Senator O'Donnell was one of those who came off the fence and stated emphatically that he was opposed to income-tax— apparently because of its British ancestry. We have taken over many things from the British, some good and some bad, and some of them for the time being indispensable—and I think we can put income-tax in that category. Of course, when Senator O'Donnell rises to speak, we generally look for a certain amount of humour, some wit, very seldom for light, good reason or logic. Being so strongly opposed to income-tax, he has decided, I gather, to lend his general support to the motion. There seems to be some inconsistency in that. After all, if the Senator is opposed to income-tax in principle, why should he support a motion the underlying motive force of which is the hope that the commission would make such recommendations as would render the collection of the tax more equitable and more efficient?
I gather that that was the general purpose of Senator O'Brien's motion. It seems to me to have been the general drift of his remarks. The only thing which shocked me a little was the rather partisan approach which he made to it. The Senator seemed to be almost embarking on a class war— a class war of the Schedule E taxpayer against those who are taxed under Schedules B and D. I notice he carefully omitted any of the enormities of those who pay under Schedule C, that is to say, who are taxed on incomes derived from overseas investments. The people who came in for the greater part of Senator O'Brien's criticism, certainly by implication, if not openly, were those engaged in the distributive trades, manufacturing industry and agricultural industry. The attack on those sections of income-tax payers was launched, I gather, on behalf of those who pay tax under Schedule E, those whose income arises in the form of remuneration for employment.
In that connection, he quoted a statement made by Mr. M.P. Linehan at a meeting of the Irish Conference of Professional and Service Associations, held in March, 1950. He mentioned that Mr. Linehan had said:
"It has been repeatedly pleaded that income-tax is the fairest of all forms of taxation in that it seeks to approximate the burden of taxation to the ability of the individual taxpayer to bear it. In theory, that may be so, but in practice it is the direct opposite, for a big proportion of the taxation thus raised is borne by persons whose incomes bear no relation to the tax imposed when compared with persons in other income groups."
Mr. Linehan seems to have originated the point of view which Senator George O'Brien expressed here in the course of his speech yesterday. There is a certain amount of sardonic humour in Mr. Linehan's remarks. After all, if the Schedule E income-tax payers feel that they suffer from a justifiable grievance, do not let us forget this very important fact, that a very large part of the taxation which is collected from the general body of taxpayers is paid out in remuneration to a very large number of people—in fact, one might almost say, to a substantial proportion of those who pay tax under Schedule E.
We have civil servants and national teachers. Mr. Linehan, who is complaining about this particular aspect of the income-tax code, is, I gather, honorary treasurer of the I.N.T.O. The members of that organisation this year and in the year 1951 benefited very substantially from the proceeds of the income-tax raised from the remainder of the tax-paying community. The same applies to those with teaching posts in universities which enjoy a subvention from State funds. We could go down the list of people who were grumbling and could find that a very substantial proportion of them derive their remuneration in one form or another from the general body of the taxpayers. I think it ill becomes them to grumble so strongly and in fact almost to drive Professor O'Brien— who, as we all know, is the kindest and most amiable of men—to plead that the income-tax code should be tightened up, in order that taxpayers under Schedules B and D should contribute more to the Exchequer and relieve taxpayers under Schedule E. The basis of his argument is that those bad boys who pay under Schedules B and D get away with it, but the taxpayers who pay under Schedule E unfortunately, he said, cannot evade the tax.
The argument was carried to such a degree of absurdity that the kindly Senator proceeded to divide the tax-paying class into two—those who could illegally evade the tax and those who could legally do so. I think legal evasion is a contradiction in terms. There cannot be such a thing, because no person is going to pay more than the law binds him to pay, and if the law is in such a form that his income has been assessed under one schedule rather than another, if different rules apply to one schedule rather than those which apply to his fellow-citizen who may be assessed under another schedule, it is because the nature of his income under his particular schedule differs from the nature of the income assessable under another schedule, and different rules have necessarily to be devised in order to enable the income to be assessed fairly. I should deal with some of these matters in greater detail if time permitted. I have touched on these matters in this way because, after all, we cannot adopt this motion without considering the grounds on which it has been urged. I shall come to some of them in a moment.
In the meantime, let me refer to a remark which Senator Denis Burke made and which, I think, is worth a great deal of consideration. Senator Burke said that income-tax was a tax on industry and agriculture and was far too high and, according to E.C.A., it was the highest in the world. I am not accepting that contention in toto, but I want to emphasise that taxation is merely the counterpart of expenditure. It is merely a reflection of expenditure and if expenditure is high then taxation must be equally high. Since in our general tax structure income-tax is a very significant element, then if expenditure is high the standard rate of income-tax will have to be high also. I think that is a consideration to which the Seanad should give great weight.
There is also another aspect of this matter which, I think, should not be lost sight of, and that is that mainly what has been pleaded here was the case for further and better reliefs and, as Senator Loughman pointed out, no case has been made for the motion by suggesting how the reliefs for various sections of the taxpayers are to be provided for. None of the Senators who suggested that we should have a different system of allowances for repairs and depreciation, or who suggested that an allowance should be made for travelling to and from places of employment, suggested how these reliefs were going to be given, without involving a consequent loss to the revenue, or how that loss to the revenue was going to be made good.
May I refer to a remark which Senator Hayes made that naturally there is a great deal of sense and reason in the argument that the Revenue Commissioners and the Minister for Finance are loth to tamper with the present system. The present system, taken by and large, is as good a code as could be devised, even for this country. We have to give credit where credit is due, even though it were a Gladstonian system which Senator Frank Hugh O'Donnell so deprecates. Even if we had not that system we would still arrive at some similar sort of structure if we were going to have any income-tax code at all. It might vary in minor details, but its general effect would be the same, and that would be to take £20,000,000 out of the taxpayers' pockets to provide 29 per cent. of the revenue of the State. There was a great deal of logic and good sense in Senator Hayes' suggestion that when a question of change is mooted, particularly such widespread, sweeping and fundamental changes as were asked for here, the Revenue Commissioners would come along and say: "Look, if you are going to tamper with this system you will lose money". That is not precisely what they would say to a Minister for Finance. They would say: "If you are going to tamper with it, we are not going to get for the time being such a continuous, constant, reliable and dependable flow of revenue by way of income-tax. How are you going to make up the difference?"
That is the problem they would put up. Those of us who have had any experience of trying to pilot Finance Bills through the Dáil or through this House know that it is a very intractable problem to be called upon to face. Naturally, all Ministers for Finance will fight shy of it, just as will all the Senators who have been advocating that I should have a different system for computing, say, allowances for repairs and depreciation, that I should make, for instance, the personal allowance depend on the cost-of-living figure and go up without the cost-of-living figure—but they would not say that it should come down if the cost-of-living figure went down.
All who have advocated these varied reliefs to the particular sections of the income-tax payers have not suggested how the Minister for Finance is going to face up to what is really the crux of the problem. If he is going to forgo a certain portion of yield from income-tax by giving increased allowances, how is he going to make up the deficit? We have got to remember in that connection that the deficit will have to be made up in one way or another. It will have to be made up either by other forms of taxation or by reductions in Government expenditure.
The irony of all this is that I have never yet—and I have now, I suppose, been 30 years or more in political life— in this House or elsewhere heard a member of the Dáil or the Seanad, either in the Oireachtas or outside, nor have I heard any leading politician get up and suggest that the Minister for Finance should drastically prune expenditure on a particular service. They all tell us, of course, that we are much too extravagant, that we are imposing burdens on the taxpayers which are much too onerous for them to bear, but none of them will tell us how we are to square the circle, how we are at one period to reduce expenditure so as to reduce taxation and how simultaneously, we are to improve the standard of life of our people.
Perhaps, if the House would bear with me, I might come to some of the details of Senator O'Brien's speech. Senator O'Brien said—and let us agree with him in this—that there is a volume of dissatisfaction existing among income-tax payers. That is a very natural feeling. Nobody likes to pay tax—and here I take issue with Senator Micheál Ó hAodha in regard to this matter—whether it is income-tax, betting tax, dance tax, excise tax or a tax on beer, spirits or tobacco or customs tax on any of these commodities. Nobody likes to pay the tax. The only effective answer to the critics of the tax would be to abolish it. Senator O'Donnell came very near to that position. Then, again, if we abolish this tax, there would remain the question of how the comparatively minor matter of raising an annual £20,000,000 or so from other sources could be accomplished.
It was stated by Senator O'Brien that there are many people who are not paying their due under the law. I do not know that there can be such a very large proportion of persons who should pay tax who are escaping their just obligations in that matter, but what is the remedy? The remedy is, of course, to furnish the Revenue Commissioners with very stern inquisitorial powers, to give them all these powers of investigation which, when they are applied to any one of us, we naturally resent, and by giving them these stern and inquisitorial powers, as I have described them, create an even greater volume of dissatisfaction among the ranks of income-tax payers.
Then, again, we are told, as Senator Burke told us, that taxation is too high. If we are to make certain that nobody evades this tax, we must not merely give the Revenue Commissioners these extensive, and perhaps, in the mind of the taxpayer, highly objectionable powers, but we also have to increase considerably the staff which will conduct the inquisition. I do not think that is possible. I do not think we have the staff available to us at the moment, and I hope we should never have to resort to the recruitment of such overwhelming numbers of revenue officials as would ensure that nobody evaded the tax. Senator O'Brien did suggest—and this is really the point I am coming to—that if everybody's true liability were captured, the standard rate of income-tax would be reduced by as much as 1/6 in the £. I do not know whether the Senator has any statistical data to support that contention. It is something which would certainly have to be substantiated before I could accept it, because it appears to suggest that an income of £13,000,000 is escaping the taxation net.
Working again on the figure of 181,000 people as representing the number of effectively liable taxpayers, Senator O'Brien suggested that this showed that only one person in 17 was paying income-tax, and he added that it was common knowledge that a much greater ratio than 1 to 17 had incomes of more than £140 per year. I think the Senator's approach to this matter was unsound under two heads. In the first place, the number of effectively liable taxpayers should not be compared with the total population. Rather should it be compared with the total number of persons who are at work, and the figure for these is only something like 1,220,000. From this figure, we should have to make very substantial deductions for persons under 20 years of age and those over that age who are engaged in agricultural work, domestic service, or assisting relatives in non-agricultural work, and ultimately, after making all these allowances, we find that this figure of 1,220,000 is reduced to something over 470,000.
The Senator was also unsound in basing himself on the figure of £140 per annum as the minimum income which would leave a man liable to tax. A married man, for instance, must have more than £373 per annum before his earnings attract income-tax liability. A married man with one child must have more than £450 and a single person would not be chargeable, if his earnings were below £187 per annum. Bearing these considerations in mind and also the fact that the total number of 470,000 earners or so includes numerous lower grade workers, it is not altogether surprising to find that only a little less than one-third of the total are liable to income-tax. I think I have disposed of that section of Senator O'Brien's case which rests upon the number of income-tax payers as a fraction of the total population.
Then we come to the case of the five Schedules. The Senator stated that the five Schedules—I presume he means Schedules A.B.C.D. and E.— emerged in 1803 and had never been altered. They are, he suggested, like sacred writings. I touched on this point in the earlier part of my remarks, but I want to emphasise that the so-called Schedules are merely sets of rules for computing the different classes of income. They were styled Schedules, and, I think the lawyers will agree, were properly so styled, because, from a draftsman's point of view, they were Schedules to the Act, but these Schedules are not unchangeable. These rules have in fact been modified from time to time and have frequently been subjected to amendment. They are not untouchable, not immutable, not unchangeable and not unalterable as are the sacred writings which Senator O'Brien suggested they were. It is true, of course, that, despite past and possible future amendments in the substance of the provisions, they remain, in their fundamentals, the same, because the classes of income with which they were designed to deal remain, in their fundamentals, the same.
The Senator went on to make some criticisms of the allowances at present granted in relief under the income-tax code. He said, for instance, that the personal allowances were not sufficiently varied with the movement of the cost of living and that he would like to see them related to a cost-of-living index calculated by reference to middle-class incomes. Let me deal with the first objection to that proposal. I should say that personal allowances have never been specifically related to any particular standard of living or any particular quantum of income; but assuming that they were, assuming that the personal allowances did increase as the cost of living soared, what would the consequences be?
Once again, these reliefs in the shape of personal allowances could only be granted at the expense of some other section in the community, and, taking it by and large, I think we will all agree that, if a relief of this type is given to the direct taxpayer, it should not be given at the expense of the man who is not sufficiently well off, who does not enjoy a sufficiently income to bring him into the income-tax class at all. If we are going to have this system of relating personal allowances to the cost of living, the only thing it would do is that, while we increased the personal allowance, we should compensate ourselves for that increase in personal allowances by increasing the standard rate of tax. I do not think that anybody, at the end of it all, would be any better off because we had tied up the personal allowances with the cost-of-living figure, on whatever basis that cost of living figure might be computed.
I think that even the Minister for Finance should occasionally get credit where credit is due. I share a certain sympathy with the point of view expressed by Senator George O'Brien, even if I have to face up to the problem in a more realistic way than he showed in his speech moving this motion. Naturally every Minister for Finance who gives some thought to ensure that the incidence of taxation will fall with reasonable fairness on the backs of the taxpayers as a whole and is shared with reasonable justice between them must be anxious to give such relief to the taxpayers as the financial position warrants. In the Budget this year I introduced the most costly personal reliefs ever granted in this State. I have increased for a single man the non-tax paying limit from £175 to £187 and in the case of a married man from £250 to £270, as well as a further extension of earned income relief and age relief allowances. The net consequence of this was that the standard rate of tax was decreased, and 170,000 individual taxpayers out of 188,000 had less to pay.
Senator O'Brien's objection to that is that we tended to shift the incidence of the tax from the lower to the higher income groups. That was unavoidable but we did, as far as the mass of the taxpayers are concerned—I assume that in the general mass of taxpayers Schedule E payers would figure more largely in the lower income groups than any other class of taxpayers—endeavour to benefit them, but we had to benefit them at some other person's expense. That brings me back to the crux of the whole problem, namely, that as long as we maintain the present rate of expenditure and the present services we cannot give reliefs without the Exchequer having to compensate itself for the loss of revenue in some other way.
I do not know whether I shall have time to deal with the other suggestions. Senator O'Brien also suggested that the taxpayer be granted allowances to cover the expense of travelling between his home and place of business or employment. The difficulty about taxation is that it is a practical business, and when we come to consider whether we will give relief or not we shall have to satisfy ourselves as to the extent to which such reliefs, if given, would open any avenue for evasion. We are always anxious to ensure that no fish will escape the net, and Senator O'Brien was even more anxious than I was and, in fact, the whole purpose of his motion was to set up a commission to ensure that no fish would escape the net at the expense of the Schedule E taxpayer. We are very much in that situation.
Let us see how we could administer a travel allowance for the expenses which a man incurs travelling between his home and place of business or employment. A lot of people have motor-cars and would be assessed on a mileage basis. How are we going to ascertain that they do not make a detour for other than business purposes? A lot of people, too, travel by bus; would they be compelled to file their bus tickets, and we would have to introduce a regulation whereby every bus ticket would have to be signed by the bus conductor and countersigned by another taxpayer on the bus. Would these tickets have to be brought in at the end of the year and solemnly presented to the Inspector of Taxes in order to allow him to compute what would be a reasonable travel allowance? What is going to happen to a man who for the sake of his health does not drive to business but walks? Will we have to give him a travel allowance to recoup him for the wear and tear of his shoe leather in this matutinal exercise?
It is easy to make these suggestions, but one should see first how they are going to work out in practice. You are up against all these practical difficulties which would have to be foreseen, have to be overcome and solved in a practical way if relief of this sort is going to be given. It is not true either that people are compelled to live outside the city. I will concede it is more difficult to get suitable houses within a reasonable distance of one's place of employment or business than it used to be, but there are a great number of people living away from the centre of the city by choice, who like to look at the hills and live in the fresher air of the higher altitudes. Again some districts may have a snob appeal. Are we to give travel allowances to compensate for all these things?
These are matters with which a sordid body like the Revenue Commissioners, concerned with getting money, and an equally sordid person like the Minister for Finance, who again has to look on both sides of a penny before he allows it to go from him, and before he can adopt any facile suggestions made here for additional reliefs, have to deal.
Senator Stanford made a very pathetic case based entirely on the fact that somebody sent him Christmas cards which that person did not pay for, and he said that this happened because the person who sent him the Christmas greetings was taxed under Schedule D, and that, therefore, his Christmas cards were provided free of charge. I think that it might be put this way that if the fellow got away with it—that is important—what did happen was that, to the extent he was subject to tax, that portion of the total cost of the card might have fallen on the Exchequer by reason of the fact that the cost of the card was debited as expense against business. That is a very exceptional case, and I doubt whether on the whole Senator Stanford would feel grateful to a man who sent him Christmas greetings in the form of a commercial card. None of us can deal with the man flagrantly dishonest in these matters but, if a card was sent out as ordinary commercial publicity, its face would have borne evidence of that fact. If, on the other hand, it was sent out as an ordinary greeting, and credited as the expenses of the business it was dishonest and, while it was not a grievous crime, it was sharp practice.
I do not think that it is possible for us to prevent shady practices on the part of income-tax payers. The position is that a person is taxed, whether he derives his income from his business or through the practice of a profession, on those things which are necessary to enable him to earn and maintain his income. I do not think that we could allow as a deductible allowance—and I do not think that it is an allowance under Schedule E— the expenses necessary to enable a man to earn his income, under that schedule. That may be described almost in the nature of capital expenditure, and that is not deducted as an expense even under Schedule D.
I think that Senator Stanford was not quite right when he suggested that taxpayers had only three years in which to obtain allowances for earned income. The relevant time is, in fact, six years, and considering that the taxpayer has all the facts in his possession, then that six years would appear to be ample.
I think, perhaps, he may have had in mind the three years provided for under Section 8 of the Finance Act of 1934, where a taxpayer may allege that his assessment was excessive by reason of some error or mistake in the return he made. I think he should be able to detect his own error within three years.
Therefore, I am going to take up what I believe is the kernel of the whole matter, namely, the objection which may be made to the motion. I think that was stated by Senator O'Callaghan and again by Senator Loughman. The real objection, I think, to setting up this commission is that we have so much more to do; that this is not such an extremely urgent matter as many of the other matters or problems affecting the country which a commission might be set up with a view to their investigation.
Senator O'Callaghan mentioned, for instance, the amenities of rural life, the provision of a water supply in rural areas and the falling-off in the beet acreage. He also suggested that there might be an inquiry into ways and means of securing that more wheat would be grown in the country. I think that one of the main considerations in regard to this motion is whether in the present circumstances we could devote the time and the personnel to a commission of this nature. It has been suggested that it was desirable that we should do so, but, nevertheless, there are these other matters which are much more urgent and important. It would be of great value to the nation as a whole if we could increase the production of wheat and beet. It would greatly enhance the attractions of rural life if we could provide the people with the other amenities which have been suggested by Senator O'Callaghan and others.