even the little bit that is there should go too. Are they saying that the £100,000 yacht is not included and therefore we will have nothing on this category whatsoever?
Deputy Kelly raised a question concerning on what principle the tax is brought in. The principle is understood very clearly by the man in the street, and I believe it is understood very well in here but it is hedged with amendments to cut out even the modest amount that it is envisaged to bring in. There are two basic principles. A person lives in a house which is way above the national average and the income coming into the house is around £20,000 a year, approximately £400 a week. There are many thousands of people who have an income of £60 or £70 a week coming in on social welfare. Will somebody tell them that we should not have a residential property tax of £100 or £150 a year where somebody is living in a house worth £70,000 or £80,000 and £400 a week comes into that house? If you go round to those people at election time and you tell them that this tax is unreasonable, or that there is something wild about it that warrants the anguish expressed here by some Members on both sides of the House, what will those constituents say to you? This is a very reasonable tax. There is no outcry about it outside the House. I have had letters protesting about the Nova radio station but I have not had one letter protesting about this tax. I have spoken to people involved in this, many of whom are constituents of Deputy Kelly and Deputy Shatter, and their universal response has been that they accept the tax, that they feel it is reasonable in all the circumstances and that they regard it as modest. That is the response which has been put to me.
I support this measure in the Bill not because I feel it is in any way adequate in providing revenue from the capital taxation source but because it is the only form of capital taxation element introduced in the Bill. The overwhelming bulk of the people would demand from their public representatives that there be a more equal balance brought about in relation to taxation on capital and income. That does not apply at the present time. This is the best that can be brought forward in the present composition of the House. One would think, having regard to the very limited number of people affected by it, who raise no objection about it and who can well afford it, that the Members who have spoken so long and hard about it would stay quiet on the subject. With regard to what is involved in it, the number of people affected by it and their position, one would think that silence would be appropriate — make a point on a section but just accept the principle. There has been very strong argument on the broad principle and one would think that a more political approach would be to remain silent on the subject and accept the principle as reasonable and modest instead of putting down amendments to try to chip away the little amount proposed to be raised in revenue in this measure. There are a couple of queries I want to raise on the Committee Stage, which indeed has been turned into a Second Stage debate. I have a couple of points on some points in the section.
It has not been turned into a Second Stage debate. It is a very comprehensive section of the Bill and covers a very wide field.
I was indicating that some of the speeches were tending in that direction, no doubt my own included. I want to ask the Minister the reason for the distinction drawn and the need to bring in a separate subsection on the definition dealing with the question of a lease that exceeds 50 years as against the question of a lease that would be less than 50 years. The first point I want to make is in relation to line 49 on page 68 which describes the lease as "the duration of which exceeds 50 years". That seems to me to be a bit ambiguous. Is that intended to mean a lease which originally had a term of upwards of 50 years, or could it mean a lease with a term of 50 years unexpired as from this particular time? If the intent is that it should mean a lease with a term originally of 50 years I think the wording is perhaps a bit ambiguous. I believe the wording used in the Income Tax Act, 1967, in the definition of section 80 would have been a better wording for that. It states: "A lease granted for a term exceeding 50 years". Perhaps the Minister would clarify that.
May I ask the Deputy for clarification? Is he suggesting that, if it was originally for a period exceeding 50 years but has only four years to run, it should be included here?
I am querying the possible ambiguity of it as it stands.
Which would the Deputy propose? I thought the Deputy was suggesting that the definition should be of a lease exceeding 50 years from the date the lease was drawn up. There might only be four years to run on that lease. Surely the Deputy would not suggest that that should be included as an unencumbered fee simple?
No. I am presuming that what the section is intended to cater for is a lease which when originally granted was upwards of 50 years. I am querying whether there is an ambiguous element in the definition as it stands at present.
Irrespective of how long the lease remains, does the Deputy think it should cover the original date and term of the lease?
Yes, of course, because these leases, as I am quite sure Deputy O'Kennedy knows, are renewable leases under the Landlord and Tenant Act and the Ground Rents Act. One can go into the thing in greater detail but a lot of talk has been made about unencumbered fee simple. People who have not bought out their ground rents in these cases are entitled to buy out the fee simple. Frankly, from a valuation point of view, does it make much difference whether you are entitled to buy it out or whether you have bought it out? The practicality of it is — and Deputy O'Kennedy knows this — that it makes little difference, if you have a lease of, say £5 a year or whatever, when you have the right to buy it out, as a residential occupier does under the landlord and tenant legislation, whether you have actually got around to doing it or not.
I should like to have the benefit of Deputy Taylor's professional experience here.
Any time.
Let us have it for the floor of the House, then. If one has a 50-year lease which is about to run out, say in three years time, and be renewed, surely the Deputy knows from his practical experience as a solicitor, which I have not had in that way, that the terms of the new lease can be very different from those of the existing one. It seems extraordinary for the Deputy to suggest that you have a right of renewal but that that does not make any great difference because you could pay a lot more for your new lease after renewal.
What I do know is that the landlord and tenant legislation provides that the terms of the new lease are the same as the terms of the old lease. What I also know is that under the terms of the landlord and tenant legislation one of the categories of people entitled to buy out the fee simple are people who are owner/occupiers. They are precisely the people who are referred to here.
The terms in the case the Deputy has mentioned do not include rent in that sense.
True.
That is very relevant.
Yes, but the landlord and tenant legislation, as the Deputy must know, provides that the fee simple in an owner/occupier situation can be bought out at a very modest price. There are certain overall provisions for the acquisition of the freehold interest by an owner/occupier.
I want to go on then to ask the Minister, dealing with the case of a lease which originally had been for the duration of a period of less than 50 years, at the time it was granted such a lease could have been a renewed lease itself; and in view of the fact that a rent reserved under a short-term lease as originally granted was at a modest ground rent, could it be that, having regard to the circumstances which existed at the time that lease was granted, that was an arm's length situation? The section dealing with this is on page 69, lines 10 to 25. That subsection does take cognisance of the circumstances which existed at the time that lease was granted and other circumstances. Therefore, if you had a situation in which a lease originally had been granted for, let us say 40 years, and at that time perhaps granted in consideration of the premises having being put into repair or something of that nature, when consequently the rent reserved might have been £10 or even £20, nonetheless that would have been an arm's length situation. Is it the position that a person holding a house in those circumstances would be exempt from the tax by virtue of that section?
My final point is that the distinction appears to be drawn here — and I do not know that it is a valid distinction — at page 69, line 32, between a person holding a property at the will or sufferance of another person — in other words a tenancy at will — and, on page 70, at lines five and six, where a person holds the property as a caretaker. There seems to be a distinction drawn there between a tenancy at will and a person who holds under a caretaker's agreement. I should have thought that broadly they would be the one category. There is a provision in that part of section 84 that, if a caretaker's agreement is made at arm's length, the tax would not apply. Could the Minister clarify how one could determine whether a caretaker's agreement was made at arm's length or not? The normal procedure on a caretaker's agreement would be that one person owns a house, he puts another person in, no rent is paid and the basis of the agreement is that he looks after the house as caretaker. That is the standard arrangement under a caretaker's agreement. I find some difficulty in following there how the question of arm's length in the context of a caretaker's agreement could arise. Would this leave a possible opening to avoid this tax by the owner putting in another person under a caretaker's agreement with the sole responsibility of looking after the house? Would that be a possible method of avoidance of this tax?
I might revert to the first point I made — and I think it is a valid one to make in the context of this section as a capital taxation measure. It refers, of course, and is confined to the question of residential property that a person occupies. There is great play about that — the home, the residence, so on — and that tax should not apply to that. Ironically, that is the one item that was excluded from the wealth tax, the person's own residential property. Yet, excluded though it was, that was the tax that the Fianna Fáil Party when they came into power were at pains to get rid of as quickly as ever they could.
I heard here this morning a number of excellent speeches on both sides of the House. I am glad to say I heard the Minister reply to them.
The Minister for Finance is an able man but he found himself today in the unenviable situation that, able and all as he is, neither he nor anyone else could defend the indefensible. The points that have been made simply have not been answered.
This tax is ill-conceived, it is idiotic and inequitable and has been proved to be all of those things. If by any chance it is passed through this and the other House, there is no question but that it will be challenged in the High Court and the Supreme Court at a very early stage. While one hesitates to make any definitive forecasts about the outcome of cases, I would be very surprised if this tax is not found to be unconstitutional on more than one ground. If one applies the principles that the Supreme Court, for examciple, applied in the Murphy case, clearly it breaches the principles that the Supreme Court laid down in Murphy. You have the same old thing again that we were supposed to have got rid of, that it pays a couple financially to live together but not to get married. Of course they benefit clearly from this and the Supreme Court presumably will set that aside because it will be found to be discriminatory against couples who are married. If you like, that is only one of the minor side issues; it is not one of the fundamental effects of this whole provision. There are so many glaring inequities which will be found to be discriminatory as between citizens that the prospects of this tax surviving any length of time are fairly negligible.
The more obvious anomalies and inequities have been referred to in a succession of speeches here today. I am sure, if we had the time to go through it all and analyse it line by line, we would find there is a ludicrously long definition of "owner" and references to rents over and above a certain level. One could spend hours speaking on the sorts of anomalies that could arise.
Deputy O'Dea asked a short, straightforward question to which he did not receive a reply. The Minister waffled on about other things. The reason Deputy O'Dea did not receive an answer is that he is right. The definition of "income" is gross income, except with the most limited number of deductions. Deputy O'Dea gave the example of a sole trader who carries on to two separate businesses, making £25,000 on one and losing £20,000 on the other. His income is £5,000 a year but for the purpose of this tax his income is £25,000 a year because that is the gross figure and therefore he is liable, although presumably it is not the intention that someone earning only £5,000 a year would be liable.
Most of the debate concentrated on the anomalies which exist on the capital side but there are enormous anomalies on the income side also. The Chinese concept of the extended family has been introduced, to the detriment of the family. If someone, as is quite common in this country, were to make provision for his mother or mother-in-law and bring her to live with his family, the family could be caught for this tax if she had an income of about £5,000 as a result, say, of the death of her husband. The obvious remedy is to ask the mother or mother-in-law to depart to the county home or somewhere else where she will be a burden on the State because by kicking her out the family will save the tax on the dwelling.
The gross income of minor children is also aggregated and one might have a child who had been left some property by a grandparent or an uncle and who derived some income from that property. What should one do with that child? Is the child to be kicked out of the house? On a strict reading, even if that were done the income would still be aggregated for the purpose of this tax.
What view will the High Court or the Supreme Court take of this ridiculous tax which has been cobbled together for the worst of reasons, not, as Deputy Kelly rightly says, because it will work or because anyone thinks it will work but because it is politically and ideologically necessary as a sop to the Labour Party. Members of that party will make the kind of speech we heard from Deputy Taylor when he talked in a grandiose way about how great it is to have a tax on big houses. People who have not studied the Bill or studied some of the commentaries on it think there is something basically equitable about this tax. I have read some of the commentaries by tax experts. They tend to express themselves in rather cold and rational terms but even such men are carried away in wonder at the nonsense that pervades this part of the Bill.
The Minister does not fully understand the significance of the argument he tries to make when he equates the unencumbered fee simple with any other kind of title. The definition of "ownership" refers to a lease, the duration of which is 50 years or more. Forty-nine of those years may be expired. How can one compare the value of a house held under a lease with one year to go and a similar house with an unencumbered fee simple, which means that it is owned forever? How can it be said that both houses have the same value? Does the Minister or any Member of this House seriously think that the Supreme Court will approve of this tax when under this fictional notional system two houses of the kind I have mentioned will have the same value for the purposes of this tax? The Supreme Court will laugh that out in two hours; it will not get even to lunch time on the first day. Still we have to go through this procedure and enact this nonsense.
It is easy to challenge people on the other side and ask them to put their feet where their mouths are. They should seriously think about this point. It will be politically embarrassing for them, whichever way it goes. They can either enact it, against their clearly and eloquently expressed better judgment, and wait for the Supreme Court to tear it to shreds, or they can put a stop to the nonsense now and tell the Minister to produce some workable equitable tax that bears some relation to reality. They may not want to vote against this measure but I would ask those who have spoken and others who know this tax is farcical to consider abstaining.
Deputy O'Kennedy made the point that when a totally new system of taxation is introduced it is brought in by way of a special Bill preceded by a White Paper and the principles of it are argued at length. The famous turnover tax in 1963 was argued at tremendous length until Members of this House were blue in the face and value-added tax, although not a fundamentally new tax because it was really a European adaptation of our old turnover tax, was introduced by way of a White Paper and a special Bill in 1972 and debated in great detail. The whole principle of it was discussed throughout the country for a year or two before it was brought in, but here we have a totally new tax dreamed up under pressure — and not in the Gaiety this time. I think this emanates from the Savoy in Limerick.
It was a house out in Ballsbridge. That is where they met.
Yes, but I think it got the imprimatur in Ballsbridge after the Savoy in Limerick, if I am not mistaken. Whether it was Ballsbridge or Limerick, it certainly did not get much technical examination whatever rapid political expediency had to be met by it when it was cooked up. I do not envy the Revenue Commissioners or the people who drafted it because it is totally unworkable, and it will be unworkable, and it will probably be set aside in any event by the Supreme Court at a very early date.
We heard all these cries for equity today. Apart from the inequity of treating a one-year lease the same as an unencumbered lease where is the equity in taking a £80,000 house, which is quite common nowadays in this and every other city — not a very elaborate establishment by any means — subject to a mortgage of £60,000 so that the value of the owner's interest is £20,000 but making him pay tax on £80,000?
Take another example. One could go on all day long giving examples. Take the example of a situation which is unhappily becoming increasingly common. Take the case of someone who was working in Cork. His firm transfers to Dublin. He has to buy a house in Dublin. He puts up his house in Cork for sale and he cannot sell it. He is on bridging finance, tremendously expensive on a house in Dublin carrying 22 per cent to 23 per cent interest. He still has the house in Cork unsaleable. For the purpose of this tax both houses are aggregated. If they are both worth £70,000 he is regarded as the occupier of £140,000 worth of residential property. He may be paying about £1,000 per month in interest alone on bridging finance. That man in that situation — I know a great many of them now — is crucified financially. He is now assessed under this bit of nonsense for another £2,000 or £3,000 because he has what Deputy Taylor calls the equivalent of a yacht owner in Dún Laoghaire.
The whole thing is farcical and those who are in a position to stop it should stop it and do the country a service and do themselves and their parties a service by bringing this to an end. This House has often enacted laws which subsequently proved unworkable or unconstitutional but it can be fairly said that this House never deliberately or consciously did that until today. If the House enacts this law this day, it will have deliberately and consciously enacted something that 90 per cent of us who sit here know cannot work and cannot survive challenge in the High Court.
This debate highlights more than ever before the need for Dáil reform. I agree with Deputy Taylor that the debate has drifted into a Second Stage debate. I think the Minister would be the first to admit it would be a pity if we did not have this kind of discussion on the Second Stage because this section is undoubtedly filled with loopholes. One would almost think that those who drafted it felt themselves it was a tax over which they could not stand. It is so riddled with difficulty I cannot see it working. Deputies get carried away with a great deal with bonhomie and cameraderie with their partners here but just let me put into context the climate in which this Bill has been introduced, a climate created by our friend over there on the Fianna Fáil benches. We should not forget the task the Minister has. He has to raise money.
On a point of order, I think we had an agreement that this type of speech dealing with general budget principles would not be made on the Committee Stage.
I suggest the Deputy should deal with the amendment.
We have a duty to find the money to pay our debts. It would have been more honest if, instead of having nine amendments, Deputy O'Kennedy proposed that the whole section should be opposed. If there are so many loopholes that would have been the more correct way of doing things.
Is that the Deputy's opinion?
I am saying Fianna Fáil would perhaps have been more honest had they opposed the whole section. They seem to be looking for the best of both worlds.
That is the Deputy's opinion.
I am entitled to say that. Many speakers have wandered in the debate but I agree with a great deal of what has been said. Coming to the tax, the only value of residential property is the value the residents get out of it, namely, the living value. It is only when they go to sell the house that it become a financial asset or financially valuable. A house, whether it has five bedrooms or three bedrooms, has the same value from the point of view of the people living in it because they are using it only for living in. The imposition of a tax on residential property is something we must argue against. On that basis this tax is built around an illusion. The Minister should seriously consider the arguments advanced and bring in appropriate amendments on Report Stage designed to make the tax workable so that it will bring in this £6 million. There is no use introducing a Bill which will only gather dust. Deputy Taylor described this as a limited and modest tax which will bring in very little. As it is it will probably create problems which will outweigh the benefits the tax might bring. The Minister has been taking careful note of the difficulties that may arise and I am sure he will bring in appropriate amendments on Report Stage.
I have been intrigued listening to some of the points made. I could not help observing that among the vast majority of the speakers on both sides from the legal profession there is a kind of disconcerting unanimity on this part of the Bill. Sean O Faoláin said in his book The Irish that the lowing of cattle is the leitmotif of Irish history and you can equate cattle with property in that context. Anyone studying the Brehon Laws and looking at Binchy's lecture in 1943, the John Reith lecture on the Brehon Laws, will be convinced about the battles fought by the predecessors of the majority of the contributors here this morning on the question of property. The only concession that was made to the Church, the only inroad that the Church, which was all powerful at the time, could make on the question of property — I come back to a point Deputy O'Malley made about the extended family — was that all the family under Brehon Laws had to agree that Church land would be ceded to the Church.
As someone interested in social history, I could not help being interested in the tone of the debate here. It would be a contradiction to hope for enlightenment but there have been some very welcome technical observations. I have no objection as a member of the Labour Party responsible for this and I make no apology for it wherever it was drafted. We are speaking about equity. I have no objection personally to somebody sitting down and looking at the objective merit of the technical objections provided we are agreed on the broad principle that the Bill is based in equity. It was Fianna Fáil who abolished the wealth tax. I know at least one member of the legal profession who under the wealth tax returned his capital acquisitions at £98,000 deliberately year after year to stay below the threshold. He told me that himself. I believe that what is proposed is fundamentally equitable because it will be progressive, vertically and horizontally. The late Limerick city manager used to tell us that this country had the highest proportion of owner occupied houses in Europe — 70 per cent. So it is only a matter of time before most people come into the realms of this proposal. Listening to some of the lawyers speaking I am reminded of Macbeth: "Methink the lady doth protest too much". I bought my house in 1958 for £1,250. That was then the price of an ordinary, urban semi-detached house. That house today would fetch about £25,000, roughly 20 times its value. Some of us used to scream about the banks and insurance companies benefiting from inflation. We all benefited from inflation and will continue to do so in that context, so it is only a matter of time until we all come into that. The advantage of what the Minister proposed, and I support him unequivocally in his search for equity in this situation, is that we are all going to move into it at some stage and it will go up vertically and out horizontally.
This is very optimistic. Lift up your hearts.
Let us take the example of somebody in a house valued at present at £85,000 with a salary of £20,000.
Be careful. You are making the opposite argument to the Minister.
Ni chuir mise isteach ort.
I am trying to save the Deputy from a horrible fate.
Vertical or horizontal?
Worse than death. I am prepared to go through that. Take the example of somebody with a house valued at £85,000. He is paying only 1.5 per cent over the threshold of £65,000. He is paying £300 a year and with an income of £20,000, that is £400 a week, he would only be paying £6. I do not think that is unfair or savage.
Somebody mentioned the disparity in the leases and things like that. I would imagine that somebody could apply a differential to that type of thing in a value context. We in the Labour Party are saying that we believe this is a fair tax and we support it fully and unashamedly. We believe it is progressive and that it is the fairest way of trying to achieve what the Government are trying to achieve. Who can say that 1.5 per cent over £65,000 is penal? If anything it is unrealistic in what it proposes to do in terms of yielding revenue for the State. I support the Minister fully and unequivocally on that.
The Minister's reply on a couple of things did not satisfy me, to put it mildly. To get back to Deputy Prendergast's point, I have not heard anyone allege that this tax is likely to be penal in the sense of being objectively oppressive and excessive. I live in a very good house away above the average, in the sense the Minister intended — only by accident it is true but the House will not want to know about that. I calculate that my liability will be substantially less than I would now be paying in domestic rates if the rates system still existed. I do not object to paying that relatively small imposition. However, I want to know on what rational basis this tax is being imposed. Deputy Prendergast spoke with creamy sarcasm about the disconcerting unanimity among the lawyers on this Bill. What we are doing here is passing a piece of paper into law. If this is not a moment when the lawyers can get in, when can they get in? When might they be given a relatively clear run if not when criticising something which this House proposes to make law?
Property as such is not an issue here. There is a linguistic confusion here deriving from the fact that people talk about house property. We are dealing only with the dimension of one aspect of property, namely house property, and house property that a taxpayer himself happens to live in. If Deputy Prendergast or Deputy Taylor or anyone high or low in their party from Deputy Spring down to the man in the back room who bashed out this document seven or eight months ago——
We are all equal.
If somebody can explain to me an intelligible basis which will be immune from constitutional challenge on which this dimension of that aspect of property, generally speaking, has been singled out for taxation, then I will eat a lot of what I have been saying. I have not heard that from Deputy Prendergast or Deputy Taylor. Somebody happens to live in a house somewhat above the average — and it is not that far above the average because Deputy Doyle said here a while ago that in Dublin city a local authority dwelling is £50,000 a unit. People who are not able to afford any kind of a roof over their heads on ordinary commercial terms and look to their neighbours to supply it on ordinary social grounds or solidarity are living in houses which cost something only a spit away from the threshold which this Bill lays down.
The properties are somewhat above the average but what about people with cars better than the average or with two or three cars where others like myself, for example, run one and it is seven years old with 100,000 miles on the clock? What about that form of property? Where is the intelligible basis for distinguishing one from the other?
A car will diminish in value. A house is an appreciating asset.
House property increases in value. What about the man or woman, and the country is stiff with them, who owns not one but two, three or a string of houses?
I do not know many of them in my party.
I know very little about the people in the Deputy's party or my own for that matter. I could not tell you the personal business of my colleagues here or of most other people; but I do know because all I have to do is to go around and look at the bells on the doors in the enormous areas of the inner suburbs and the outer suburbs on which I have knocked at election time for the last 14 years. I know that colossal tracts of Dublin city are not owner occupied but are flatland. Even in the new suburbs people are buying houses as an investment and letting them out to a transient population. During the Cork by-election in 1979 I canvassed an entire privately built estate. There was scarcely an owner occupier in the place. It was very hard to find names on the register which corresponded with the people on the doorsteps. What about that form of poverty? I thought there was a whole wardrobe full of rhetoric that could be deployed against Rachmans and people profiteering on the necessity which others experience to have a roof over their heads. They are let off here.
This is like standing the wealth tax on its head. In the 1975 wealth tax which the party opposite, much to their discredit, opposed at the time and subsequently scrapped, the principal private dwelling of every person in the State was exempted. It was only when it got to the wealth a person had in addition to that that the tax began to bite. However, the crazy coons who thought this thing up want to do it the other way around. Every form of property is to be exempt, whether it be yachts, shares, horses——
The Chair has some difficulty in recognising this as a Committee Stage speech.
I yield to no one in my admiration of the Ceann Comhairle and Deputy Ryan as tenants of the Chair but one minute we are running free on a fairly loose rein and the next minute we are drawn up with a rather painful start, depending on the alternating of yourself and your colleague.
The Chair does not believe in a tight rein but neither does it believe in taking the bridle off.
I accept that. The whole thing has no rational basis that I have heard in the House. With regard to the section dealing with definitions, I asked the Minister if he could assist me with regard to the problem of somebody who lived in one house and owned another which he habitually let but which happened to be untenanted on 5 April. In theory, it was accessible to him to change the use, to put in a member of his family or even to live in two houses, but at the same time he might be liable for the tax. The Minister answered my worries about the definition of "occupied" by pointing to the expression "relevant residential property", meaning property in relation to which the person concerned was the owner and which was occupied by him as a dwelling. However, in order to understand what that means I have to go back to the word "occupied" in an earlier stage of the definitions section. That tells me that "occupied" means having the use of property whether actually used or not. Even within the frontiers of this fatuous legislation there must be some common ground for reason between the Minister and the rest of us. I hope he will clear up the doubt I raised, and not just by giving us an assurance that is not part of the law of the land.
With regard to the appeals by Deputy O'Kennedy and, I think, Deputy O'Malley that we should not rush through this matter and that it should be sent to a committee, I sympathise with that idea. I have a double sympathy with it when I hear Deputy O'Malley appearing to agree with me that conceivably this is constitutionally defective. In my judgment — although I may be wrong — it contains flagrant discrimination. Deputy O'Malley appealed to the House not to do something with its eyes open which it is specifically forbidden to do by Article 15. Deputy O'Kennedy pleaded for the referral of the matter to a committee. I sympathise with both points of view. It is difficult to be certain about a legal opinion. I do not think that one's view of the constitutional dimensions of the Bill, even if unfavourable, would necessarily lead one not to vote for it. The reality is that in a party, like ours, or the party across the floor of the House or, I suppose any party, one's conscience is respected but on matters on a somewhat lower plane, one has to be bound by the majority wisdom. Under that rule I consider myself bound by the majority wisdom of this party even though I profoundly disagree with it.
What will happen at the end of the day or next week, unless there is a miracle, is that the people will get a law that at least 95 per cent of the Members of the House do not want, do not see any sense in and which they think is rubbish, in the very same way that we will have a referendum about which the same could be said. I do not think there are five Deputies in the House who could genuinely explain the need for the referendum, who believe it is necessary or who could say why it is necessary. Nevertheless we will get it just the same because of the crazy way politics are organised here. We close off the most obvious option, in the way the previous Government did, doing business with Deputy Gregory and The Workers' Party and Canon Horan rather than doing business——
The Deputy is departing from the measure before the House.
I should like some information about the procedure from now on. At what time it is envisaged that this part of the Bill will conclude?
I am obliged to put a composite resolution at 3. p.m.
Perhaps the Chair would have some sympathy with this side of the House in this regard. We have some amendments down which are of substantive significance. One is to permit the deduction of the capital value of a mortgage from the value of the house for the purpose of this tax. The second is to confine the income in so far as the income limit is concerned to the income of the husband and wife and the third set of amendments is to try to have some rationale as to the value of the house from the point of view of residence. These are three broad principles we are trying to implement with a view to making the tax somewhat rational, if that is possible. From the way we are debating the amendments it appears we will not get to vote on them. Can the chair offer us any help? Will it be the position that at 3 p.m. there will be a composite vote without regard to the quality of any of the proposals?
The Chair is anxious to facilitate Deputies in any way it can. Unfortunately the Chair's hands are tied by an order made on 24 May and confirmed yesterday by this House. The Chair has no discretion in the matter. At 3 p.m. I will put the resolution that will bring this part of the Bill to a conclusion.
Is there any way in which we could, for instance, isolate in advance of that composite motion amendment No. 118?
We have been debating this section since 11 p.m. yesterday. It is up to Members of the House to decide how long the House will spend on any amendment or any section. For example, the House could nod through ten or 20 amendments in a few minutes and spend the rest of the time dealing with one amendment. The Chair has no control over the matter.
I endeavoured earlier to nod through these technical drafting amendments.
It appears to me that when the amendments to section 84 were disposed of and when the question was put that the section, as amended, stand part of the Bill both sides were keen to have a Second Stage debate.
Deputy Kelly succeeded in bringing in the Constitution.
Well, he did not succeed for very long. He had a swipe at it.
He had a swipe at other things too.
I do not think this section goes far enough. I have no doubt that if various property holders want to have this declared unconstitutional it may well be possible to do so. As we have seen over the years, the Constitution very much favours property holders and the bigger they are the more it favours them. I am not an accountant or a lawyer, but I have listened to the points which were raised and most of them are related to inequities that already exist in the housing market in relation, for instance, to bridging loans. There is no doubt that that is an inequity in the system of transferring houses from one person to another. Any person, wealthy or otherwise, should not have to pay 23 per cent on bridging finance. Clearly, it affects most those who are buying houses costing about £25,000 because they cannot afford a more expensive one.
I do not think this property tax can be faulted because there are inequities in other parts of the housing market. If I am following the debate correctly, the Minister is proposing to reduce the take from what he originally proposed. The original section is now being amended by the Minister and the net effect will be to reduce the amount of tax which it is possible to take. I cannot see that anyone in all seriousness can claim that a tax of £150 per year on a family with an income in excess of £20,000 and living in a house worth more than £65,000 is a gross imposition. I do not think it is unfair.
One of the points raised in relation to it was that the income of a number of members of the family would be taken into account. The question was also asked that, if the income of a son or daughter was taken into account: who was going to pay? Presumably, the person in whose name the house is will have to pay. Again, I cannot see that that is a logical objection. There are hundreds of thousands of local authority tenants whose family income is taken into account in assessing the rent which is paid. The principal income is the largest income, whether it is that of the person who is a tenant or not. The person who is obliged to pay the rent is the tenant although it is not necessarily his income that is taken into account as the principal income in that house. What is sauce for the goose is sauce for the gander in relation to that aspect of the Bill.
Deputy Kelly indicated that those who supported this were in some way vindictive towards people who live in large houses. I am certainly not vindictive towards anybody. It is simply a question of trying to introduce equity into our taxation code. We have spent hours upon hours debating this section and I have to draw the contrast between the time spent of this section, which is attempting to extract taxation from people who are relatively well-off, and the time that was spent on debating the 1 per cent levy which applies to everyone across the board, even those who do not earn enough to be in the tax net. It was passed with hardly a whimper.
We voted against it.
I did not see many Deputies in Fianna Fáil or Fine Gael making as strong a case as they have done against this property tax.
We tried to. There was not time.
Your party, your Chief Whip and the Chief Whips of Fine Gael and Labour set the time for the debate, so I do not accept that time was not allowed. Time could have been allowed if this House was agreeable.
The Deputy should address the Chair.
Deputy De Rossa is not fair in that regard. We sought to oppose it.
The Deputy's party sought to oppose it but there was no willingness to do so judging by the amount of time and the number of people who came in here to debate the issue.
That is not true.
There was a very strong debate in relation to farmer taxation which had ranks of Fianna Fáil people in here protesting about the inclusion of 90,000 farmers in the tax net. There was also a much less comprehensive debate with regard to widowed persons when we sought to bring in equity for them in relation to tax allowances and mortgage interest relief. The debate was over in a matter of five minutes. I could accept the concern of Deputies in regard to the inequities in the section we are discussing if they had shown at least as much concern for other elements of society who are being virtually ground into the dust under the weight of taxation. I simply want to make the point that I am among the 5 per cent or 10 per cent of the Members of this House who favour property tax.
I raised a number of questions.
I appreciate Deputy Haughey's concern in relation to proceeding with the rest of it. The questions raised by Deputy Taylor and Deputy Kelly are covered by the terms of the section as it is. If the Deputies wish to have a further discussion we can do so now, otherwise we will proceed to the next section.
Is it the case that a dwelling owned by a taxpayer, not inhabited by him but which happens accidentally to be vacant on 5 April, is not going to be caught by this residential property tax?
That is the case, yes.
I move amendment No. 113:
In page 70, line 25, to delete "assessable".
Amendment No. 114 in the name of Deputy De Rossa and Deputy Mac Giolla has been ruled out of order.
Would the effect of this be that the residential property tax would be a charge on the person or on the property? If the tax is levied would the tax run with the property if the property was to change hands from one person to another?
No. The tax would be assessable on the assessable person. I am anxious to make it clear to the Deputy that that is the case if he is thinking of what would happen in the case of a property changing hands. If a property changes hands from one person to another then, obviously there would be a totally new situation depending on what other property the new owner would have.
The new owner would not carry the old liability with him?
No.
Amendment No. 115 in the names of Deputies Mac Giolla and De Rossa has been ruled out of order.
I should like to give notice that following, some further reflection I have had about this section, I intend to bring forward an amendment on Report Stage to clarify the position of persons resident but not domiciled here in relation to their liability to this tax.
We were aware of the point but we decided not to pursue it.
I move amendment No. 116:
In page 71, subsection (1), line 20, to delete "the unencumbered fee simple of".
This is a very clear cut proposal by us to try to improve the equity of the tax. I believe that Deputy De Rossa, and Deputy Prendergast who has left the Chamber, will agree that if we are going to have the tax it should be as equitable as possible. The point has been ably expounded by Deputy O'Malley. There may be two houses with different types of title and the proposal in the Bill is that it does not matter what the title is they should both be taxed on the basis that they have perfect fee simple titles. That is grossly inequitable. I will not delay the House on this but I recommend it to the Minister, and the House, as something that is simple, plain common sense, fair play and equitable.
I oppose the amendment for the reasons we have already discussed. I stress that the tax in question is not one that is being charged on the total value of the property, it is not one that is being charged on the income of the person. The tax is one that is being assessed by reference to the net market value of the property. It is a tax, one might say, on the enjoyment and use of property and the level of income and the value of the property are the two parameters of assessment of the tax. For that reason I oppose the amendment.
The Minister mentioned the net market value of the property but surely he used a very technical way to describe the net market value if he is not taking into account any encumbrances involved.
It is the net market value as defined in the Bill. The point of the amendment is to take account of encumbrances of the title of the House in assessing the starting point for the calculation of the tax. Since the tax is not directly concerned with the property itself but rather with the enjoyment or the use of the property the question of whether or not there are encumbrances on it is not directly relevant.
What the Minister is doing is taking the phrase, pardon me for living — he intends taxing a person for living in a house. That is going a bit far.
I move amendment No. 117:
In page 71, subsection (1), line 21, after "sold" to insert "for residential use".
I do not think we are going to get anywhere today because I do not think logic, reason or argument are of any importance today. I believe the whole process of parliamentary debate is being rendered totally nugatory by the way the Minister is treating the legislation. For those reasons I will not delay the House. In the amendment we are trying to have some semblance of rationality in this business. The Minister has just told the House that people are going to be taxed not because they have or own property but because they live in it, they enjoy the property. We are trying to confine the tax to the residential use. If we are taxing people because they live on a piece of property then they should only be taxed on it on the basis of its use as a residence, as we are trying to do in the amendment. We want to make sure that the market value of the house is looked on as a residence and from the point of view of its residential use. That is exactly in line with what the Minister said a few moments ago.
I am afraid I am going to discommode and surprise the Deputy by saying that I accept the amendment.
We have won the argument.
And Deputy Kelly is not present to hear that.
I move amendment No. 118:
In page 71, subsection (1), line 23, after "property" to add "less the amount outstanding on a mortgage or home loan in respect of a principal private residence of the assessable person on the valuation date".
I should like to warn the House that we intend putting this amendment to a vote because it is crucial to the whole concept of equity.
It may be accepted.
It is crucial to the whole concept of equity in regard to this absurd tax. Deputy O'Malley, and others, have put this argument so clearly that it is irrefutable. If Deputy De Rossa must have this tax I know he will agree with us that it should be equitable. His argument is that the bringing in of this tax is equitable but once it has been brought in as a tax it should be equitable as such. That is what we are trying to do in the amendment. We are trying to equate the different taxpayers. If one person has a house worth £100,000 with a mortgage of £80,000 that person is only worth £20,000 and if another person has a house worth £100,000 and does not have a mortgage that person is worth £100,000. I do not think any system of taxation anywhere in the world would tax those two people on the same basis. In this case we are trying to say that the property shall be valued by taking into account the capital value of any mortgage outstanding on it. I should like to make the point that we are confining it to a mortgage outstanding on the principal residence. None of us has any great sympathy for those people who can afford a second residence and we are talking about the principal residence and the mortgage outstanding on it. These days it is a heavy enough burden on a householder to pay the cost of a mortgage. We suggest that that is a sufficient imposition on the householder without at the same time having that mortgage totally ignored from the point of view of this new tax.
I do not accept this amendment. The procedure being set out in this Bill is not, as Deputy Haughey suggested, without precedent. Up to a few years ago we had a tax which took no account of the fact that one owner of a house worth £X on a different basis had a mortgage and another person with the same kind of house worth the same amount did not have a mortgage. We did not have any adjustment for that in the rates but that is not the point.
The Minister is talking about rates.
Yes. I am making the point that it is not true to say that the kind of procedure proposed in this Bill is without precedent. I am opposing this amendment because since the tax is being imposed on the occupancy of the house, the question of the net real interest in the house is not directly relevant.
Surely it must be relevant because it is the value of the house which determines how much tax a person is going to pay. It might not be relevant from the point of view of the concept of the tax as a tax, but it is terribly relevant for the amount the unfortunate taxpayer will have to pay. I cannot see how the Minister can even attempt to make that case to the House because one man will pay a certain level of tax and the other will pay ten or 20 times that amount. This is relevant and should be taken into account.
We are talking about a tax and the use and enjoyment of a house. That is not directly affected by the question of whether a person who owns a house has a mortgage and his neighbour who owns the same kind of house does not have a mortgage.
The person who has the mortgage is already getting tax relief on the interest element of his mortgage repayments.
That did not apply to a resident of this kind.
This amendment highlights the ludicrous situation in which we find ourselves. Every system of taxation should be equitable, and unless this amendment is accepted, it will highlight the total hypocrisy behind the Bill. The Minister is hiding behind technical relevance, use and enjoyment.
In many parts of my constituency there are young couples, both of whom are working to pay for their mortgage on their homes valued over £65,000, and because they have a joint income above £20,000 they have to pay this residential property tax. These couples have large mortgages on their £65,000 or £70,000 houses. They are not mansions. In many cases they are four-bedroomed, semi-detached houses valued over £65,000 because of the values of the property in that area. These people are working to pay off their mortgages but there is no incentive for them to work in what the Minister is proposing. There is no equity if credit is not given when a mortgage is involved. How can the Minister tax a couple in a £70,000 house if they have a mortgage of at least £40,000? I abhor the principle behind this proposal and this amendment highlights just how inequitable this proposal is. This Bill discourages incentive and this is a classic example. In all justice the Minister should give credit for a mortgage because these couples are working day and night to buy a home of which they can be proud and to provide a proper home for their families.
I will deal later with the fact that the Minister is not confining the income to the husband and wife but is including the income of the children, because there are many anti-social aspects involved here. We have listened all morning to Deputy Kelly and Deputy Shatter ease their consciences, but when we call a vote those Deputies, together with their Fine Gael colleagues, will vote the Minister's measure through. So will The Workers Party and the Labour Party. What we are voting on today is not a measure which deals with equity; it is a cobbled version of a cobbled deal to bring the Coalition into existence. It was one of the terms of this Coalition's formation.
Do not forget it is on the floor of the House, not residing in the Library.
We are dealing with amendment No. 118. There is an anxiety to get through as many amendments as we can, and I ask Deputies to co-operate.
The reality of the situation is that we will be voting on the ideological sop to the Labour Party, and despite expressions of disgust by Deputy Kelly, Deputy Shatter and others, they will vote through a totally unfair and unjust taxation system against the best interests of initiative and incentive at a time when we should be encouraging people to buy their homes and try to improve their lot. All we are doing is bringing in a totally unjust and inequitable taxation system. Deputy De Rossa would be in favour of an equitable taxation system, but even he and his party could not under any circumstances say that this measure, which will not give credit for a mortgage, is equitable.
I want to recall all the arguments made on this side of the House this morning. I have had the advantage of having my lunch but the Minister did not and I am pleased to note that we seem to have had one amendment accepted, but that was not the main issue on which we argued this morning. Our discussion was to treat all properties as if they were unencumbered fee simple. If there is one thing that stands out from the others which should be taken into account, it is the situation where a person has a mortgage of up to 80 per cent or 90 per cent of the value of the property. The Minister said this was not relevant. He seemed to say that whether a person had a mortgage or owned it in fee simple made no difference. Of course it makes a great difference. A person becomes liable to the income related property tax because of the value of the house, and the amount he pays is determined by the excess over £65,000. The difference between a person who owns his house and a person who has a 90 per cent mortgage must be clear to the Minister because there is a vast difference between them. He does not have the same right or the same clear title to the property, or the same basic ownership to the property, as the other.
He has the same enjoyment and use of the property.
That is a different matter altogether.
Do you really enjoy your property if you have to pay an enormous amount of money every month in mortgages?
I want to remind the Minister of the title of the proposed tax, but perhaps it was Deputy Taylor and his colleagues who thought it up. It is an income-related property tax. It is an income tax related to property. There is no question about that. It is a hybrid, of course. The Minister must recognise that the person who has to make mortgage repayments will not have the same income capacity to pay this tax, if his house exceeds £65,000 in value, as the person who has no deduction in respect of mortgage on the property. Whether in terms of equity or otherwise, he is not on a par, in terms of an income-related property tax as the other person is. Clearly the two are very different from each other. One could give many examples but the Minister does not require us to do that at this stage. We could quote figures of one person whose income was £30,000 with a property valued at £70,000 unencumbered. He is much better off than the person with £21,000 income and a £90,000 property encumbered with a mortgage. The Minister knows that.
If one is going to introduce a tax of this nature and is concerned about equity, this flies totally in the face of equity, as also does the Minister's refusal to accept our previous amendment on the unencumbered fee simple. The Minister does not require us to prove to him by any of a variety of examples that a person who escapes a liability or has a very low liability could be much better off than a person with a heavy mortgage on a house which might be notionally more valuable and with an income just above £20,000. That is one reality.
The second reality is that when one is talking about mortgaged as distinct from unmortgaged houses, one is talking by and large of married couples. We have spent a long time arguing all the principles and reasons and nothing that I heard before the lunch adjournment answered in any way the cogent arguments made from all around this House. I do not suppose that I will hear any reasonable reply now. If the Minister says in relation to this crazy tax and the manner in which he has developed it that we cannot correct it, let it be known as the Dukes' equity. The public will see it as being a better example of a Dukes' inequity.
I speak in support of this amendment, which is asking a minimum. It is obvious that the Minister should accede to it. I have taken some time to try to understand the resistance to this amendment. It is quite obvious that the resistance is due to the huge number of people involved. Of the 150,000 mortgage-holders operating on an average figure of about £25,000, one-third of that figure are young couples who have married and are both earning, perhaps for the first few years of marriage. Real revenue will accrue from that hard-hit sector and hence the resistance. If that is not the reason for it — it is not? I am very pleased to hear that from the Minister. Having heard that it is not——
I am saying they are not necessarily the people who will be paying the tax.
I have pointed out to the Minister a very valid argument for supporting Deputy O'Kennedy's reason for accepting the amendment.
How can the Minister's Department equip itself with an army of valuers to value homes for which private individuals cannot possibly be expected to strike market values? That is ridiculous. If a home is possessed by poltergeists, who will determine its value? The section says that striking the market value cannot be done by self-assessment, that one must engage professional valuers and that will cost the private individual more — that is, unless the Minister has in his Department a sea of valuers readily available to do this work. How many valuers are available at the moment in the Department?
I find myself in agreement with Deputy O'Kennedy when he described this section as a minor ideological irritant, although it could turn out to be a somewhat major ideological irritant. I want to raise a few brief queries with the Minister on section 88.
We are now on the amendment.
This relates to the amendment with regard to the allowances for the mortgage. Subsection (3) states that any charge to tax shall be made by reference to the market value estimated by the inspector and not by reference to the market value estimated by the person. Would the Minister please tell me the exact appeal procedure against that? I am sure that it is spelt out in the Bill, but cannot find it. It is specific and appears to suggest that there are very little grounds for challenging or overturning that valuation. Perhaps the Minister might deal with that query in reply.
Another part of section 88 touches on our amendment:
if sold in the open market on the valuation date in such manner and subject to such conditions as might reasonably be calculated to obtain for the vendor the best price for the property.
Why should the Revenue Commissioners be entitled to take the best view of a sale of a property? Why would they not, as everybody in this time of recession, take the worst view? Why write into our legislation that the Revenue Commissioners shall take the best price for the property? That is a luxury which nobody else has in this economy. If the Revenue Commissioners were the sellers, perhaps they might not take the brighter view of things. If the person sells the property a couple of months later and does not get that best price, will the sales prices be deemed to have been the value a month earlier and will the money be refunded?
No, it will not.
It is nonsense to put such a phrase into legislation in the present recession. Does the best price imply that the House is painted, the grass cut, the photographs which the auctioneer has look good? That section should be taken out of this Bill pretty quickly.
In regard to our own amendment, the whole principle of our taxation must be based on what people have as disposable income, what they have left after they have paid their bills. Any Minister for Finance with any human touch would not look at gross incomes these days. He would be looking at the take-home pay. One cannot look at disposable income without looking at the greatest single expense. Let him look at his household budget and at his surveys. The biggest single item of expense for anybody is his or her house mortgage. Yet he has chosen to ignore in this legislation that that is the situation. After paying a substantial mortgage there might be no disposable income left and in that case the Minister would be talking about taxing a mythical figure. Section 88 is designed as are other sections to give the Revenue Commissioners the inside track in everything. It is a provision that should be removed now from the Bill.
Has the Minister any view as to the rights of building societies in this matter? Let us suppose that a solicitor is trying to sell a house for a client. If the debt has not been cleared on the house in terms of property tax, can the solicitor sell the property openly and honestly without regard to whatever tax has built up on it? The Minister will probably give the answer that this is an individual tax but I want that put clearly. My main objection relates to the question of the best value of the property on the open market. If the Minister is not prepared to accept the amendment in the name of Deputy O'Kennedy, he is saying that he is not taking any account of the biggest single item in household budgets. In bringing legislation before the House the Minister should think in terms of a person's disposable income. It is irrelevant to talk about gross incomes. If the Minister has regard to his own disposable income compared with his gross income he will find that there is a big difference. Disposable income is what people have to spend and not some mythical figure referred to as gross. The next generation will not even know what gross means because there will be such a difference between that and disposable income.
This appears to be a reasonable amendment in relation to mortgages but it would probably create a few problems and perhaps a further outlet. What we have here is a very complicated piece of legislation for what should be a simple tax. About 12 months ago we endeavoured to cost the suggested tax on second houses which are becoming a common feature in our society but the Department of Finance said it was not possible to do so because they had no information or no method of collecting the information in regard to second, third or subsequent houses and that the only type of property tax they could suggest would be a tax on houses valued at £50,000 or £60,000. We were not talking then about the type of tax proposed here. We were talking about a property tax on houses other than on main residences. Apparently that is not feasible because there is no way of collecting information in that connection. Here we have the position of a tax on the main residence, that is, where a person both owns and occupies the property.
There is a net point in this amendment and I should like the Deputy to keep to that point. If we reach the section before 3 o'clock, the Deputy may speak to it then.
The point is that if mortgages are exempted from the tax or are related to it this leaves an escape clause for a person to take out a mortgage and purchase another property and let it without having to pay the tax on it. The new house would be free of tax because of there being a mortgage involved. This opens up a new escape clause. There appears to be justification for the tax but at the same time there is the question of income limits and also the offsetting of interest against tax. To pass the amendment would leave a further escape clause for those people who should be taxed more. We could deal with the situation by imposing a tax on second or subsequent houses.
There is a tax on those.
Deputy Brennan asked some specific questions. First, he asked in relation to subsection (1), whether it was reasonable to assess the value of the property on the basis of the best price that might be obtained for it. There are two points in that connection. We already have an amendment down to that subsection in which we are using a definition of the market value of property that is enshrined in other legislation in relation to capital taxes.
Regarding subsection (3) this operates if the inspector is not satisfied with the estimated market value of any property as returned by an individual. Therefore, this would not apply to all of the cases. We will be asking people to provide a self-assessed value of the property and subsection (3) will apply only in the event of an inspector taking the view that the value supplied is not correct. I would refer Deputy Brennan to amendment No. 164 which introduces an appeals system so far as the valuation of property is concerned.
I asked the Minister how many valuers there are in the Valuation Office?
There are approximately 40 but it would not be the case that every property in respect of which tax would fall to be paid would have to be valued. That is why we are providing for self-assessment.
These valuers estimate the values from their desks mostly.
A Cheann Comhairle, may I remind Deputies that they are now voting on an issue as to whether——
Deputy O'Kennedy is out of order. I must deprecate that very much. Deputy O'Kennedy is not only out of order. He is grossly out of order.
, Dún Laoghaire): It has been agreed to extend the time for dealing with those sections to 4 o'clock.
Does that mean it is proposed to introduce an omnibus motion at 4 o'clock to conclude the Committee Stage?
(Dún Laoghaire): Yes.
We appreciate that.
Amendment No. 119 in the name of the Minister, amendment No. 121 and amendment No. 123 are related. The three amendments will be discussed together by agreement.
I move amendment No. 119:
In page 71, lines 31 to 38, to delete subsection (3) and substitute the following subsection:—
"(3) If the Commissioners are not satisfied with the market value of any property estimated by any person, or if they consider it necessary to do so, they may, subject to the same conditions and requirements as apply in the case of that person, estimate the market value of that property and, where the market value as so estimated by the Commissioners exceeds the market value estimated by the person, any charge to tax shall be made by reference to the market value estimated by the Commissioners and not by reference to the market value estimated by the person."
Those three amendments have to do with the fact that we are amending the text of the Bill to provide that the Revenue Commissioners will administer this tax through their capital tax branch. These amendments are consequential on that particular change.
The Minister might tell us a little more. It is nice to know that the Revenue Commissioners are dealing with it through one branch or another. We have been reading through those amendments, Nos. 119, 121 and 123 at great length without seeing precisely the impact of what the Minister is saying. If it is purely administrative that the Revenue Commissioners will deal with it through their capital taxation branch as distinct from some other branch, if that is the case I cannot see any reason for these amendments. Perhaps the Minister would explain it a little further in layman's terms because the amendments are very detailed.
We referred to this earlier in connection with amendment No. 93. In each case we are taking out the reference to inspector and all the pronouns associated therewith and making the reference in each case to the commissioners rather than to an inspector.
I move amendment No. 120:
In page 71, subsection (3), to delete lines 35 to 38.
This amendment deletes lines 35 to 38 of subsection (3) in page 71.
Our amendment must have got mistyped.
Perhaps I could help the Deputy. My understanding of the amendment is that we would delete from subsection (3) of section 88 the words "and, where the market value as so estimated by the inspector exceeds the market value estimated by the person, any charge to tax shall be made by reference to the market value estimated by the inspector and not by reference to the market value estimated by the person". Those are lines 35 to 38 of that subsection. The intention of the provisions of this Bill is that as far as possible the tax should be paid by self-assessment based on the valuation of the property carried out by the assessable person. Nevertheless, we have to recognise that there will be cases where the assessable person under-estimates the value of the property. Section 88 (3) empowers the Revenue Commissioners to substitute their own estimate of the market value. Those are the words proposed to be deleted.
I want to make the point, for the reassurance of the Deputies opposite, that the assessable person will have a right of appeal if he is dissatisfied with the assessment made on the basis of the Revenue Commissioner's valuation. That is provided for by amendment No. 164.
Since our amendment was put down the Minister has, in fact, amended the section we were proposing to amend and, on that basis, we will withdraw our amendment.
Amendment No. 121 has been taken with amendment No. 119.
I move amendment No. 121:
In page 71, lines 39 to 45, to delete subsection (4), and substitute the following subsection:
"(4) The market value of any property for the purposes of subsection (3) or section 94 (2) shall be ascertained by the Commissioners in such manner and by such means as they think fit and they may authorise a person to inspect any property and report to them the value thereof for the purposes of this Part and the person having the custody or possession of that property shall permit the person so authorised to inspect it at such reasonable times as the Commissioners consider necessary.".
On amendment No. 121——
It has been discussed already with amendment No. 119.
So it is now out of order to query anything on it?
It is not in order to discuss it now.
I move amendment No. 122:
In page 71, subsection (4), lines 40 and 41, to delete "in such manner and by such means as he thinks fit and he may authorise" and substitute "by authorising".
The purpose of this amendment is to ensure that you do have a properly authorised and qualified valuer to deal with the property, as distinct from what can happen under the existing provisions of subsection (4) of section 88 which says:
The market value of any property for the purposes of subsection (3) or section 94 (2) shall be ascertained by the inspector in such manner and by such means as he thinks fit and he may authorise a person to inspect any property and report to him the value thereof for the purposes of this Part and the person having the custody or possession of that property shall permit the person so authorised to inspect it at such reasonable times as the inspector considers necessary.
The important words being "in such manner and by such means as he thinks fit and he may authorise a person to inspect any property...." We propose to delete those words by simply saying "by authorising", which would leave the appropriate part of the subsection reading: "... shall be ascertained by the inspector by authorising a person to inspect any property and report to him the value thereof for the purposes of this Part...." As the subsection stands at present it is much too vague, loose; there is no way of knowing how the valuation process will be undertaken by the use of the words "in such manner and by such means as he thinks fit". If, on the other hand, he has to authorise, as would be the consequence of our amendment being adopted, a valuer from the branch that the Minister has said will be involved in this, then what the Minister is hoping to achieve, and as far as our amendment is concerned, would be quite the same. I cannot see why anyone should insert anything as vague or loose as the terminology that is there. The Minister has said that the intention is that this will be dealt with by the Valuation Office.
That is not so.
The valuation of the property — well, it is self-assessment in the first instance. But, in terms of the application of this, which section of the Revenue Commissioners will be dealing with it?
Capital taxes.
Who will be advising them in terms of valuation?
It is up to the Revenue Commissioners to decide.
It could be any person who has any experience, or no experience——
——or any means.
For any purpose, for any means——
Think of a number.
Surely the Minister does not want that to happen. There is a specific section in the Revenue Commissioners who have the qualifications, though not always the time. I might say in passing that one of the great risks is that what has become a practice, even up to now because of a lack of adequate staff and facilities in the Valuation Office, will become an even more widespread practice, that is the practice of desk valuations. Anybody who has known anything about that section of the Revenue Commissioners, who has served as Minister for Finance, will know that that is a widespread practice even at present. I should say quite clearly I am not making any criticism of the staff there, quite the opposite, but, even the most highly competent professional staff cannot be expected to make valuations from their desks. I would prefer at least that those people who are the qualified people would be those who would be concerned. If the Minister does not accept our amendment it can be any officer, anywhere in the Revenue Commissioners, who puts a valuation on property here. Heavens above, that is going too far. Surely, if the person making the self-assessment presents a valuation which is reported by a duly qualified, authorised valuer, he is entitled to balance on the other side and not have anybody, in any manner, in such way as the inspector thinks fit putting a figure on it which could make him liable to a significant overpayment for the time being? And remember if he does overpay he will not get his interest back. That is unreasonable and I hope the Minister sees that it is.
I appreciate the point made by Deputy O'Kennedy, but with respect, I would say that his amendment does not appear to cover the case he is making. The text, as amended, says that the inspector shall, "in such manner and by such means as he thinks fit and he may authorise a person...". What the Deputy's amendment would require me to put in is that the market value shall be ascertained by the Revenue Commissioners by authorising a person to inspect.
Well, we could say "a duly authorised person", if you like.
The difference is that you are leaving out the words "in such manner and by such means" which I would consider would be appropriate in order to allow of the proper flexibility and proper response to each problem. The person in question, in either the Deputy's text, as he proposes it, or in mine, can be a qualified person who does not necessarily have to be from the Valuation Office. I am also anxious to make allowance for cases in which the matter can be dealt with otherwise than by sending a person, whoever that person might be, to value the property.
I might reiterate that we have provided, in amendment 164, for a procedure of appeal against the valuation, so that there is an appeal against the valuation and an appeal against the assessment.
Might I make two brief points — we have matters of more significance to deal with — first of all, it is not surprising, as I said this morning at the very beginning, that because the Minister has introduced amendments to the very Bill he introduced a while ago, while we were arguing all during the week, amendments that we have not had an opportunity of looking at until this morning, the amendments we put down before his amendments came in obviously, are in a sense, not now quite to the point, as much as they were when the original Bill was introduced. That is a further illustration of the ridiculous position in which we all find ourselves here, having to deal with a new tax of this nature without even having the time to consider amendments that came in here while we were speaking into the late hours of last evening and the previous evening, with no opportunity whatsoever to examine the impact of the Minister's new amendments. I want to protest about that again. We are being forced to do it and we must live under that constraint. I hope the public will forgive us for not doing the job as well as we should.
That said, the Minister, in view of the changes he has made, if he finds that my words do not quite fit the case, I will be quite ready to say: all right, I am not wed to these words. We are agreed, I think, that it will be a properly qualified person. If the Minister was prepared to tell me now that he is willing to look at a form of words — after all he has more facilities available to him and perhaps more time over the weekend than we will have acting on our own individually — then I would be quite prepared to say: right, I will not press this. The Minister has available to him all the services of the Revenue Commissioners and the legal draftsmen who perhaps have not been working until midnight every night over the last week, and who might have an opportunity of looking at this to ensure that it will be a properly qualified person who values a property.
I might make a point for the comfort of Deputy O'Kennedy. The text I have here is similar to the corresponding text in the Capital Acquisitions Tax Act. Obviously it would be a concern of the Revenue Commissioners to have the valuations carried out in a proper manner. What I am concerned to do is to allow them some flexibility, so that the operation can be carried out in the most convenient manner possible. We have added in, with amendment 164, a further safeguard that there is provision for an appeal in this connection.
Apart from the absurdity of attempting to patch together any kind of repairs on this Part, I must say, that apart from that, I am very much on the Minister's side in this regard. I do not think the expression "by such means as he thinks fit" could be construed, these days, as conferring an unlimited discretion on the Revenue Commissioners to behave unreasonably or arbitrarily. On the contrary, the whole thrust of the way the courts have interpreted an expression of this kind in recent years has been to the effect that the Revenue Commissioners, in making use of these powers, must behave reasonably and within the frontiers of what is objectively related to the purpose of the Act. In this case, that is visible from subsection (1), where they have got to try to reach this valuation by a route which will bring them to the market value of the property — admittedly calculated in a particular way. Any route which is not calculated to bring them to that result, which arbitrarily envisages, as Deputy O'Kennedy said, a desk valuation or something like that, I believe would be quite out of court even though not specifically ruled out here. I think his apprehensions in this regard are somewhat unfounded.
This section is unsatisfactory and the amendment has not quite grasped the problem. The phrase "in such manner and by such means as he thinks fit" is too vague. I might be accused of paranoia about the tax people if I were to suggest that the Revenue Commissioners could appoint an inspector of taxes instead of a valuer who would call to the house in order to value it or adopt any other means such as talking to the neighbours or interviewing people. He might decide when calling to the house to make some other notes as to various items of wealth in the establishment. The section leaves open the possibility of a direct visit by an inspector in order to assess the value of the house and he might do a little survey as well. Perhaps I am being unduly sensitive but both the amendment and the section are far too woolly.
In view of the fact that amendments have already been made by the Minister, this is one case where we will just have to hope for the bona fides of both the Minister and his officers. I will not press this amendment.
There is a similar provision already in force in the capital acquisitions tax which has the same wording.
We have argued that point on other issues and I do not think the analogy holds.
Certainly the analogy holds. They are assessing the market value of a property. The commissioners will also have other means of ascertaining the market value of a property in that they will have information on sales in the open market of similar properties. The appeals provision is built in.
I and some of my constituents share the opinion expressed by Deputy Brennan of the view an income tax inspector might take if he visited a property. However, it can be assessed in a different way without visiting the property. The emphasis should be put on that kind of assessment.
I am concerned to leave open that possibility.
It is very important.
Could the person visiting the house be a tax inspector?
It could.
I move amendment No. 123:
In page 71, lines 46 to 48, to delete subsection (5) and substitute the following subsection:
"(5) Where the Commissioners require a valuation to be made by a person named by them, the costs of such valuation shall be defrayed by them.".
I move amendment No. 124:
In page 71, subsection (5), line 48, after "Commissioners" to insert "and if agreed by the assessable person this valuation shall be final and conclusive, provided however if the valuation of the person authorised by the inspector is less than the valuation of the assessable person, the excess tax paid shall be repaid forthwith to the assessable person with interest at 1.25 per cent. per month or part of a month from the date of payment to the date of repayment.".
This amendment is designed to make provision for the repayment of interest in certain circumstances. Some people will be so anxious to ensure between now and October that there is no risk of being penalised that they will over-estimate their valuations. We feel that if there is a difference, in such exceptional cases, between the valuation made by the authorised officer of the Commissioners and that given by the assessable person, then that person should be entitled to the repayment of interest when it transpires that his liability should be less. This is to balance the fact that the Commissioners become entitled to interest payments on amounts in excess of the owner's assessment.
On a point of order, at what time is the question to be put?
At 4 o'clock.
There appear to be two effects which are desired in this amendment. The first point is that if the commissioners value a property and the assessable person agrees, this should be regarded as final and conclusive. Secondly, if the commissioners have a property valued and conclude that the value is lower than that set by the assessed person, an appropriate refund of tax and interest should be made. As far as the first proposal is concerned, one does not know how many properties will fall to be valued annually and it might not be possible for the Revenue Commissioners to have every case fully investigated every year. There will also be cases where people will under-value their properties. It would be desirable that the Revenue Commissioners would have a certain latitude or discretion in this matter of agreeing valuations. For that reason I would be inclined to resist the first objective of the amendment but I would also draw attention to the fact that we have provided for an appeals procedure so there is a protection against what might be considered unreasonable behaviour on the part of the Revenue Commissioners. The second point covering a refund of tax and interest in the case where the valuation would be found to be lower than that stated by the assessable person is provided for in section 97.
Will such refunds be made?
It is provided for in section 97.
Let us deal with the first part. Surely it is reasonable to suggest that if the inspector requires a valuation to be made by a person named by him and if that valuation is agreed by the assessable person, the valuation should be final and conclusive. There must be some degree of finality and the next amendment deals with this matter of finality in regard to a different issue. If one person agrees with another on the basis of an offer, proposal or value, then there is an agreement and it is final and conclusive. If the officer of the Revenue Commissioners sets a certain valuation and the citizens accepts that value, it is essential that it should be final and complete. We are moving into new territory here so there really must be a principle involved when a person does what he is asked to do, meets the bill as presented to him and does all required of him. In those circumstances he should not run the risk of being open to a further charge in respect of something he has agreed on. It is as simple as that and it is a retrograde step on the part of the Minister to reject that principle. I do not know on what basis he does it. He says he does not want to have his hands tied. Remember, it is the Revenue Commissioners who will put the value on this and the citizens will be required to agree and pay up. I do not see why it should not be final and conclusive. I do not know what other reserved powers they would want after that. Otherwise there is no advantage at all in coming to an agreement with anybody. That is why I was anxious it should be a properly qualified person. I presume it will not be somebody on the sixth floor in Government Buildings who will send someone out to examine the situation. I presume there will be higher standards than that. Assuming they apply proper standards and come to a value and the citizens accept that, surely then that should be final and conclusive. There should be no qualification about it. The citizen too has his rights.
Here we are right into the question of arbitration on the acceptance of a particular valuation. Very definitely a slur is being cast on the association of surveyors and valuers. I am just wondering is this a safeguard because the Minister will not have confidence in his own valuation. If the value is agreed it should be axiomatic. Why not just accept it? Why involve the person in more expense? This underlines the fact that again this section is unworkable from a practical point of view.
I understand the concern of the Deputies on the other side but I would like to make the point that this cuts both ways. We have a similar provision to this in the Capital Acquisition Tax Act.
I am hearing that argument all the time. I want the Minister to read the similar provision.
I shall do that although it is not at all relevant to the substance of my point. Subsection (3) of section 15 of the Capital Acquisition Tax Act, 1975, reads:
The market value of any property shall be ascertained by the Commissioners in such manner and by such means as they think fit and they may also authorise a person to inspect any property and report to them the value thereof for the purposes of this Act and the person having the custody or possession of that property shall permit the person so authorised to inspect it at such reasonable times as the Commissioners consider necessary.
The valuation of the property is carried out.
It is the next subsection I am talking about, not that one. I want the words added to the next subsection. The Minister will not get away with this. He is misleading the House.
If anyone is misleading the House it is Deputy O'Kennedy because he has not the patience to wait and listen to my point.
The amendment is not made to that subsection.
The valuations are made for the purposes of the Capital Acquisition Tax Act. Where it happens that the valuation turns out to be lower than the one suggested after the application of this procedure the Revenue Commissioners accept the lower valuation. I want to allow flexibility here to do that. Again, should it happen in any year that a large number of valuations have to be carried out and it would not be possible to have all the applications properly examined the Revenue Commissioners would not be tied down, kicking for touch and going for the higher valuation if on a full examination they could accept a lower valuation.
Quietly and calmly I want to deal with this point. The Minister said the words were identical. He read this subsection but it was not the subsection that is involved here. Our amendment is to subsection (5).
The Deputy wants to split words. I was making the point about the system of valuation.
I am talking about the precise words. We are dealing with a provision giving power to the Revenue Commissioners and protecting the rights at the same time of the individual citizen. We have no control at all over the system. What we do here may not affect the way things are done. The system is an entirely different matter. Our role is to make the law and let those who apply the system know the law. Subsection (5) of this section does not exist in the Capital Acquisition Tax Act. That is what we are proposing to amend for the good and sufficient reasons I have already given here so that where the inspector requires a valuation to be made by a person named by him——
For the information of the Deputy, what he has just said about subsection (5) is not true. Subsection (4) reads:
Where the Commissioners require a valuation to be made by a person named by them the cost of such valuation shall be defrayed by the Commissioners.
When you look at subsection (5) of this section and take account of the amendment we have already made, where we have substituted "Commissioners" for "inspector", it is exactly the same thing. I am going along the same line as the Deputy here. The result that that produces in the operation of the Capital Acquisitions Tax Act is as I described and is a result which I would wish to be produced in relation to the operation of this Bill.
What will happen in the event of it not being possible to sell a house, of there being no market for it? What value would be struck in that event? We all know that at present there are a number of houses coming into that category. How will they be valued? Will it be a notional assessment done by the inspector? If a value has been determined and then the value falls will it be possible to get a new valuation?
The elements that would be taken into account in making the valuation should, since it is my intention that we should keep the text of the Bill in a way that would allow us to do it, take account of factors such as the factor that at a given price a particular kind of house proves to be unsaleable. That is clearly something that will have to be taken into account in assessing valuation, preferably by the assessable person making his own return, but then by the person nominated by the commissioners in the event that that situation arose.
So it has to be notional?
Of course it has to be notional because we are not going to require everybody to sell his house in order to collect this tax.
There are houses at present the value of which has fallen very substantially and they cannot be sold even at the lower value.
It would be a question of assessing what the market value of the property is. If it happens that a given size of house in a given area has proved for a couple of months to be unsaleable at the price of £72,000 obviously that figure does not represent the market value of the house.
With regard to the second question as to what would be the situation if house values are falling, it is for that that we have an appeals system which provides that, for example, if in the first year of the operation of the tax an assessable person were to declare the value of his house to be, say, £70,000 and in the second year of operation of the tax he found that taking all the factors into consideration that kind of house would not fetch £70,000 but might go for £62,000, he would return £62,000 as the value of the house. It would be up to the commissioners then to decide whether or not they accepted that. If they decided to contest it obviously what was happening in the market would be a factor to be taken into account and in any case at that point the appeal procedure would be open to the assessable person.
I am most unhappy about this appeals procedure. The Bill reads:
...reference to the market value estimated by the inspector and not by reference to the market value estimated by the person.
I know there is an appeal procedure but I assume it is similar to the procedure in the ordinary taxation cases. If it is, it means going before appeal commissioners. If it means that, who will pay the cost of taking that case to the appeal commissioners? Will the State bear the cost or will the person bear the cost? I know the ordinary procedure is that the person pays the cost, but there is one difference. At present most of the people who appeal are in business and it is in the nature of their business to have to deal with tax queries and to an extent they have funds available to do that. The average householder will not have a budget to take on the appeals commissioners and to pay for professional advice because one would not dream these days of taking on the Revenue Commissioners without professional advice. I see an additional cost to the householder in appealing this tax. Could the Minister tell me how much it will cost? I heard people last night throwing around figures like £150 or £500 but if one has to go to appeal on top of that because the Revenue Commissioners are not satisfied one is into fees which might be more than the tax.
Is the Minister conscious of what he is starting here? I can see a new market opening up. In a few months time the advertisements in the property page will say: "House for sale, valued by the Revenue Commissioners at £85,000." They may even put in a phone number so that you can ring your friendly Revenue Commissioner to check if it is worth £85,000. The Minister is starting a field day for auctioneers and valuers.
I wish Deputies on that side of the House would look at what is happening in terms of the operation of similar legislation. Deputy O'Kennedy knows this very well, perhaps better than Deputy Brennan would. Deputy O'Kennedy and I represent rural constituencies and we frequently come across cases where estates, farms and properties are being valued by the Revenue Commissioners for capital acquisitions tax purposes. I have never seen in any newspaper — the Nenagh Guardian, the Leinster Leader or The Nationalist, a property advertised for sale with a byline underneath saying: “Valued at £X by the Revenue Commissioners”.
I will bring it back to the Minister in six months.
If the Deputy makes his case on that basis he cannot expect to be taken seriously. As to the cost of appeals, amendment 164 sets out the appeal procedure. Normally each party pays his own costs. It is in order to avoid a situation where we would get a substantial number going to appeal that I want the procedure before that to be as flexible as possible so that we do not have to get into appeals.
The taxpayer pays his own costs?
In the event that it comes to an appeal.
It is not our role here to get involved in administration matters. What we are dealing with is the legislation. We could spend weeks on end discussing how the Revenue Commissioners do their business. We are pressing our amendment for two reasons. First, it is important to maintain the balance between the citizen and the Revenue Commissioners. If the Revenue Commissioners put a value on the property and the citizen agrees, he should not run the risk that it might not be final. The Minister keeps giving the analogy of the capital acquisitions tax and this tax. As I have indicated on many occasions today, there is no such analogy. In one case there is a change of ownership but in this case it remains in the same ownership. The person is not selling or disposing and there is no effective date.
I was talking about a valuation date. For the operation of the capital acquisitions tax a valuation date is fixed and for the operation of this income-related property tax a valuation date will be fixed. In both cases it is a matter of putting a value on a specified piece of property. They are both similar in that respect. Of course a transfer will not take place in this case. In relation to capital acquisitions tax, frequently we are in the business of valuing a property where no commercial transaction was taking place from one person to another or from one generation to another. I make the point that the experience of previous similar legislation is a reasonable guide.
The Minister has not satisfied the House regarding the criteria for any proposed valuations from his Department. Anyone trying to sell a house on the open market will be told by the auctioneer that the market is so volatile that the property has to be put to auction. It cannot be done in any other way at the moment. I see this as totally unworkable. The market varies from month to month and there is no way to determine a valuation.
All the circumstances referred to by Deputy Brady are met year in and year out in one county after another in the operation of the capital acquisitions tax. In the period it has been in operation, since 1975, some 15 cases have been referred to the property arbitrator. In most cases we would be talking about property valuations considerably in excess of the valuations we are talking about here and about tax liabilities very much in excess of what we are talking about here.
I move amendment No. 125:
In page 71, between lines 48 and 49 to insert the following subsections:
"(6) If, however the inspector does not express dissatisfaction with the valuation of the assessable person within one year of its submission and does not disprove it within a period of two years from its submission it shall be final and conclusive and shall only be increased on subsequent valuation dates by reference to Trends in Private New House Prices Index Number.
(7) On any future disposal of taxable residential property no account, in respect of any valuation date, shall be taken for the purposes of this Part in respect of disposal proceeds unless the property is being disposed of for residential use by the purchaser.".
This amendment is introduced to ensure that after two years a person can be satisfied that the Revenue Commissioners will not come back to him after the valuation has been determined. The Minister has already accepted the principle of the new subsection (7) in the only amendment he has accepted in the whole Bill. Subsection (6) is important. The inspector has a year to accept or otherwise the assessment put forward. We ask that if he does not disprove the assessment within two years it should be final and conclusive. Two years will give the Revenue Commissioners quite a long time. Surely the citizen is entitled to assume that they will not come back to him after three or four years after somebody else has sold a similar property and say that he underestimated the value of his property. Account should be taken of the principles of justice and equity. The Minister has accepted our proposal in respect of residential use and he should be in a position to accept this amendment.
The arguments with regard to subsection (6) are similar to those we have been through earlier. So far as subsection (7) is concerned, I have accepted the wording in relation to disposal for residential use in a different connection but that is not really the point at issue here. Based on the arguments we have had with regard to the previous amendment, I have to say I cannot support this amendment.
Because of the impossible position in which we find ourselves due to the ridiculous time constraint, I will have to leave it at that. The Minister has rejected two fundamental principles. We have raised the case of an honest taxpayer who wants to discharge his responsibility and who wants to be sure that if objections have not been raised after two years that the matter is finalised but the Minister has rejected that. He is also rejecting the principle that would eliminate an excessive value being placed because of a change of use after the date.
If that is the Minister's attitude, so be it. I insist that our amendment be pressed.
I move amendment No. 126:
In page 72, before section 90, to insert the following new section.
90.—(1) In this section—
`general exemption limit' means the general market value exemption limit applying on a valuation date, that is to say, the amount obtained by multiplying £65,000 by the new house price index number relevant to that valuation date and dividing the product by the new house price index number relevant to the valuation date falling on the 5th day of April, 1983;
`market value exemption limit', in relation to an assessable person as respects a valuation date, means the amount of the aggregate of the unit exemption limits attributed to the units of residential property comprised in the relevant residential property of the assessable person on that valuation date;
`the new house price index number' means the Trends in Private New House Prices Index Number compiled by the Department of the Environment and the new house price index number relevant to any valuation date means the new house price index number for the three months ended on the 31st day of March next before that valuation date expressed on the basis that the new house price index number for the three months ended on the 31st day of March, 1973, is 100.
`unit exemption limit', in relation to a valuation date, means the proportion of the general exemption limit in relation to that valuation date which is attributed to a unit of residential property, and shall be the amount determined by the formula—
|
A x G |
|
——— |
|
B |
where—
A is the market value (ascertained without regard to section 89) on the valuation date of the unit of residential property.
B is the aggregate of the market values (ascertained without regard to section 89) on the valuation date of all the units comprised in the relevant residential property of the assessable person.
G is the general exemption limit:
Provided that, in relation to a valuation date, where a unit of residential property is comprised in the relevant residential property of two or more persons, the unit exemption limit in relation to that unit of residential property in the case of the assessable person shall be reduced to the amount which bears to the unit exemption limit calculated without regard to this proviso the same proportion as one bears to the number of those persons.
(2) The amount of the market value exemption limit applying on a valuation date in the case of any person shall not exceed the general exemption limit applying on that date.".
This new section is concerned with setting the market value exemption limit. The tax that we are providing for here is charged on the net market value of the property which is arrived at by deducting from the gross market value an amount known as the market value exemption limit, which is what this section defines. Normally this would be £65,000 with provision for adjustment in future years by reference to the new house price index number. However, where a property is owned and occupied jointly or in common by two or more persons the market value exemption limit will be shared between them. This is to secure as far as possible that the property will pay the same tax whether held solely by one person or jointly or in common by two or more persons. Indexation of the limit is desirable because we have a directly relevant index, which is the new house price index. Secondly, the objective is to secure that better than average properties will be subjected to the tax as the tax is one that one would not wish to put on the average house owner. For that reason providing for indexation of the exemption limit is a proper procedure in a case like this.
The market value exemption limit is defined as a function of the unit exemption limit, that is the proportion of the general exemption limit—£65,000 in the first year 1983 — which is attributed to each unit of residential property and is set out by the formula as shown in the amendment. In that formula A is the market value of the whole of that unit of residential property, B is the market value of the total of the units of residential property and not merely the shares of such property which may be owned by the person, and G is the general exemption limit which, as I said, is £65,000 in 1983. The proviso inserted here secures that where a property is owned jointly or in common the unit exemption limit attributed to the property would be the figure obtained by the application of the formula divided by the number of persons sharing the house.
This is one of the very detailed and complex sections that have been introduced by way of amendment while this debate has been proceeding. I must repeat with very deep conviction that this is no way to deal with this Bill. Unfortunately, we must deal with an amendment as complex as this in two or three minutes and that is quite ridiculous.
I want to make a point in relation to market value exemption which also will point up one of the major anomalies which we will not now have time to discuss. Nevertheless, the point must be made. The effect of this Bill will be that properties which are affected will be valued as if this legislation did not reduce the value. The market value, exemption limits and so on will be determined as if this legislation did not exist. That is the effect of this Bill. Unfortunately, this legislation will exist and the reality that follows from that is that it will affect the market value of houses, the exemption limits we are talking about and so on. Such notions will apply to houses and their market value will be reduced. Ask any valuer in this city whether this legislation will affect the market value of houses and any of them will tell you immediately that it certainly will. The Minister should be made aware of this if someone has not already told him. Scores of people have queued up to tell me so. Each potential purchaser will say, "Yes and what is the liability for income-related property tax and what will it be over ten, 15 or 20 years? If I want to sell it in five years time I must take account of the fact that the purchaser will take account of all this." This is one of the matters of which this new section, lately introduced, takes no account, nor did the section originally introduced take any account of it.
Subject to that, we have not an amendment down for it at this point and we are not resisting it in that formal sense. Had we more time we would resist it not just in a formal way but we would also put down appropriate amendments to it. The Minister must be conscious that the provision of this new tax is inequitable and any valuer in this city will tell him so.
I do not want to get into a deep discussion since Deputy O'Kennedy is not inviting it. I want to take one point that he made. He says that we are creating difficulty in that the application of this tax will be in some way on the basis that the tax is not in operation and fixing of the exemption limits will be done on the basis that the tax is in operation. I am not sure that the Deputy has followed that thought through. If the application of this tax would have an effect on property values generally and the effect of reducing property values generally, that would be reflected in the marketplace. Since the values of properties that will be used to determine the amount of tax will inevitably be related to what is going on in the market, other things being equal——
If you are going to sell——
——that would reduce the values that would be used for the computation of the tax. The Deputy is really arguing in a circle in that respect.
I am not. If you are going to sell the market value will be reduced by the existence of this tax, but the people liable for this tax have no contemplation of selling. They are going to stay on living in their homes.
I would like a chance to ask a question because we are coming near the deadline. I want to avail of this opportunity to ask the Minister one very simple and direct question. Does he really believe in this legislation himself?
That is, as the Deputy says, a very simple, direct question and he will get a very simple and direct answer, which is illustrated by the fact that I have been here sitting from whatever time it was, 3.30 p.m. on Tuesday last to 4 o'clock this afternoon. If I did not believe that what I am doing is worthwhile I would not be here.
That is not an answer.
Will the Minister give some clear indication to the House as to how it is intended that the market value of a new house is to be determined when this legislation has been implemented, if it ever is, bearing in mind that the Department of the Environment issue certificates of reasonable value where the house is a new house? In the first year is it to the CRV value of the house that the tax will apply?
That seems to be the least complex of all matters. If somebody comes along who is assessable and has to return the value of the house, if he can say that he paid £52,000 for that house on 1 April or 1 June this year, it seems beyond question that that valuation will be acceptable. I add for the information of the Deputy that I bought my present house last year at the end of May and when I am making my return for the purposes of this tax I propose, in line with the provisions of the Bill, to take the new house price index at the nearest date to when I bought the house, the nearest date to the date on which the tax is payable, multiply the price of my house by the change in the index and that is the value I will declare for the purpose of this tax. If the Revenue Commissioners wish to argue with me and establish a lower value, I will be perfectly happy to go along with that.
The Minister is in a special position because he is an exemplary citizen and he is in a unique position if he wants to argue with the Revenue Commissioners. If he wants to introduce his own position as an example, I should remind him that by comparison with the vast majority of people whom we have been concerned about during this debate and who have been living in their homes for a considerable time, the Minister, for good political reasons, moved only last year to where he now lives. I do not think he should quote himself as an example to reassure the public. The circumstances are very different.
(Clare): The true value of any house is its market value. I am not saying that everyone should put up their property for sale to find out what the bidding would be; but, nevertheless, it is valued according to the current market value.
Is the Minister aware of the anomalies which exist at present in departmental attempts to determine the value of houses? I am again referring to the Department of the Environment certificates of reasonable value which are being issued by the Department, yet the houses are being sold at figures way below the certificate of reasonable value issued by the Department. The house price index need not necessarily reflect the accurate price of the house on the open market.
That is a different point. If Deputy Molloy has a proposal to make, the effect of which would be to improve the accuracy of the new house price index, we would be glad to hear it.
That is a very facile answer.
It is not facile. I sincerely mean it.
The Minister is ignoring market forces and the real value of houses in the artificial devices which have been drawn up by the civil service seeking to impose what they consider to be the value of houses and which, in effect, is not the value on the open market. When this legislation is in operation the bureaucracy will be seeking to impose the value instead of trying to determine the accurate market value. That will cause concern to many people.
Deputy Molloy is dealing with a completely different question. If he has a problem on the discrepancy between CRVs and prices being realised for houses on the market, that is a completely different question. The point I made in reply to a question was that in the event of somebody buying a new house this year it is perfectly in order for that person to write down the price he paid as the value of the house.
The new section is inserted and section 90 is deleted.
Section deleted.
SECTION 91.
Amendments Nos. 127 and 128 may be discussed together.
I move amendment No. 127:
In page 72, subsection (1), line 47, after "income" to insert "and that of his spouse".
The purpose of these two amendments is to confine the income to that of the man and wife in the home. If we must live with this extraordinary legislation we must ensure that the income liability will be only the aggregate income of man and wife. We want to exclude all the other categories which were mentioned last night — grandmothers, grandfathers, stepsons, stepdaughters and illegitimate children, whose incomes will all be aggregated to bring in over £20,000. If we are talking about people in reasonably comfortable circumstances, perhaps a couple with an income of £20,000 could be so described in certain circumstances, but you would not so describe a couple with two children who are earning or include grandma's pension, which all add up to over £20,000. That is nonsense and it should only refer to the income of the man and perhaps his wife. Acceptance of our amendment will give effect to that intention.
For the purpose of the income exemption limit in section 91 the criterion would be the aggregate of the incomes of the taxpayer and his or her spouse, rather than the aggregate income of the members of the household. I oppose this proposal because it would being about an unconstitutional position which would go directly against the principles laid down by the Supreme Court in the Murphy case. Any law which seeks to impose a higher tax charge on a couple by reason of their being married than they would be required to bear if they were not married would be unconstitutional. Under section 91 of the Bill, as initiated, the income of the spouse will be aggregated with that of the taxpayer in most cases but it will be aggregated because the spouse will usually be a relevant person as defined in section 84.
This section and this Bill should end on that extraordinary note. The Minister is telling us that the reason he cannot accept this is because of its unconstitutionality. It is quite clear from all the arguments that as soon as it gets through it will not be very long before it is tested for its constitutionality.
As it is now past 4 p.m. I must, in accordance with the Order made by the Dáil on the 24th May, as amended, put the following question:
That the amendments set down by the Minister for Finance to Parts VI and VII of the Bill, and not disposed of, are hereby made to the Bill; and, in respect of the sections undisposed in those Parts, that the sections or, as appropriate, the sections as amended, are hereby agreed to, and that the Schedules to the Bill and the Title of the Bill are hereby agreed to.
When is it proposed to take Report Stage?
It is proposed to take Report Stage on Tuesday, 31 May 1983, subject to agreement between the Whips.
When may we expect to have the amendments which the Minister intends to put down on Report Stage? I was hoping that he would give us the precise time or day. We need time to look at these amendments.
I would like to be in a position to give the Deputy a precise time, but since the Deputy and I have been in the House since early this morning, he will realise that I have not had time to ascertain the state of progress in the preparation of those amendments. I can assure the Deputy that they will be made available at the very earliest possible moment.
Would the Minister guarantee that if we do not have these amendments tomorrow there will be people available to take copies of the amendments if they are available—or the Bill, as amended, so that we can study it?
I thought that the Deputy was asking a different question.
The Bill will be sent immediately to the printers with a direction that it be given top priority.
Would it be possible to collect it tomorrow in the House?
I do not imagine that the Bill is sent out from here.
In other words, we will not have it until Monday morning.
The Clerk of the Dáil will see if there are some copies available. Otherwise, it would be sent out by the printers. I cannot personally give any undertaking, but I imagine that it will be in the post on Monday morning.
If it is available here tomorrow morning, perhaps we could collect it.
The amendments should be available on Monday at the latest.
I have no role with regard to the amendments.
We will be ready to work all over the week-end.
Join the club, Michael.
The Dail adjourned at 4.35 p.m. until 2.30 p.m. on Tuesday, 31 May 1983.
