Finance Bill, 1983, [ Certified Money Bill ]: Committee Stage (Resumed).

Question: "That section 2 stand part of the Bill" put and agreed to.
Section 3 agreed to.
Question proposed: "That section 4 stand part of the Bill."

On Second Stage I raised the question of ensuring that the provision here for an improvement in the tax position of separated couples would ensure that they would be able to avail of separate assessments. In his reply on Second Stage the Minister referred to this and said that he would give a more detailed account of it on Committee Stage. I would be grateful if he could clarify precisely the position of separated couples in relation to their tax assessments. This is a very welcome proposal. There has been very clear discrimination against separated couples in the tax provisions that existed prior to this. I would like to be assured that it goes as far as possible in the right direction.

Senator Robinson had a specific question about the application of the separate assessment procedure to separated spouses. It is provided in this section that income tax could be charged on the incomes of the spouses as if an application for separate assessment had been made by one of the spouses. Under this procedure the couple would be taxed separately under individual incomes but any unused balance of allowances and benefit of the lower tax bands would be transferrable between the couple so as to ensure that their combined tax bill would not exceed the tax that would be payable by the husband if he were assessed on their combined incomes. The effect of this is to ensure that the husband would pay the tax attributable to the maintenance payments and he would be granted the married allowances and the double rate bands. If the wife has income apart from the maintenance payments the tax assessment on the couple would be apportioned between them but the tax referrable to the maintenance payments would still be paid by the husband while the tax attributable to her other income would be paid by the wife. The effect of this is to give couples in that situation the same procedure as would be applied to them under separate assessment.

Question put and agreed to.
Question proposed: "That section 5 stand part of the Bill."

I should like to ask the Minister to look at the anomaly in section 138 of the 1967 Act whereby the family of a company director are not treated equally as other employees. It is an outrageous situation to think that you can have an ordinary company, whether large or small, and by virtue of one of the parents being a director, the son, whether he is married or single, suffers a £600 reduction in his PAYE allowance. I do not think this is acceptable. I hope that it will be possible for the Minister to indicate how he will be able to deal with this anomaly. I have read through the Bill and I think that section 5 is the only section on which I can raise the matter. It is very difficult to explain to a worker why he is treated differently from others working beside him on the factory floor. This appeared to arise also in the 1980 Act. I must say I do not recall there being a substantive debate on this either in 1967 or in 1980. But it is quite clear that that situation is unacceptable. I should like to know what is the Minister's thinking on maintaining that situation.

The difficulty here arises from the possibilities of abuse that could flow from making a provision of the kind Senator McDonald has in mind, in the sense that it could lead to the attribution of notional incomes to family members which it would be very difficult to check and to keep properly under control. As Senator McDonald pointed out, the then Minister for Finance, Deputy O'Kennedy, undertook to look at this problem during the debate on the 1980 Finance Bill in response to a request by Senator Alexis FitzGerald at the time. The examination carried out since then has not shown any means of avoiding the particular difficulties to which I have referred, that is, the attribution of notional incomes to members of a family or spouses. The implementation of a measure of the kind suggested by Senator McDonald would require a lot of detailed examination and investigation by staff of the Revenue Commissioners and divert them from other work that is more important to make the tax system work as necessary. The only answer I can give is that, given the complexity of the problem, it has not yet been possible to find a way of dealing with it satisfactorily.

With respect, that answer by the Minister is absolutely unacceptable and is total rubbish. There are companies whose accounts in the main are processed by computer systems and so on. How any one person working on the floor should be treated in such an inequitable fashion is beyond me. It is inconceivable that people cannot have equal treatment.

I cannot accept the Minister's statement to the effect that it is beyond the ability of the Revenue Commissioners to devise a system. Everybody must be treated equally and I would request that the Minister introduce a suitable amendment. Granted there are quite a number of people who will be adversely affected by this. Perhaps a repeal of section 3 of the 1980 Act might be the appropriate way to do so. It adversely affects every family company in the State. Is the Minister now telling the House that people who provide employment not only for their own families but for other workers also are all dishonest? Does it mean that their computers are not to be believed? I am absolutely shocked at the Minister's reply.

I must point out to Senator McDonald that the problem does not arise in relation to the processing of the return. There is no particular difficulty on that side. The problem arises in determining the propriety of the allowance that is made in the first place. Discussions on this problem since 1959 have shown that there are difficulties. On previous occasions when provision was made for similar allowances it was found that in many cases it gave rise to abuses. For those reasons those allowances were terminated at various times in the past. The difficulty arises not from the treatment by computers or otherwise of the allowances that would be built-in but in establishing the correctness and appropriateness of the allowance in the first place. That is where we have not yet found a system of dealing with it properly.

Surely every worker must be treated in the same way. It would seem to me that the only way a young person who may work for a firm of which one or other of his or her parents is a director with even nominal shares — in order to reap the benefit of the ordinary PAYE allowance — would be to change jobs. I cannot see the great difficulty and with jobs now so scarce it is unfair to expect people to do that. Indeed, if one were to follow through the Minister's argument then one might well suggest that because a young person's parents were employers they should not even get unemployment benefit. I do not see the logic of the Minister's argument or why this provision has obtained for so long. Perhaps the Minister could tell me what the directors of a company would need to do to avoid that penal clause, because £600 is a lot of money.

I appreciate the problem raised by Senator McDonald. I might just make the point that the difficulty arises that in the kinds of cases to which he refers it is open, to put it no stronger than that, to directors of the company so to arrange the remuneration of people who work for them as to reduce the total tax liability of all those persons. That is where the possibility of abuse arises. As I have said, the treatment of the allowances would not create difficulty in terms of processing them. The question would be to establish the appropriateness or the propriety of the allowance in the first place. Given the circumstances we are in, that would require a level of inspection which would represent a misuse of the resources or a less than optimum use of the resources we have for collecting tax.

I have some sympathy with Senator McDonald on this problem. In this day and age it must be remembered that no longer are children prepared to work for their parents for a mere pittance. They want to be treated like the other workers on the factory floor, in the office or as a member of the staff of the company. If they do that then they should be treated as genuine employees. Parents can no longer keep their children around them or employed in a kind of glorious hand-out style any more. Children want to be independent. They want to be able to go to the same sporting fixtures, the same dances, parties, take out their girlfriends, boyfriends and so on and they cannot do that by asking their father at the end of the week for £5 or £10. That used to be the way but is no longer. Young people working for their parents for a salary, or however the remuneration is described, should be treated as ordinary workers in their own right and be regarded as ordinary taxpayers, contributing to the PRSI system. It is only fair that they be treated the same.

Obviously there is an anomaly here. I know what the Minister is trying to do — to close off any loopholes such as that in which a director could be purporting to pay a salary to various members of his family who were not genuinely working for him. Probably this is the kernel of the problem. But where it can be proved that a child is genuinely working in the company, on the factory floor, in the shop, in the office, or even in management, then he or she should be treated the same way as any other worker. The Minister understands that and perhaps he will give us a commitment that he will look at that matter. Where people are in genuine employment with a company they should be treated the same as any worker.

We are not just talking about teenagers but about married people with families. Where a man who works for a firm is promoted to the board of directors his family will be penalised because of his promotion. It should be made quite clear that we are not talking about teenagers taking summer jobs but about people in their twenties and thirties with families. Why should they have to suffer the loss of a PAYE allowance of £600?

I go along with the point made by Senator McDonald. We are not just talking about children; in some circumstances we could be talking about spouses of proprietary directors. I take fully the point that there are circumstances where this creates a difficulty and an inequity in relation to individual taxpayers. Senator Ferris suggested we should find a way of dealing with genuine cases. That is our concern. If Members of the House have suggestions as to how we could define "genuine" in those circumstances I would be very pleased to have them. If Members have suggestions as to how we could properly distinguish between cases where there was a legitimate business with legitimate employment on the one hand and, on the other hand, cases where proprietary directors were notionally shedding a part of their income to members of their family for tax purposes, that would be the basis on how we would look at it. I should not like Senators to have the impression that I have a closed mind on the subject, far from it. All I am saying is that we have not yet found a mechanism that would allow us properly to distinguish the cases with which we want to deal. If we could find a way of dealing with them I would be very happy to do so.

I recognise the point raised by Senator McDonald and the difficulties raised by the Minister. Would the Minister consider approaching the matter initially from the following viewpoint, namely, restoring the allowance in respect of children over 21 years of age? Many of the abuses to which the Minister has referred — abuses that I confidently expect would multiply if the Minister conceded willy-nilly to the suggestion — occur in respect of spouses and minor children. Most people over 21 will have an independent source of income themselves, they will be genuinely working in a particular establishment. Therefore, confining the restriction to those under 21 years might be a way of discouraging most of the abuses. Even though there may be some cases where people will be able to shed part of their income to adults over 21 years who are not working, I think it will be a minority of cases in which that will apply.

I am relieved at the assurance given by the Minister when he said he will have the matter examined to see if equity can be restored in the system. I appreciate the Minister's concern and I look forward to an improvement at the earliest possible opportunity. I think it is something the Government cannot stand over.

Question put and agreed to.
Question proposed: "That section 6 stand part of the Bill."

With due deference to the Minister's dislike of words such as "punitive" I regard the change in this section as a mean and niggardly provision. It removes a provision that was there for many years, namely. State recognition of the expenses that young couples incur at the time of marriage. When comparing this against the total budgetary provisions it seems to me there should be room to enable the Minister to continue the existing facility to young couples.

I think it is regrettable that what was a specific relief or concession to young married couples is now altered by the change in the perception of the year of marriage. I should like to draw the attention of the House to, and invite the Minister's comments on, the extent to which this section generated feverish activity: the fact that the Government were going to change and remove the concession led to a sudden rush of marriages in the registry offices by couples who had planned to marry a little later. I think this is worth noting. I do not know if the Minister has the numbers involved. I gather the graph of the normal numbers of marriages in registry offices is fairly constant, rising slightly. Then it suddenly went up because couples who had intended to marry afterwards, mainly I think in Catholic churches, rushed in to marry in order to bring themselves within the provision before a change was made. This is very interesting because it shows a certain openness in social attitudes. The fact was that many young couples considered getting married in registry offices for tax reasons rather than, as would have been the situation even a decade ago, carrying on with their plans while rueing the fact that they would be taxed more heavily as a result.

We must be concerned that any measures we take in the area of marriage law, whether they be financial provisions relating to marriage or other measures, are going to affect people's willingness or unwillingness either to marry, to marry at a certain time or to postpone marrying. We have reached a stage in Ireland where the attitudes and the approach to marriage of younger people is very different from the situation a number of years ago. I say this because I am concerned that our laws are very uneven in this regard. For instance, even a proposal such as that announced by the Government of moving to co-ownership of the matrimonial home could, if we do not make other changes, be a deterrent against marriage. It could be a burden placed on the institution of marriage which would discourage couples from marrying. Obviously this is a matter that would have to be considered by the Joint Committee on Marriage Law if that committee can get under way.

Even in relation to fiscal measures, it had begun to be the case that the aggregation of the incomes of married couples, before this was successfully challenged in the courts, was a deterrent to marriage. Here we have seen the clearest example of the way fiscal policy can determine social responses even in such a fundamental area as the decision whether to get married, the ceremony of marriage that will be gone through or the timing of a marriage. We must be aware of the reality that there are a number of stable unions with children that are not based on marriage. This Bill improves the situation of the separated couple but we have a long way to go in our legislation to recognise and provide for protection and support for stable relationships. For one reason or another, very largely because there is no way of terminating a marriage relationship here, these relationships are not, and cannot be, based on marriage. I am drawing attention to the importance of ensuring that we do not bring in in an ad hoc way specific measures or laws which have an effect completely opposite to that we might wish to have in devising our policies. We must be aware, particularly in the area of financial and tax measures, that couples now will take whatever steps are best in their situation, even if that means changing very dramatically from the previous patterns of marrying and marrying in the Catholic Church if they are Catholics, etc. The responses for a young couple are much more open and more geared to trying to survive at a practical level. In many instances now we have clear discrimination in our law against couples who cannot marry for one reason or another. For example, all the legislation in relation to barring orders and maintenance is confined to the lawful spouse and is posited on there being a valid, subsisting marriage. We must look into this as a matter of some urgency.

I conclude from what Senator Robinson has been saying that one of the effects of this change will be to remove what existed previously and took the form, in a sense, of an artificial incentive to couples to wait until later in the year to marry. I have not carried out an examination of the incidence of marriages over different months of the year and, therefore, I am not sure about that, but I think that the Senator's remarks would apply with equal force in the opposite direction. Whether this will make a substantial change in the marriage customs of the country I do not know, and I speak as one who got married just a couple of weeks after the beginning of the tax year at that time and, therefore, had no tax motivation in the timing of my marriage. I wonder if there is really such a widespread amount of tax planning in the fixing of marriage dates.

On the other points raised by Senator Robinson, I would say that the present provision removes a certain discrimination which exists — granted it is in favour of married couples — in the sense that up to now they could under some circumstances get the benefit of three times the single rate bands in the year in which they were married.

Is section 6 agreed?

We are opposing it.

Question put.
The Committee divided: Tá, 21; Níl, 8.

  • Belton, Luke.
  • Browne, John.
  • Bulbulia, Katharine.
  • Burke, Ulick.
  • Connor, John.
  • Daly, Jack.
  • Ferris, Michael.
  • FitzGerald, Alexis J.G.
  • Fleming, Brian.
  • Higgins, Michael D.
  • Howard, Michael.
  • Howlin, Brendan.
  • Kelleher, Peter.
  • McDonald, Charlie.
  • McMahon, Larry.
  • O'Brien, Andy.
  • O'Leary, Seán.
  • O'Mahony, Flor.
  • Quealy, Michael A.
  • Robinson, Mary T.W.
  • Ryan, Brendan.


  • de Brún, Séamus.
  • Ellis, John.
  • Fitzsimons, Jack.
  • Kiely, Rory.
  • Killilea, Mark.
  • Lanigan, Mick.
  • Ryan, Eoin.
  • Smith, Michael.
Tellers: Tá, Senators Belton and Howard; Níl, Senators de Brún and Fitzsimons.
Question declared carried.
Question proposed: "That section 7 stand part of the Bill".

I understand that this will yield a very small amount, less than £1 million. I am wondering is its purpose merely technical or is it to save that amount of money. Even though it was a small encouragement, investors in industry have so little encouragement nowadays that to remove any is a retrograde step. There is no doubt that encouragement to investors is very badly needed at present. The climate for business generally and, consequently, the incentive for investors to invest their money in business is very bad at the moment. I wonder whether the amount which the Minister is going to save on this is really worthwhile because, in the overall context, it is going to be a disincentive to investment and gives an indication that the Government are going to pare away any encouragement there may be in regard to investment in industry. If something of this nature is done, the implication is that the Minister will be looking around for further ways in which he can discourage investment, to make it less worthwhile for investors to invest in industry. To that extent where it may save a little money, a little tax, in the present climate of business and investment, it may do a good deal of harm. I know it can be argued that the benefit at present is small but that works both ways: if the benefit is small then the tax is also small. The impression it creates is very bad because it would be impossible to exaggerate the situation in business at the moment and the extent to which people are reluctant to invest any money in industry. There are so many disincentives in the ordinary way, and anybody looking at investment in business or industry is up against so many different problems, industrial relations, infrastructure, telephones, electricity, transport and the very high price they have to pay for commodities and raw materials that it is not worthwhile, and if anything they should put their money in Government stocks or something like that. Small though it may be in the sense that it may not affect many people, it is an indication of the Government's attitude to investment of this kind and, to that extent, it will do a certain amount of harm.

Senator Ryan said that it is impossible to exaggerate the situation in industry. I suggest, with respect, that it is possible to exaggerate it. I am very much afraid that that is what a number of commentators on this Bill have been doing. The measure in question here is relief which was introduced in 1932 and which has been modified on a number of occasions since then. Since 1932 and since subsequent modifications of this, the situation in regard to incentives or assistance for investment in industry has changed very substantially. In particular, we have had a very substantial development in the numbers and scope of capital reliefs for industry which have changed the total picture as far as investment is concerned. I make the point that this measure which we are proposing here to repeal concerned the distributions of some 82 companies and would cover not more than 10,000 shareholders in total. The cost, as Senator Ryan has said, is rather small. The total amount involved would be about half a million pounds in a full year.

I should like to draw the attention of the House to the fact that the Commission on Taxation recommended abolition of this, and to read the particular paragraph from the commission's report dealing with this:

This relief has served the purposes for which it was introduced and is now unnecessary. Today, the demand for investment opportunities in publicly-quoted Irish companies exceeds what the market supplies. We recommend that the relief be abolished. This would improve both the equity and simplicity of the tax system.

If we look at it from that point of view, we can appreciate that the change proposed here is nothing like as dramatic in its effects as Senator Ryan is suggesting.

Question put and agreed to.
Question proposed: "That section 8 stand part of the Bill."

I know that the Minister has dealt very thoroughly with this section in his Second Stage opening speech. It is the section which deals with the reduction of the amount of interest that one is allowed to earn before it becomes declarable for tax. I understand completely the reason given by the Minister for inserting this section now and that there are many people who have deposit accounts in several institutions specifically for the purpose of gaining all the exemptions. Obviously, many people at that level were playing the system. I hold absolutely no brief for them and, no doubt, this section will catch them.

I am concerned about what has been said about the section in the media and by various people for reasons other than legitimate ones. Old people, old age pensioners and people on quite low incomes are being told deliberately at various meetings and otherwise that on every penny they have in the bank they will now have to pay tax and that, with the exemption in operation, every penny over that will be taxed.

I want confirmation from the Minister because it must continue to be restated, in particular by the Minister that this sum of money will be added to a person's income only for taxable purposes and may not necessarily be taxed. It will be taken just in the overall context of their income, but if their income is below tax level — as an old age pensioner's is — they will not necessarily pay interest on this kind of money, unless all their income together goes above the normal tax-free allowance. People are now being told that small savers will be paying tax on this kind of money, which is not the case.

From what Senator Ferris says the reason for this is merely to prevent the abuse of the original provision. That seems to be a rather unusual approach by the Minister, if it is accepted that there should be relief for small amounts and that a certain amount of interest should be free of tax. There should be some other way to deal with abuses rather than to penalise the people for whom this relief was originally provided — that is, people with very small incomes and very small amounts of capital. It seems very hard on them that because it has been abused by people who are much wealthier, they should have to suffer. Senator Ferris is right; I do not seem to remember the Minister saying that. This seems the wrong way to approach this problem.

In regard to the actual figure that is being allowed, if the intention was to curtail this, leaving it at its present figure, that in fact, would be curtailing it because with the effect of inflation, if no increase is given, its worth would be whittled down over the years. This seems to suggest that not merely is the Minister cutting it down, because he could do that by doing nothing, but that it is his intention to gradually eliminate this relief altogether. I would be glad to know if that is his intention.

The section is most unwelcome. The reduction from £150 to £120 in respect of the first type of financial institution such as the trustee savings banks and post office savings bank and from £70 to £50 in respect of the second type of financial institution such as the commercial banks which are defined in the section is not the proper approach. In the debates in the other House some play was made by the Minister about the different treatment of various financial institutions and that is a very fair point. The treatment of these institutions should be brought into line. There is no reason why money on deposit with financial institution A should be treated differently from money on deposit in financial institution B. They should all be treated in precisely the same way. However, that does not mean that this concession should be abolished.

The way in which we should be going, in general, is towards total disclosure by all financial institutions of all interest, but with exemption limits for small savers. That is a sensible approach. We should encourage people to save. This view would not find universal approval either on this side of the House or in the political party of which I am a member, but the difference in treatment between the commercial banks and the building societies is also not acceptable. In the long term, the same level of disclosure must apply to Post Office savings accounts, trustee savings banks, commercial banks and building societies, at the same time maintaining a sensible level of exemption. Total disclosure then means that income tax would not be charged for say, the first £120 or £150 — figures not being the important issue at present. It is likely to have the twofold effect of getting rid of our ambivalent attitude towards tax evasion in so far as it refers to interest earned on money on deposit, while acting as a encouragement to the small saver to save. Those are the twin objects we should have in mind. I am aware from my business activities over the years, that there are people who abuse this system. The Minister is quite right to try to tackle those people and I support him strongly on that.

I do not share the view of other people that money flows out of the country when any change is proposed in taxation of interest or disclosure of money on deposit with financial institutions. Certain people can move money in and out of the country, which they do from time to time. They move it in and out for a complex variety of reasons which have a lot more to do with exchange rates, particularly since the EMS, than with rates of interest. The small saver except in the Border areas would not have the facility available to do that. The medium sized saver, by and large, is saving for a particular purpose. There is no point in his having money outside the country, as he cannot use it. Inevitably, the money comes back into the country again.

We must look at the situation much more sensibly. We must treat trustee savings banks, post office accounts, commercial banks and building societies in the same way. We must have disclosure and sensible exemption limits. With the rate of inflation and the rate of interest, the reduction from £150 to £120 and from £70 to £50 is not sensible. If the Minister felt it necessary to reduce it from £150 to £120 he should not have made the change in respect of the commercial banks. He should have left that unaltered and brought the two of them closer together. In due course we would have had uniformity in the treatment of money on deposit.

This is not the section that deals with disclosure.

I appreciate that.

This section is concerned only with changing the amount of interest which is exempt for tax purposes. As Senator Ferris said the amount exempt does not necessarily represent the total of the amount of interest that would be free of tax for any depositor because that depends on the level of a depositor's income and tax-free allowances. The limit is only part of the calculation that needs to be done to see how much tax would be payable on interest received by depositors.

Senator Ryan asked if this was the beginning of a gradual move towards the elimination of these exemptions. He would be going too far in reading that into it. There is no doubt that we need to assist savings and encourage them. The saving ratio in this country, given the requirements we have for investment, is too low. Our tax system is neither the only nor the main means at our disposal for encouraging savings.

I made certain other provisions in the budget in relation to encouraging small savings which might offer a prospect of a better return to small savers who have limited funds at their disposal, particularly the elderly, who need an assurance as to the kind of a return they will get on their savings.

Senator O'Leary spoke about the differences between financial institutions. His point is well taken. I have taken the opportunity for a specific reason, to extend to the Agricultural Credit Corporation the benefit of this measure as far as the taxation of interest on deposits is concerned. The ACC is in competition with the other lending institutions. It has a difficulty in that it tends to lend for longer than the banks. It is even more important for it to be competitive in attracting deposits. The extension of this provision to the ACC will even things up in relation to their ability to compete for deposits.

The Senator also said that we should aim at total disclosure of interest paid by financial institutions. Discussion on that would be more appropriate under a later section. His concern was to point out that we should have equality of treatment between the different institutions. There is a problem in relation to the building societies which we will discuss under a later section. There is a misunderstanding about what the arrangements in relation to the building societies are supposed to achieve.

The criticism has been made that this is a measure which unduly affects the small saver. As I have said, that depends on the total level of their income apart from the interest they earn. This measure, being one of many factors which influence people in relation to the amount of money they save, is not the determining factor. It is more important that we should have the overall economic policy which will give security to people who save and which will bring about a better balance between inflation and interest rates. Those measures are more important for the encouragement of savings than a marginal adjustment of this kind in relation to the interest exemption.

For a person with money on deposit in a bank the effect of this is to reduce the tax exemption by £20 per annum. People usually speak about small depositors. If such a depositor is paying income tax at 35 per cent, which is the rate at which small depositors would pay, this measure amounts to a total cost of £7 per annum. In that light it cannot be looked on as a measure which will have any major effect on the volume of savings or their location.

While £7 per annum is a very small amount when we take into account the number of savers involved, what the Minister is doing is bringing that money within his own ambit. It would have been better to leave the exemption limits as they were because the Minister is just bringing extra money into the Department of Finance which was formerly available to the commercial banks. I would prefer if a depositor's money was used by the bank rather than by the Department of Finance. The commercial banks have a better idea of how to distribute the money they get in through deposits throughout the system.

I have every confidence in the Minister and I fully support his policies. He has the mettle to take the necessary decisions to turn the economy around and take us out of the difficult state in which he found the country. However, I must refer to the apprehensions of the poorer sections of the community.

The initial publicity given to this section by the media upset many pensioners. These people came through times which were more difficult financially than what we are going through at present. It must be made clear that it is in the interest of the economy for people to save. There should be a clear inducement for people to do so. Old age pensioners, now in the autumn of their lives, worked very hard during their lives in order to save for the rainy day and put by a nest egg. They must be looked after. Even if the Minister, and I am arguing against a couple of points that have already been made by colleagues, were to exempt the Post Office index-linked savings schemes from this section, he would give people who are over 59 years of age an opportunity to have a respectable nest egg that would cater for their retirement or for the difficulties they may face. There is no way people who live in accommodation, even if it is a local authority house which is vested, can carry out urgent repairs or to have roofs repaired. To get a handyman in now costs £10, £15 or £20; and if he is on the dole it well probably be £30. I would ask the Minister to look at that aspect. Perhaps he would even have an exemption in respect of Post Office savings, whichs are part of State services, for those over 59 years of age. People would not object to this because here you have people whose means are so clearly limited. Those people who come up the hard way are inherently honest. Perhaps those of us who are besieged with PRSI and income tax payments are the ones who look around for dodges of one kind or another. That is the general feeling. However the Revenue Commissioners are so top-class at their job that there are very few people escaping, although one sector seem to think their neighbours in the other sector get away without contributing anything. I would ask the Minister to have regard for the contribution that senior citizens in their earlier years have made to the development of this State and to regard them as people who want security and want to be in a position whereby if the roof blows off their house, they have a few bob to have it replaced.

People who came through the thirties have a tremendous fear of not being able to meet the demands of the rent man, the rates man or the tax man. These are the people who need our special consideration and I ask the Minister to look specifically at that narrow sector of the community.

For many years we have been relying as a country on very substantial borrowing and in the past ten years, possibly only with the exception of one year, the inflation rate would generally have exceeded the interest rate payable to people who had investments. Therefore the climate for investment from that point of view has not been anything like as good as we would want it to be. Any additional measure taken that will act as a disincentive to savings is obviously very bad.

I do not want to over-emphasise the point but it has been said both here and in the other House that as far as the older generation are concerned they had a savings mentality which was far better and healthier than most of my generation have been able to equal and many of them were prepared to do without much of what we would regard as absolutely essential items in order to be able to provide for what they traditionally called the rainy day. The Minister very often makes the point that the accumulative of all the different items that one has to watch in an economy in order to restore the full health of the economy is what counts. I put that point in another way to him here: all the different changes that are being made and the view the public have that further changes are being contemplated, or that these systems will be eliminated are adding to their fears and, therefore, not encouraging the kind of investment and saving we so desperately require in order to avoid excessive dependence on borrowing and in order to try to generate greater economic activity here at home from our own total resources.

I am glad to be able to say that to an extent I have been able to anticipate what Senator McDonald talked about a few moments ago when he referred particularly to the case of the older savers. I remind the House that in the budget debate, as I mentioned a few minutes ago, we did make some further provision to encourage small savers.

First, I have increased from £5,000 to £10,000 the maximum amount which persons aged 55 years or more may hold in index-linked bonds. I have made provision also for joint holdings of these bonds and I have increased from £100 a month to £150 a month the maximum amount that a person can put in national instalment savings. I have reduced from two years to one year the deposit period required to earn an index-linked return on amounts saved under the scheme. Those two provisions are specifically designed to meet the needs of the group of savers Senator McDonald particularly had in mind.

Senator Smith has opened up another area of discussion which goes a lot wider than this Bill. But I think, nevertheless, we should reflect a bit on it, even if we do not discuss it in a great amount of detail here. He has made the point that for some years past now we have not had what one would call a real rate of interest here in that the rate of inflation has been in excess of the rate of interest. That has given rise to its own problems. It creates the obvious difficulty for saving and it creates an obvious incentive for borrowing, as many individuals and firms have indeed found out to their cost when the matter finally caught up with them and as we are finding out ourselves to our cost as a nation, because even if the rate of interest is not real you still have to find the funds to pay the interest. It is an important point that we should bear in mind. It comes back to what I said earlier on: that it is far more important to create the conditions where savers can get a real rate of return on their savings and we are not going to do that simply by juggling around with the tax system.

I would make the point that interest on deposits is a form of income like any other income and, therefore, falls properly to be considered within the framework of our income tax system. If we are going to look for means to encourage saving we must do it on the basis that we can improve the return from savings and the return from investment. As I say, if any one of us has a surplus of disposable income — and I know it is difficult to come by these days — we have a certain number of choices as to what we will do with it. We can put it on deposit and expect a return in terms of interest. That generates income which is properly taxable. We can put it into productive investment and there it also generates income and if there is profit on it it is properly chargeable to tax. Therefore, the measure we are talking about, that is, modifying the tax exemption limit on interest on deposits, is very clearly analogous to what we are doing overall with the taxation of income.

I do not think it would be a valid reason to oppose this section to say that because we want to encourage saving we should not charge tax on the income that arises in the form of interest. I would be inclined to take a much more fundamental view of the situation and look at the policies we need to bring about in order to ensure that people can get a real return on their savings, whatever form those savings take and whether they are on deposit in a financial institution or put directly into productive investment.

Does the Minister see any merit in one of the conclusions of the Commission on Taxation that interest paid should be taxed only on the amount by which the deposit interest rate exceeds the inflation rate?

We could have a long discussion on that and other suggestions made by the Commission on Taxation. One could apply the same argument to all incomes, for example, since interest arising on deposits is properly to be regarded as income. It is another suggestion as to how we might improve the return from savings but it is done through the tax system and it does not meet directly that much more fundamental requirement of creating the economic conditions in which there would be a real return on savings and investment.

There is a difference between money which is invested and ordinary income in that the savings will generally have been taxed already. The income which is at a person's disposal to put on deposit has generally been earned and, therefore, taxed.

The Minister is being rather selective in adopting the advice of the Commission on Taxation. He quoted their advice when saying that he could not adopt something I had suggested but he is not willing to take their advice in this respect. That is understandable enough. The Minister did not really refer to the point I made. If the reason for lowering the amount is because of abuses of the system, would he not take other measures rather than victimise those with very small savings?

I specifically said that this was not the section dealing with the question of abuses. Section 17 deals with disclosure. For some time past the disclosure limit has been the same as the tax threshold limit but this is not the section which deals with the disclosure provision that is intended to meet abuse. The thresholds in the two cases are the same but that is due more to an accident of history than to design.

Question put and agreed to.
Question proposed: "That section 9 stand part of the Bill".

I am getting hints from the Minister and I am grateful because anybody who had to read section 9 and make sense of it would be very pleased to receive hints from any source. It amends things and simultaneously inserts them and it is difficult to arrive at a conclusion as to what it really means. It makes more than one change in the appeal procedures and makes certain changes with regard to the right of appeal in general. There is one area of particular concern to me because I could imagine it personally affecting me or people in a profession in which I formerly operated. This personal aspect makes one capable of understanding it and determined to do something about it.

The amendment I suggested was ruled out of order but it has been circulated to Members. The purpose was to meet a change which the Minister had suggested regarding the limitation of the right to appeal. I am not talking about the right of appeal against the determination of an appeals commissioner; I am talking about the right of appeal as it is now included in the table which forms part of this section in subsection (7) (a). The words "within 12 months after the date of the notice of assessment" are inserted by subsection (a) (i) (II) (A). The purpose is to limit the right of taxpayers to appeal in certain circumstances where the normal period for appeals has elapsed. Up to the present where that situation obtained the existing subsection (7) (a) read exactly as the subsection in the table, except that the words "within 12 months after the date of the notice of assessment" were not included. The effect of the section was that the inspector or any other officer being satisfied that, owing to absence, sickness or other reasonable cause, the applicant was prevented from giving notice of appeal within the time limited, and the application was thereafter without unreasonable delay, notified the applicant in writing that his application had been allowed. Basically this allowed the entry of late appeals and if the inspector did not decide in favour of the late appeal the taxpayer could appeal that decision to the appeals commissioner and normally between one and the other a very sensible approach was adopted. Like everything else it could be abused and the Minister's reason for changing it was probably that he felt it was being abused. I support him in that I do not think the abuse of the system by the insertion of late appeals should be encouraged or condoned.

The insertion of the words "within 12 months after the date of the notice of assessment" appears to limit totally the right of the taxpayer to appeal in those circumstances and it limits the right of the inspector to consider such appeals, unless and until the taxpayer has paid the full amount plus interest which has been assessed.

During the Dáil debate on this measure Deputy O'Dea gave a concrete example of what could happen under this section. He stated:

I can recall a case in the last 12 months in Limerick city when a person who was working full time in a PAYE job and doing some part time work on a self-employed basis at night was assessed for £20,000 tax. He had been let down by his accountant, the appeal did not go in in time and the taxpayer eventually brought the point to a head. Eventually I settled that case with the tax office in Limerick for £250 - that was the admitted liability. If this section becomes law that man would have to pay £20,000 in order to have the appeal determined and he would lose the interest on that. Surely that is draconian.

That statement is reported at Volume 342, column 2343 of the Official Report.

Inspectors of taxes are not infallible and they can make mistakes Accountants are not infallible and taxpayers are not always as careful as they should be. It is very foolish to cut off the possibility of late appeals because both the taxpayer and the inspector of taxes could experience serious difficulties once an assessment has been made. Accounts cannot be considered by the inspector unless the taxpayer pays the amount of tax due.

It is for that reason that I proposed an addition to the section which would per-quote mit the inspector, or other officer, after the expiration of 12 months and at his absolute discretion, to allow an application for late entry of an appeal for any good or sufficient reason. So as not to destroy the intent of the Minister's amendment, I put in a saving provision to say that the decision to allow or not allow a late entry for an appeal after the expiration of 12 months after the date of the notice of the assessment shall not be subject to appeal to the appeals commissioners. It was only where the inspector was satisfied that this should be done that it would be done. If there is some other section which would enable people to arrive at a sensible decision where an error had been made either by the inspector, by the postal authorities by not delivering what should have been delivered, or by the taxpayer by not being as diligent about his duties as he should be, or his financial adviser or accountant I would like to know. If there is some method by which late appeals can be entered and the situation processed without the necessity for paying the amounts of money, as suggested by Deputy O'Dea in the quotation which I read out I would like to know it. If there is I would be happy to support the section as it stands.

I should like to support Senator O'Leary on this. It seems to be rather unusual because the existing legislation provides for cases where, due to absence, sickness or other reasonable cause, a taxpayer was prevented from giving notice of appeal. We are starting with the situation where somebody has merits on his side. He has a reasonable cause for not appealing within the normal time. In those circumstances to put him in a position that he has to pay tax which he believes is not due puts him into a kind of catch 22 situation. He does not believe he owes the tax but he cannot appeal unless he pays the tax. In the beginning he has a reasonable cause, he is a person with some mertis on his side; but to put him into this situation seems to me to be extremely rigid and unreasonable. I fully agree that there should be some discretion left to the inspector. Inspectors are not unduly reckless in exercising their discretion in these matters. They are not likely to allow everybody unlimited time to appeal. They can certainly be relied upon to exercise their discretion in a way that will not lead to great abuse of the situation.

To have this in such a totally rigid situation, even in a case such as the one Senator O'Leary mentioned which obviously will lead to injustice — and the inspector, with the best will in the world, cannot do anything about it — seems to be quite unsustainable. It is quite extraordinary that a situation should be allowed, as will happen, where a citizen can be put in an impossible situation and even if the inspector recognises that it is impossible and unfair he cannot do anything about it.

I also have reservations about this section and about the justification the Department of Finance have for issuing assessments at all. Assessments are generally sent out to people who are believed to be in business and the figures are picked out of the air. There is no basis for the figure on the assessment forms. In certain cases the person who gets this assessment has just set up in business and it might seem to him to be best initially to pay what is on the assessment form. As the years go by he may think — people do think this way — that the amount of the assessment is the tax he is due to pay. That might sound naive but it is true.

The person suddenly finds that due to circumstances the assessment has been increased every year and he is not in a position to pay. It is there the problem arises. Senator O'Leary mentioned one of the problems we have: that the accountancy profession here to a large degree let down the small business man or the self-employed person who has been dealing with his tax on an assessment basis. The accountancy profession stand indicted because in many areas they have been the delaying factor. I understand that in the Bill the onus is on the taxpayer to pay his tax or appeal against the assessment. But in many cases the assessment is handed to an accountant and, let us be frank about it, a lot of accountants are not as fast as they should be in dealing with their clients' cases. As we have an extension of taxation into more areas we have the situation where quite a number of accountants are not able to carry the workloads they have. This results in many delays. If we are to have ridigity in the application of the 12 months timescale, and if we are going to have penalties, it should be written in that in cases where a person has handed over to a chartered or registered accountant his matters of taxation there should be a penalty on the accountant also.

I recognise that we need to tighten up on the whole area of tax appeals because in some instances it was used as a method of non-payment of tax resulting in a loss of revenue to the State. Some elements in the section deny the individual's right to appeal. That is what I am concerned about, the individual's arbitrary right to an appeal. The restriction of time to 12 months as mentioned by Senator O'Leary, is a straightjacket which many people genuinely cannot comply with within the ordinary business circles and because of individual problems they might have with their accountants. The appeals commissioners' right to order dismissal of an individual's appeal is particularly limiting as well. The Minister should consider carefully the limitations and the genuine grievances and difficulties that many taxpayers and companies may have in providing the information within a limited time. There are certain occupations which of their very nature could not furnish all the demands required by the Revenue Commissioners within that set time.

The Minister and his colleagues make the point regularly that nobody has anything to fear from the Finance Bill if he is not trying to avoid the payment of legitimate tax. In the face of the opposition mounted against this provision I again ask the Minister to have another look at the very rigid way he wants to apply it. The taxation system generally is very complicated. Every Finance Bill adds another layer of difficulty as far as the ordinary public is concerned in understanding their basic requirements. I want to make a plea for new businesses. At the moment we want to encourage everywhere we can investment and people with an entrepreneurial bent to establish new businesses, to encourage import substitution and try to provide additional jobs. In the early stages of establishing a business the managers, owners and others concerned devote all their, time trying to get the business off the ground. They concentrate on the floor, getting contracts and finding more business. For such people 12 months is a very short time. It may often be the best part of 12 months before these people get in touch with their accountants and this is not done with the deliberate intention of avoiding making legitimate tax payments.

Skills in management, accounting and business do not come naturally to most businessmen; they have to be learned. Therefore, I ask the Minister to tell us if he is prepared to take another look at this matter in the light of the examples that have been given. We are not making representations for people who want to deliberately avoid paying what is owed to the State but rather we want to consider the many situations where an injustice could be done if the facilities we are requesting were not provided.

I support the view that assessments are totally unrealistic. I do not know how they are calculated but it appears that a figure is pulled out of the air. In my view greater attention should be paid to making assessments. That is very important now that we have three 1 per cent levies — youth employment, health and the new levy. A person might get an assessment of £6,000 and he must pay £180 — the three 1 per cent levies — but he might only be eligible to pay on £4,000 — £120, a difference of £60. My information is that this £60 will not automatically be sent back to him, he must write away for it or get his accountant to do so. I am told that as few as one in 100 people who are owed money are doing this. The point I am making is that the assessments and the calculation of the assessments should be given more thought because they are unrealistic and should be examined.

First, I want to say a few words about why assessments are raised. There are a number of cases in which assessments are raised by Revenue and we have to look at the reasons why that is done: in the case of new businesses, if taxpayers who have not provided returns for some time, and taxpayers who are newly coming into the system. Normally an assessment based on no previous information would be raised in cases like that, because we have to start somewhere.

I would like to remind the House that the process of lodging an appeal is not very difficult. When a taxpayer receives an assessment the business of lodging an appeal requires him to sit down, write a letter to his tax inspector and say he appeals against the assessment. That does not require the services of an accountant or a lawyer. We should get that point clear and in perspective. The lodging of an appeal is not a lengthy or complicated procedure requiring the presentation of detailed accounts.

The provisions here are intended to tighten up a situation which has developed over the years and given some very unsatisfactory results. I will give just one example. In the case of Schedule D taxpayers up to 20 per cent fail to respond to assessments for a period of up to two years. I cannot imagine that 20 per cent of people who receive assessments for Schedule D tax are sick, away or otherwise unable or indisposed to either produce their returns or to sit down and write the letter which says "I appeal against this assessment".

They might not exist.

In that case there is no problem. We can raise assessments until we are blue in the face but if the person does not exist we are not creating any inequity. There are also cases where assessments are raised on taxpayers, including companies, who no longer exist. That is different.

Senator O'Leary's recommendation as far as I can understand it would be intended to secure a situation in which late appeals would be admitted without penalty on the discretion of the tax inspector after the 12-month time limit provided for in this section has passed. This would of itself undermine the tightening up of the appeal procedure which this section is intended to bring about. Therefore, I would have some very serious reservations about doing it. What is provided for here in terms of tightening up the procedure is this: a late application made later than 12 months after the date of the notice of assessment which would be admissible in present circumstances would no longer be admissible unless the tax assessed and interest thereon was paid. The provisions further stipulate that in the event that there is an overpayment of tax, the overpayment with interest thereon, is returned to the taxpayer. The central point is the question of the period after the date of the notice of assessment.

Senator Lanigan and others criticised the accountancy profession and how, in some respects, some of them fall down on the job of helping their clients. Again I come back to the point and say it does not require a great deal of energy or expertise in accounting to say within 12 months after getting a notice of assessment that you want to appeal against that assessment. That is all that is required. The cases Senator Lanigan was talking about deserve looking at from that point of view. If somebody setting up in business for the first time receives a notice of assessment from the Revenue Commissioners and considers it excessively creative on Revenue's part, he does not have to produce a detailed set of accounts to make an appeal. All he has to do is say: "I appeal against the assessment" and, once that is done, the procedure of examining the assessment and comparing it with his returns can begin. That procedure would be unaffected by this provision.

I suggest to the House that the dangers Senators see in this provision, strictly speaking do not arise and would not arise as long as people take the view that, if they get an assessment that they disagree with or that they might disagree with, they simply say within 12 months of the notice of assessment that they wish to make the appeal. I consider that to be a not very onerous requirement and the effect of it, on the other hand, will be quite beneficial. It will curtail the number of cases where the determination of liability takes a long time and where successive appeals are used over a long period to delay payment of tax. In the light of the time period given and the simplicity of the business of making an appeal, the effects being attributed here to the measure in question are vastly exaggerated and will not apply in reality.

The Minister has made a case, but the fact of the matter is that the Department of Finance envisaged a situation in the past where there would have been reasonable cause why a person might not be able to do it in 12 months. It is not as if the Minister is dealing with suggestions by Members of the House that there could be situations in which it would be reasonable not to appeal within 12 months. Up to now the Department of Finance accepted that that might be the case, so he is not dealing with something which we are dreaming up here. He is dealing with something which was already accepted by the Department. It could have been dealt with by the exercise of discretion by the Minister, by the Revenue Commissioners, by the inspector concerned, but making it totally rigid is regarded by everybody as going too far, as creating a situation in the interests of administrative convenience in which a citizen may be very unfairly treated.

I should like to say one other thing about the question of assessments. The Minister says assessments are only sent out normally where returns are not made. Of course, that is quite simply not true.

I did not say that.

Assessments are made — and this is the infuriating thing — in the cases of people who send in their returns every year and by and large the returns are accepted at the end of the year. Then there is this case of somebody who has been paying taxation for years and years, making regular returns, and the inspector must have a file and be very much au fait with the affairs of the taxpayer. Yet every year he sends out an assessment which is totally at variance with everything he must know about that taxpayer. It is a kind of “think of a number” and, in spite of the fact that there is a regular return every year and that he must know almost as much about the affairs of the taxpayers the taxpayer knows himself, nevertheless this “hell-zapoppin” assessment is sent out. The only conclusion I can come to is that the Revenue Commissioners have a wild idea that some year the taxpayer will inadvertently send a cheque for the amount he was assessed for, without thinking of what he is doing.

The position outlined by Senator Ryan is true. Probably the Minister is not aware of the number of assessments that are raised. I do not know if I am strictly accurate in making this statement, but I believe that every limited liability company gets an assessment. They all get assessments, because it is physically impossible for them to have their accounts finalised before the assessment arrives. Every single one of them gets an assessment. That does not happen in respect of each individual taxpayer, but I believe that it happens in respect of each individual limited liability company.

The Minister has no idea of the number of assessments that are flying around the place. They are coming down like rain. Of course there are good reasons for this. People are abusing the system. I certainly accept that. I support the Minister in making it more difficult for people to appeal after a period. I agree with that but, as sure as I am standing here, within two years this will be repealed. If it is not repealed, somebody will have found a way around it within the rules that already exist.

It is not going to be a problem between this and the next Finance Bill because it will apply only to assessments raised after the passing of this Bill and a period of 12 months will have to elapse. In two years' time the Minister, whoever he is — and I hope it is the same Minister — will be coming back and telling the House that we must amend this section because there is terrible trouble.

Some individual will be assessed for £½ million and because of his mistake, or the Revenue Commissioners' mistake, or someone's mistake, £½ million will be due allegedly from the taxpayer, and he cannot appeal. That will happen. The inspector can do nothing, except perhaps to cancel the assessment and raise another assessment. I do not know if he is entitled to do that. That will be a frightfully difficult thing to do when the information will not have been processed. It is absolutely imperative that over the next 12 months the Minister should look at this section. I am not suggesting it should be made easy. I am not suggesting people should be entitled automatically to a reassessment of the position if they are more than 12 months late. On the other hand, I am realistic enough to realise that, with the number of pieces of paper called assessments that are flying around at present, a number will slip through the system. That will happen.

I know a PAYE worker who supplemented his income by helping on a fishing craft during his summer holidays. He is a teacher. He returned that and arrived at a settlement with the Revenue Commissioners on the amount due. In spite of that he gets assessments in respect of his activities as a full-time fisherman, even though he was never a full-time fisherman, and in respect of his activities as a shopkeeper. Why? Because he bought a house that was previously used as a shop and an assessment was raised on the income of himself and his wife arising out of being a shopkeeper. There was a third one which I forget.

I do not mind these assessments being raised because it is better that they should be raised than that people could avoid tax. We must be realistic enough to realise that, with all these pieces of paper flying around, this problem will exist. In two years time the Minister will come back shamefacedly saying that he has got to change this.

I doubt that he will be shamefaced. It would not be in his manner.

The Senator lives in hope.

I do not see any reason why cases stated to the High Court and Supreme Court should not be held in camera. They should be held in camera. I said on Second Stage that I am firmly in favour of full disclosure by everyone using a system of self-assessment. That is the proper way and then everybody's tax affairs are out in the open. Until everybody's tax affairs are out in the open I do not consider that anybody's tax affairs should be out in the open.

I know the argument will revolve to a certain extent around legal points but inevitably, in respect of some of the cases stated there will be disclosed to the general public the amount of profit which a person made in respect of a particular venture. That is wrong. If there is disclosure for one it should be disclosure for all. In the cases stated it will be an inevitable part of argument of the point of law being discussed to explain what device the taxpayer used to minimise his tax liability. Normally the serious case stated would be in this area. In those circumstances, people will be capable of establishing what profit or gain a person made out of a particular enterprise. The same laws should apply to everyone. I said on Second Stage I am in favour of it but I am not in favour of partial disclosure only in respect of the taxpayers who were creative enough to use the legislation to their advantage. We cannot object to that.

The legislation is there to be adhered to. If a person can find a legitimate way around it it is a fair thing for a particular taxpayer to do. In exercising his right to persuade the High Court and the Supreme Court that what he has done is legitimate and he should be taxed on a capital gain instead of on his income, it should not be necessary to disclose the amount of the gain he made on a particular transaction, I see no merit whatsoever in a partial disclosure. It does not add anything to the stability of society or of the community to have partial disclosure. This enables those people who make a lot of noise, who pretend they are speaking on behalf of the lowly paid—in fact they may be very highly paid themselves—to point the finger at other people who are engaged in very genuine business enterprises. Some of those people hide behind the cloak which all other taxpayers have with respect to the amount of income they have achieved in a particular year.

When the Minister spoke the last time he made the case better than anybody could for the total abolition of the assessment method. He mentioned the different areas under which an assessment is raised. He said it can be raised in the case of a person going into business for the first time or in the case of a person who has not sent in his tax return in time. I do not know what the history of the assessment method is. The origin goes back a long way but since then we have sections in each Finance Bill laying down penalties for not returning proper returns of income. A number of problems are created. Granted that it is very easy to appeal, like a lot of things in the taxation system, people who come into the tax range for the first time possibly do not know the procedures. In some cases when they get an appeal notice they probably send it on to their accountant or whoever is advising them.

The penalties for not disclosing one's income are in other sections which we will come to later. The other problem has arisen in this particular year because of statements which have been made about the amount of tax that was overdue. The reason this huge amount of money was supposed to be overdue was because of the very section we are talking about, because assessments were made. The Minister suggested at one stage, rather than £1,200 million or £1,400 million being overdue, the figure might be £80 million to £90 million. The problem is that because of the assessment method of picking figures out of the air, people got the impression that this huge amount of tax was overdue but this is not actually the case. The case must be made now for the elimination of the assessment system because there are other ways of getting to the taxpayer without this notional method. It is a juggling of figures. The figures produced on assessment papers have no bearing on reality. It is think of a number. You could put down a telephone number. That is what is happening and there is no basis for it in fact.

Would the Minister please comment on the fact that assessments are in many ways unrealistic bearing in mind that the levies I referred to earlier, the three per cent levies, are paid on the basis of the assessment that is issued? There is no refund unless the person writes for it.

I will come back to this question of assessments. Senator Lanigan has made the case that assessments are unrealistic. In many ways I would be very happy if we could find a more accurate way of establishing tax liability. The difficulty is that the companies on whom assessments are raised are not in a position to make a weekly or monthly return of their income as a basis for deciding what their tax liability is. It has been fairly said on a number of occasions that our tax system effectively relies to a great extent on self-assessment and also relies to a great extent on the level of compliance. It is very difficult to envisage a system of taxation of companies or self-employed people that did not include the kind of assessment procedure which we have, for the very reason which Senator Lanigan must realise if he thinks about the situation of his business. I believe that most people in business at present would find it very difficult now to make a projection of what their total income might be at the end of the year and what their total taxable income might turn out to be for the whole year. That is the reason it is necessary to make assessments.

On the whole if you are dealing with a taxpayer who has been in the tax net for some time and the inspector dealing with a case has been working on it, he will have a fair idea what the progression is. Nobody talks about the assessments that turn out to be reasonably near the case and where a determination can be made fairly quickly. Of course, nobody is talking about the assessments that are received by taxpayers who say: "That is fair enough, I reckon I should probably pay a bit more than that so I will take the money and run, thank you very much". There is a large number of those cases inevitably.

Could we get a rough percentage of those cases?

I cannot believe that Senator O'Leary's ingenuousness is at quite the level he is trying to have me believe now. I do not really see a fair way of getting away from the assessment procedure. Obviously, if we can produce a situation where tax inspectors are inspired to the point where the assessments will more accurately reflect the actual income situation in a business we will be very happy. Again I wonder if it is realistic to expect that. No matter what line of business one takes, whether it be somebody involved in a profession, in a service occupation or in manufacturing, there will be variations from year to year in the amount of income he earns and in the amount of taxable income that is generated in the business. It is very clear that assessments from year to year will vary up or down around the line of the actual income trend. I would also make the point that the notice of assessment itself includes a recall to the taxpayer that there is a right of appeal so that it is not the case that people get assessments and have no way of knowing what are their rights in relation to an appeal. It is pointed out to the taxpayer and it is pointed out to whom he should appeal in the first place. Mind you, if Senators have suggestions for improving that level of information I would invite them to make submissions to the interdepartmental committee on the simplification of tax forms I mentioned yesterday who will certainly take account of whatever may be their problems.

On the question of the removal of the in camera provision for hearings in the higher courts, I would invite Senators to consider the history of that provision. There was an in camera provision in operation between 1929 and 1943. Notwithstanding the fact that there was a provision in the 1929 Act not one case was heard in camera in the period during which the Act was in operation. From 1943 to June 1953, 25 cases were heard in the higher courts and six of them were heard in camera. The provisions of this Bill are that the appeals to those higher courts would be on points of law. Therefore, I would not envisage that appeals that would be heard under the provision in question would be ones in which the total amount of tax would be the issue. The issue would be whether tax was properly payable or not in respect of a particular type of activity. When we reflect on it in that way we find there is quite an amount of justification for having such cases heard in court because, typically, it will be on a point of interpretation of the law as to whether a particular activity is or is not taxable, as to whether a particular device is a legitimate means of avoiding tax or not. And the hearing of those cases in public will be of advantage not only to the Revenue, in terms of their exemplary effect, but also of advantage to other taxpayers and to tax practitioners in that they would have a quicker means of access to information which they now get anyway in relation to cases that are heard in camera. That is the reason for this provision. It does not apply to appeals heard by appeals commissioners or appeals heard in the Circuit Court, because in those cases what is at issue is the actual amount of tax payable by the individual. I accept the point that it would not be correct that an appeal related to the amount of tax payable should be made public.

Question put and declared carried.
Section 10 agreed to.
Question proposed: "That section 11 stand part of the Bill".

I want to refer to the failure of the Minister to reply to what I regard as some comprehensive suggestions and questions I put to him yesterday. I do not know whether I was singled out for any particular treatment in his replies. Perhaps he did not like the questions I put to him but I think they were realistic and——

I thought the Senator had the impression last evening that I had singled him out for particular treatment.

Well, I understand in the national press today I was singled out — I have not read the papers as yet — but I have been told that I have been singled out for a special reference. In that light the Minister should have made some comment on some of the submissions I made. However, it is my intention to endeavour to extract replies from the Minister under the various sections here, those applicable to farming activities. I did ask whether medical cardholders, old age pensioners, widows and orphans and pensioners were eligible under the provisions of this section. The Minister seemed to indicate that they were not. I should like him to say, in replying to this section, whether or not those three categories of people will come into the category of the 90,000 farmers he is now bringing into the tax net.

I might point out that out of 269,000 holdings in this State over 63,000 would comprise holdings ranging from one to 15 acres. In my view surely those 63,000 farmers with holdings of from one to 15 acres could not be liable to tax or be included in the 90,000 he is now bringing into the tax net. Indeed, I might go further and suggest that the 61,000 holdings of from 15 to 30 acres, comprising part of the 90,000, and who were partly assessed to tax previously should not be liable. I maintain that a 15 to 30 acre farm, of variable size, especially in the west, most of which are reclaimed bog with foothills and perhaps some of unclaimed bog, should not be regarded in any farm survey as a viable holding. I submit to the Minister that the 63,000 holdings of from one to 15 acres and the 61,000 from 15 to 30 acres could not reasonably be regarded as coming within the category to be taxed. I should like the Minister to say so now, to tell those people, because he has not said so as yet. Neither has he said that medical cardholders, old age pensioners, or recipients of widows or orphans pensions would be exempt from this tax. I have pointed out to the Minister the frustration being experienced by these people because of the implications of this measure.

The Minister said himself that it will take three years to have this new farm profile implemented in regard to the 90,000 farmers now coming into the tax net. Indeed, I think he said it would take a number of years to do so, or to get around to everybody. I would suggest to the Minister that he delete holdings in disadvantaged areas immediately. When we were endeavouring to define disadvantaged areas for EEC grant purposes surely cognisance was taken of the type of land, its size, location and type of farming carried on there. It would be only fair that the Minister would delete such disadvantaged areas from the administration of this new provision, which would reduce the numbers considerably.

It would only be fair if the Minister excluded those people in the disadvantaged areas. He has said on a few occasions that most of them will have to make returns but will not be taxable. If the Minister would adopt my suggestion he could immediately eliminate that section, thus easing the burden on the administration. A sum of £2,500,000 is not a large amount in the context of the budget.

I wish to know if unemployment benefit will be taken into account when considering tax liability? A person qualifying for unemployment benefit has paid his contribution each week. In a way he has been taxed already. Will unemployment assistance be taken into account? Will the cattle headage and sheep subsidy headage grants be assessed for tax purposes? I believe they should be exempt. They are a supplement to small farmers who must be given every encouragement to develop their herds at a time when herd numbers are dropping. Meat processing factories badly need more cattle to kill. If cattle numbers were increased the meat factories would have more work and this would help the employment situation. The disadvantaged areas scheme was designed specifically in Europe to increase cattle and sheep numbers. I wish to know if the grants given in this connection will be included in the assessment for tax liability.

There have been many references to the farm profile form. I have not seen the forms in question. However, I understand they were produced by a farming organisation. If it is a case that the forms were produced before the Finance Bill passes, I wish to know if that is legal. Perhaps the Minister will state if the form to be use was produced by a farming organisation or by the Revenue Commissioners? I should be very glad if the Minister would clarify this matter.

Some of the questions I wished to ask have been asked by Senator O'Toole. Last night the Minister stated we will be bringing an additional 87,000 to 90,000 farmers into the tax net. Obviously the Revenue Commissioners will not be physically able to deal with all those farmers this year. What criteria will be used in determining the number who will be dealt with this year? Will we refer to the old PLV system, starting at, say, £39, and moving down to £20? Senator O'Toole referred to the disadvantaged areas in the west. There is another category within the disadvantaged areas in the west called the severely handicapped areas. Will the Minister consider exempting all the small farmers in the severely handicapped areas from income tax?

In my contribution on Second Stage yesterday I questioned the system of collecting income tax from farmers as against the production unit system. I shall give a few examples of the disincentive to production that will arise. The fees farmers will have to pay accountants will probably amount to more than will be collected by the Revenue Commissioners by way of tax. I understand that a farmer over the threshold of £4,800 will be liable for income tax. A farmer whose income is assessed at £4,700 will not be liable for tax. However, on the advice of his agricultural adviser that farmer might subsequently increase his cattle numbers and this might bring his income for tax purposes to £4,900, thus bringing him into the tax net. In that situation his accountant's fees might amount to £400 with 23 per cent VAT. There is very little incentive for a farmer in that situation to increase productivity. The production unit accounting system would be better for the Revenue Commissioners and for farmers. We should not do anything that will discourage an increase in agricultural production. By increasing production, extra jobs can be created in milk processing and meat processing factories.

Before calling the next speaker perhaps Senator Ferris would tell the House the arrangements regarding adjourning for lunch.

I have had discussions with Senator Lanigan, leader of the Opposition party in this House. We have agreed we will adjourn for lunch on the basis of a commitment to complete this Bill today. We have agreed, subject to the concurrence of the House, that we will take No. 6 at 4.30 p.m. This means that if we have not completed discussion on all sections of the Bill by that time then all sections will be put and agreed and we will proceed to item No. 6. If we make good progress on the Bill in the afternoon, it is possible that there might be an earlier closure but we have put the time limit I mentioned on the matter for the moment. Senator Lanigan has agreed with this so that Senators would know about the arrangements for the afternoon. We will adjourn for lunch at 1 p.m. until 2 p.m.

I would have to be assured that there was a definite agreement before I would bring the proceedings to a close at 4.30 p.m. However, perhaps the Senators would let me know about the matter at lunch time.

There is one aspect of this section that is good for the farming industry, namely, that all farmers are now obliged to complete an income tax return. I know that the vast majority of farmers do not have taxable incomes and this is to be regretted. I hope the Minister through other legislation will make a significant contribution to changing that. Over the years there has been a problem with farmer taxation where sectoral interests tended to play off against one another. For that reason I am happy that at least everybody is being treated in the same way.

I would like to make one appeal to the Minister. With the additional greater number of farmers many people will genuinely experience difficulty, even in filling out the simple form which has had a great deal of discussion and attention. I would hope that the officers of the Revenue Commissioners, the inspectors of taxes in the various regional offices, will use a more than usual amount of commonsense and that they will be helpful to people and will go out of their way to assist them to understand the system. I am confident that the filling in of the form and the submission of it to the local office will be the end of the matter for a great many people. For farmers with valuations in excess of £40, in this rather difficult year which has got off to a bad start with the spring work moving into the summer, yields may very well be down significantly in the coming harvest, and I would hope that the inspectors of taxes will bear this in mind having regard to the great scarcity of cash flow in many of the farming husbandry lines at present. While the Minister is reforming the system in a very significant way, it is very important that the inspectors of taxes and himself should be aware of the situation in agriculture and not expect blood from a turnip.

It is important also that the Minister would assign to the regional offices suitably qualified inspectors of taxes who would visit a farm here and there to see the situation for themselves. This is important. Many poor people living in remote areas have not the facility of expressing themselves or their views or making a good case for themselves. We all accept that it is unthinkable that these people should have to pay several hundred pounds for the services of an accountant. The Minister and his Department have an obligation to meet the problem and the demand and to assist people. I know that most inspectors of taxes do not want one penny more than the law states they are entitled to collect.

Sitting suspended at 1 p.m. and resumed at 2 p.m.