Seanad Éireann díospóireacht -
Friday, 3 Jun 1983

Vol. 100 No. 15

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

SECTION 11.

Question again proposed: "That section 11 stand part of the Bill."

Mr. Lennon

At least 90,000 farmers will be brought into the tax net. The Minister assured us that the farm profile he mentioned would be very simple and he gave us examples of the type of questions that would be on it, for example, the number of cattle, acres, and so on. I am not doubting what the Minister said but it seemed a bit too simple. What the Minister and the people who make out these forms regard as simple may not be that simple to farmers around the country, not necessarily in disadvantaged areas only, which Senator O'Toole mentioned this morning. Having sat on many committees and councils over the last few years, I know that pensions officers often disallow pensions because they feel the margins of profit should debar people from receiving pensions. When we talk about the numbers and sales of cattle we have to remember the margins of profit. These will differ greatly from one farmer to another and, indeed, in different parts of the country, as well. It can well happen that the times of selling can vary from one farm to another and prices also. For that reason I am particularly worried about this farm profile.

In spite of the Minister's assurance here that this will be a very simple type of form, I am still convinced that almost all farmers, before they fill in that form, will get advice. I would not tell them that they should not get advice, but this is a very simple form. Whatever they put down on that paper stays. There is an old saying that you cannot unscramble the egg. What they put down may not necessarily be the full truth. I am sure some people often do not necessarily put down the full truth of these forms. The farmers will probably get some advice as to what to put down in relation to the margins of profits. They will have to put down margins of profits because this will differ perhaps from area to area. It would seem strange for example, if it were acceptable to put down the number of acres and the number of cattle. Some investigation of some type would then have to be made.

Senator O'Toole mentioned this morning the number of farmers who have from one to 15 acres. I have no doubt at all that those farmers with one to 15 acres will not have to pay tax. Nonetheless, they will still have to fill in their forms. I believe, although I may be wrong, that these people will still engage accountants. It will still cost them some money to satisfy, not necessarily the Revenue Commissioners, but themselves that what they are putting down is right.

Having worked with farmers for many years and with many farming bodies I would have to say that farmers would be hardly as scared of a war as they would be of tax. In fact, foot and mouth disease would not scare them as much as tax and tax forms. It is true that most farmers are not afraid of work, of using picks and shovels and all those types of implements, but they are very afraid of the pen. Somebody once said that the pen is mightier than the sword. They would much prefer to work for perhaps two more hours out in the yard and in the fields than to work for five minutes with a pen. I do not know who may disagree with me in this House today on that, but I believe that is the truth. I know many farmers. I have worked closely with ACOT committees and many of their advisers. Many simple forms which have gone out in the past are still not filled in by the farmers. They still seek the advice or assistance of the ACOT advisers and as a last resort go to the accountant if they have any greater difficulties.

Very often we see in industry if people are asked to work a few hours overtime in the evening they find that it is scarcely worth working because the tax is such that at the end of the day they do not gain much. I must point out, though I do not agree with it, that some people are so reluctant to pay tax that they feel when they come to a certain stage, possibly the limit when they would have to pay tax, they say "Look, there is not any point in killing ourselves. If we now produce more, we are going to have to pay more tax". It is not a good argument and I am not saying that it is, but it does happen.

What I hope will not happen as a result of this tax is that many farmers, not necessarily from the £1 to £15 valuation but perhaps closer to the £40 valuation, who will survive this year and in the years to come without paying tax on whatever margins of profit or whatever income they have, will have a certain reluctance to increase their output. They may feel that if they increase their output they are going to be caught within that tax net. I want to express the view myself publicly — and I do not mind doing it now — that many farmers would have been happier if they had been hit for a certain figure, whether based on poor law valuation or something else, when they would not have to fill up forms, but would be asked for £X per acre. It is true that the IFA agreed to this, although not in all counties. If they had to pay £X per acre through poor law valuation — that may be gone by the board now — it would mean that these people might well be anxious to work and if they were we should not try to stop them. They could work all night if they would like to. There would be no disincentive there.

I hate to see any disincentive in farming, where we have ready markets for all out produce, be it cattle, corn, or whatever we have. I accept what the Minister and Senator McDonald said, that perhaps there may not be many people whose profits would be such that they would have to pay tax, to whom that would apply. I appeal to the Minister to keep this farm profile which none of us has seen at the moment, very simple. Otherwise, accountants are going to get handy money and farmers are going to have to pay them.

The first time that farmers get this tax profile into their hands, I can see them running to their neighbour almost immediately to see if they got it and what they are going to do with it. I am quite sure that their next trip will be to somebody who has some experience of these forms. They are going to get advice and I want to be on record as saying that I believe it is going to cost them money, unless the form is very simple. He said here yesterday that this form will be very simple and perhaps many of the ACOT advisers will be able to help farmers among their other duties. I do not want it to cost farmers £50, £100 or £200 to get forms filled in. They cannot afford that. I would not like to see them scared into doing that. For that reason, I make this appeal now to the Minister.

Mr. Dukes

I am sorry if Senator O'Toole felt that I did not reply yesterday to the points that he made. I had thought that my remarks about the system addressed the particular points that he raised, but in case there is any confusion about the matter, I will take up a couple of the specific questions that he asked.

Unemployment benefit, unemployment assistance and smallholders assistance are not part of reckonable income and, therefore, would not fall to be considered with other incomes for the purposes of taxation. As Senator O'Toole knows, other pensions — some of which he mentioned — are classed as reckonable income and would therefore fall to be included in the amount of income considered in order to determine tax liability.

Payments made under the disadvantaged areas scheme would also fall to be classified with income that would be considered for the purpose of determining tax liability. Of course, liability arises only to the extent that income exceeds the tax-free allowance. If the total of reckonable income comes to less than either the exemption limit or the tax-free allowances, then no tax is paid. Many of the cases Senator O'Toole has in mind are where there would not be a taxable income.

I would point out to Senator O'Toole that there is no way that account can be taken of the number of hours that a person has worked to earn the income, because what we are concerned with in determining tax liability is the total amount of income. It would be a novel departure if we were to look at the total number of hours worked in determining tax liability. In spite of what is said in some of the popular press, for example, if we were to take account of the total number of hours worked Members of the Oireachtas would on that score find themselves with a considerably reduced tax liability compared to what they have now.

Mrs. Honan

We would pay no tax at all.

Mr. Dukes

Perhaps there are some of us who would be due a net refund on the basis of the number of hours we work. It is not my intention in operating the system to make any specific exemptions for disadvantaged areas or for any other areas. I expect that we would find very few cases in disadvantaged or severely handicapped areas where tax liability would arise because of the nature of farming in those areas. However, we all know that even in the disadvantaged and severely handicapped areas there are cases where people make reasonable incomes out of farming. Equally, we know that in some of the areas classified as being the more advantaged areas — for example, in South Kildare — we have cases where people have a level of income that would leave them outside the tax net. There is not an exact relationship between possible tax liability and the part of the country in which a person is farming.

I do not intend to make a specific exemption for people with farms of less than a certain acreage because there are cases where people are farming on small acreages and who have another enterprise which would bring their income above the taxable level. I am not suggesting that there are people making fortunes out of small acreages, but someone with 30 acres and an intensive pig unit or mushroom producing unit or with an acre or two under glass could well be in a position that his income would exceed the total of his tax free allowance. It would complicate it unnecessarily to make exceptions of that kind. It would probably be unjust in that people outside those categories might be discriminated against and be put in a position of apparent liability.

The profile is a simple document of four pages. The front page deals with the name, address and declaration. The fourth page consists of notes for the guidance of the person who is filling out the form.

Mr. M. O'Toole

Is the Minister talking about double pages or single pages?

Mr. Dukes

Four pages.

Mr. M. O'Toole

The equivalent of an ordinary yearly tax return form?

Mr. Dukes

It is smaller than the yearly tax return form. There are four pages. The two centre pages are the operative part of the profile. It has been drawn up by the Revenue Commissioners based on consultations which took place with the farming organisations. The two main farming organisations have agreed on the form of the profile and have accepted that it is a reasonably simple document and one that will carry out the function for which it is intended. They are all agreed it is a document which can be filled in by a farmer without professional assistance. However, if a farmer wants professional assistance in filling it out that is up to him.

The information which is requested is a description of personal circumstances, that is, whether a person is married or single and the number of children he has. Section B asks for farm buildings erected in the last ten years, the type of building, the date it was erected and the cost. Section C asks for details of vehicles and farm machinery purchased in the last five years, type of vehicle and machine, date of purchase and cost. Section D asks for the total cost of land reclamation carried out in the last five years and the total amount of grants received. Section E asks for details of livestock numbers for the year ended 31 December 1982. Section F asks for a description of the use of land owned and rented in that year. Section G asks for total farm receipts in the year ended 31 December 1982 where known. Section H asks for an outline of farm expenses, including a question as to whether full-time non-family labour or part-time non-family labour was employed. It does not ask how much was paid in respect of either labour. It also asks for an indication as to whether agricultural contractors were employed in the year in question. There are five questions: was expenditure nil; was it less than £500; was it between £500 and £1,000; was it between £1,000 and £2,000; was it over £2,000 Section I has seven questions in relation to cash, bank balances and investments including, for example, information in relation to balances outstanding on bank loan accounts. All this information could be provided quickly by the lending institutions. Section J asks if the person filling out the form has any other trade, profession or employment. Section K asks for details of other income in the year ending 31 December 1982.

These forms will be sent out in the next few weeks. This kind of information could normally be provided by the farmer himself. When thinking about this I am reminded of the time when the VAT system was introduced. I was involved in a different line of business then and was involved in discussions with the Revenue Commissioners about the system. I made the point to my employers — and it is still valid — that there are many farmers who would find that it was in their own interest to register. One of them remarked that he did not think he could do that. His reply was: "I could be out in a field some day and a neighbour would come along and see I had a good calf in the field. He might make me an offer that I would accept and I would sell the calf to him. I would not necessarily have a bit of paper or a pencil with me so how would I be expected to know how much I got for the calf?" I replied that if he thought he had done a good deal, he would have no difficulty in remembering it 20 years later because he would be so proud of himself. One tends to exaggerate the difficulty that people would have in remembering or having access to the kind of straightforward information that is looked for in this profile.

As I said yesterday, the system being set up by the provisions of this Bill means the following: To those farmers who are not now in the tax net — some 90,000 of them — we would send the profile, asking them to complete it. giving the kind of information asked for. The farmer would submit that to the local tax inspector who would examine it. If the farmer wished to add to the profile a set of accounts detailing his total farm receipts — that would be helpful although it would not be required — the tax inspector would then arrive at a view whether it was likely that the person concerned had a taxable income. If the inspector was of the opinion that there might be a taxable income, he would then send to the farmer the simplified form on which he would make a declaration of income.

We have asked for submissions from representatives of different professional associations as to how we would further simplify those forms. Of course, a large number of people who would fill in the profile would present information which would allow the tax inspector to conclude that in a substantial proportion of those cases there was not likely to be a taxable income. So far as those cases are concerned, that is the end of the matter for that year, and probably for a couple of years afterwards. They would not be asked to provide any further information. It would be only prudent to provide for coming back to those cases every few years to take account of changes in circumstances. In the event that somebody was likely to have a taxable income we would start off with a simplified form of accounts and the matter would proceed from then on as we proceed now with people who have been in the tax net already.

I do not expect we will get around to sending out profile forms to 90,000 farmers this year. If we get 20,000 of them covered this year it is about as many as could be managed given the resources we have. Obviously, we will start at the level where there is most likely to be a taxable income. I cannot say for reasons of judicial decisions just how we would pick them, but we would start at the level that is most likely to identify people who are more likely than the rest to have taxable incomes. The process will go on for some years.

In operating on the basis of that profile, I would suggest that it is fairly clear that we will not be building up an enormous onerous system that will create particular difficulties for the people who are being asked to supply the information. I will insist on the point that we are obliged this year to have a system to do something like that because we can no longer use the trigger point of a given level of poor law valuation given the decision that has been made by the courts in this matter. We have two choices. We can try to do something which has been declared unconstitutional or we can do nothing at all which would be downright wrong.

Senator Kiely has come back again to the question of production-unit accounting system. In the light of what I have said about the operation of the profile system he would have to agree that it is a simple and a very straightforward system. The advantage he claims for the production-unit accounting system is that there continues to be an incentive for people to increase production — to keep more cows, for example — or to increase their number of stock. Of course, that is not the case because in the production-unit accounting system if you have more units you are more liable for tax. There is no way that we can envisage a system, without its being totally discriminatory, that will relieve people of the obligation to pay tax if they increase their incomes. The question of incentives has to do with a lot more than taxation. I put the point, which I think people generally do not think about a lot, that I do not know of any tax system in the world except one abberation in the Swedish tax system a couple of years ago which produces a marginal tax rate in excess of 100 per cent. If you increase your income, in all of the tax systems that I know of, you still keep a portion of the extra income you have earned.

For Members of the Oireachtas to make the claim that increases in production are penalised by taxation is a shade mischievous and is done I think more out of emotion than out of any real analysis of what happens to people whose incomes increase and whose tax liability changes as a result.

It will be fairly clear from what I have said that the farm profile system will not require a lot of accounting and will require people to have recourse to professional services in order to give the kind of information that will be required.

Senator Lennon made the point that farmers are scared of forms and taxes. That may be true but Members of this House should remember that farmers are not unique in that. However, they will be more scared of forms than they need be if people exaggerate the difficulty of filling in forms. Frankly, I have a greater appreciation of the level of education of our farming community than other people seem to have. Having to canvass them for votes fairly often — but not too often in the future, I hope — gives me a fairly keen appreciation of their analytical abilities and of their abilities to digest what is put before them on paper. I do not really think the kind of information we are looking for in this profile will present any particular problems for them.

The other point I make and to which I referred yesterday is the disadvantage that exists in all notional forms of taxation that are not based fairly correctly on the actual level of income the taxpayer has. Notional systems have the disadvantage that people whose incomes are below the average level, that is the basis of the notional system, are overtaxed and that people whose incomes are above that average level are undertaxed. The usual answer to that is to say that the people who are below the average level should be given the option of having a factual assessment. So far as the Revenue and the State are concerned and also the general taxpayer in a sense, that is a situation of, "Heads you win, tails I lose". It is not the sort of system that would commend itself to us either on grounds of efficiency or of equity. It is another plea in favour of adopting this kind of system. It is not onerous and will not require the expenditure of a great deal of effort or money in complying with the information requirements.

Mr. M. O'Toole

I must compliment the Minister on making a marvellous case without having to give or any good news to offer to small farmers. He has made an excellent case in trying to persuade us that what he is doing will not require any accountancy. The Minister has a back-up team with him ——

An Cathaoirleach

The Senator is not entitled to refer to the officials in that way.

Mr. M. O'Toole

A back-up team.

An Cathaoirleach

The Minister is responsible to the House.

Mr. M. O'Toole

What will I call them?

An Cathaoirleach

You need not call them anything. The Minister has total responsibility.

Mr. M. O'Toole

The Minister knows what I mean.

Mr. Dukes

I can tell the Senator that I do not know how many questions are on the normal tax return form and I am myself in breach of the regulations since I have not sent back my tax return form in time this year.

Mr. M. O'Toole

I accept that. I believe there are more questions in the profile.

Mr. Dukes

Twenty-four.

Mr. M. O'Toole

There are probably fewer questions on the ordinary form.

Mr. Dukes

There are more in the ordinary one.

Mr. M. O'Toole

The Minister says that a smallholder in the west who has a medical card is not eligible for tax. Is that correct?

Mr. O'Leary

What is a smallholder?

Mr. M. O'Toole

A person holding between one and 15 acres.

Mr. Dukes

The answer depends on the amount of income. It is more likely than not that a smallholder in the west who has a medical card will not have a taxable income. However, it is not beyond the bounds of possibility that a smallholder in the west or any other part of the country who qualifies for a medical card on the basis of the assessment we now have might turn out to have an income that would be taxable.

Mr. M. O'Toole

So a medical card holder can be assessed for tax.

Mr. Dukes

As is the case with a large number of medical card holders who do not happen to be farmers. Many medical card holders in other walks of life pay their tax and PRSI contributions depending on the level of their income. Their medical card eligibility is determined partly on the basis of income, partly on the number of their dependants, partly on the basis of certain outgoings such as mortgages or rents, and medical necessity.

Mr. M. O'Toole

They are eligible for free transport and school buses and free medical services but it is within the realm of possibility that they will be taxed under this new system.

Mr. Dukes

They may.

Mr. M. O'Toole

There is a possibility.

Mr. Dukes

As with other medical card holders.

Mr. M. O'Toole

People who are in receipt of unemployment benefit, having paid their contributions over the years, and have now retired to the farm may be liable for tax. Will a person on unemployment assistance now be liable? The Minister said that there was no consideration for a family unit working around the clock seven days a week but he also said that the profile form contains a question as to how many people are working.

Mr. Dukes

Non-family labour.

Mr. M. O'Toole

That is all right. The isolated mushroom grower, tomato grower or pig breeder might come under another section of the Bill for tax purposes but he will also be assessed under the profile. He may already be making returns.

Mr. Dukes

Then he will not get the profile.

Mr. M. O'Toole

They should not be included in the 90,000 because they are already paying tax.

Mr. Dukes

They are not included in the 90,000.

Mr. M. O'Toole

When the Minister was making the case for bringing in the 90,000 he said there might be isolated cases.

Mr. Dukes

If they are already paying tax they are not in the 90,000 because their valuations are over £40.

Mr. M. O'Toole

The Minister mentioned grants for reclamation. Do I take it that a grant for land reclamation is now regarded as taxable income?

Mr. Dukes

No.

Mr. M. O'Toole

Is it exempt?

Mr. Dukes

We are trying to establish the net cost of having carried out the work. Surely the Senator is not pretending that the grant for reclamation might exceed the cost of carrying out the work.

Mr. M. O'Toole

No, I am not pretending anything. I am trying to get information. I take it that reclamation grants will not be regarded for tax purposes.

Mr. Dukes

It is part of the information we are looking for in the profile.

Mr. M. O'Toole

For what purpose?

Mr. Dukes

For establishing whether or not it is likely that a person might have a taxable income.

Mr. M. O'Toole

Then I take it that it will be assessed as taxable income.

Mr. Dukes

The question relates, firstly, to the total expenditure and, secondly, to the amount of the grant.

Mr. M. O'Toole

The question might be deleted if there is no point in its inclusion.

Mr. Dukes

It would be most disadvantageous to delete that question because then we would not know the net outgoings on the reclamation work. Farmers would not thank anyone for taking out that question.

Mr. M. O'Toole

I want to find out the reason for its inclusion. It should not be income for taxable purposes.

Mr. Dukes

No. We are trying to find out the costs.

Mr. M. O'Toole

Will this form be sent out every year? The Minister told the House that the Revenue Commissioners when they get the screening profile back will decide if a farmer is liable to pay tax for that year, and I should like to know if that will mean that the farmer will not be reviewed again for a number of years. Has it been decided how often they will be reviewed or will the profile be sent out annually? If the cycle is to be distorted, as it will be because of administration on the first occasion, I cannot see how an annual review will take place. Will it be left to the judgment of the Revenue Commissioners, arising out of the first profile received, when to assess a person again? What about the person who decides to burn the profile?

Mr. Dukes

Is the Senator recommending that?

Mr. M. O'Toole

I am not. I am too long on the road for that. It has been suggested that farmers should not return the screening profiles and I should like to know what the next step will be in that event. Will the Revenue Commissioners assess such people after 12 months? I am concerned about these matters because I represent many small farmers and I have no doubt that they will be posing such questions to me. Most of my constituency work involves filling forms for isolated houses and loans — I am engaged almost full time at that — and I have no doubt that I will have a lot of work to do in connection with the profiles. It is important that I know as much as possible about this provision in case I make any errors when filling up the profile for my constituents. It is for that reason that I am endeavouring to get all the information possible from the Minister. I must compliment the Minister on the case he has made considering he has the help of a poor Finance Bill.

Mr. Connor

The Minister has said that profile forms will reach about. 20,000 farmers this year and I asked him what criteria will be used in choosing whom to send them to. The Minister said there will be no reference to the old PLV system which in a sense had some relationship to the size of a farm. We had a threshold of £40 and I am anxious to know if the Minister intends starting below that figure. Will the Minister be taking a random sample across the country? If it is the intention to send forms to 20,000 farmers this year it will take up to four years to communicate with all farmers. In that event some farmers will not be contacted for four years and if it is found that they have had a taxable income for four years will they have to pay accumulated tax for that period? That may be a problem for some farmers. Is the Minister telling us that farmers do not come into the system until such time as they meet the assessment or until their profile has been considered?

Mr. Kiely

The Minister told the House that on the profile farmers must give an account of non-family labour input and I should like to know if they will be required to give an account of family labour input.

Mr. Dukes

No.

Mr. Kiely

Is it because it is considered that family labour input is free?

Mr. Dukes

No.

Mr. Kiely

The labour input of a wife, a son or a daughter must be recognised and taken into consideration in assessing whether a farmer has a taxable income or not. I am aware that the farming organisations accepted the profile form but I do not think they are keen on the simplified form that will be sent out. Irrespective of what the Minister says about the simplicity of them farmers will need professional assistance when completing them. In my view many farmers will have to employ accountants. I do not know if Senator O'Toole will be qualified enough; he may have to go further afield. I am aware that one farming organisation does not agree with the simplified form system of assessing whether farmers should be taxed or not. The Minister has said that he does not have any alternative but I suggest the production unit would be a good alternative. The Minister expressed the view that under that system farmers would have to pay more tax but in that case it would be tax on income. It would also encourage farmers to have better stock.

Mr. Smith

It is important that we move towards equity in our taxation code and how it affects all sections of the community. Obviously, farmers are not an exception. It is a tragedy that there has been such a preoccupation in recent years among farm organisations with regard to how farmers are taxed as if it was the major problem for the agricultural sector. The Minister has said that the question of including all farmers in the tax net arises directly from a decision of the High Court in regard to the valuation system. That is technically correct but it could be argued that independent of that decision any Government would have to look at the overall situation. In many ways the farm organisation that was involved in that legal matter was ill-advised if one considered the matter on a long-term basis. I am not arguing that the valuation system was a totally equitable one but a problem arises in farm taxation as we know it. The argument is advanced — the Minister does not accept it — that the tax system is viewed as a disincentive to the intensification of production and, at the same time, the elimination of any other tax on land inevitably means that we have under-utilisation of vast tracts of land at a time when there is a great need for more production. We have had a substantial drop in capital taxation as a percentage of total taxation in the last ten years and the effect of that has been seen in many local authorities. Many of them find that they are substantially down on income which, in the normal way, would have come from rates on land. The Government gave a commitment that local authorities would be refunded these amounts. To my consternation in the Local Government (Financial Provisions) Act by one stroke of a pen the Government have excluded themselves from the responsibility of making up to the local authorities the funds that would otherwise be available to them.

Mr. Dukes

Who abolished the system in the first place?

Mr. Smith

In many respects——

Mr. Dukes

The Senator is five and a half years too late.

Mr. Smith

We are moving slowly back but under another name, but we can deal with that point later. I made those points to illustrate that while it is necessary to move towards equity in relation to farm taxation vis-a-vis all other sectors, it is important to put it into perspective and to have a system which encourages development but does not exclude from responsibility owners of vast tracts of land which are required for more intensive production than is done at present.

Mr. Dukes

Senator O'Toole is concerned about unemployment benefit and unemployment assistance. I have already said they are not reckonable income for the purpose of the Income Tax Acts. I wonder if we could find somebody drawing unemployment benefit, working on a farm, and having another source of income at the same time.

Mr. M. O'Toole

I did not say that. I was talking about people who had been working for some time and were in receipt of unemployment benefit but are now back on the land, and still eligible for unemployment benefit.

Mr. Dukes

If he is eligible for unemployment benefit there is no difficulty. That is a part of his income which would not be included as reckonable for the purpose of computing his liability for tax. The same applies to unemployment assistance. Smallholders' unemployment assistance is not reckonable income for the purpose of applying the Income Tax Acts.

As to whether people will be asked to fill in a profile form every year, I said earlier that would not be the case. We would come back every so often, but it would be at the discretion of the local tax inspector who would have an idea of what was going on both locally and in a general way. He would decide whether to review again a number of people whose first return of the profile form showed there was not likely to be a taxable income.

I was also asked what would happen if, after four years, it was found that on the basis of a profile form produced, somebody was likely to have a taxable income at that point. The profile form asks questions in relation to a particular year or for the nearest year the farmer can provide the information. That is the starting point. It is different from the situation for people already in the system. Since we are bringing people into the system for the first time, administratively and for convenience we have to start somewhere and we will start from the point we are at now and decide whether, from here on, that person has, or is likely to have, a taxable income.

Mr. Connor

The Minister said earlier that only 20,000 profile forms would go out this year, because presumably that is all the system can digest in a year, and 20,000 will go out next year, 20,000 the year after and so on. That means it will take more than four years to send profile forms to everyone, if they are being taken at random. If somebody with a fairly large farm is found to have a taxable income from 1983, and it was discovered in 1988, would he be paying tax from 1983?

Mr. Dukes

Is the Senator making a proposal?

Mr. Connor

No, I am expressing a fear. A farmer might have this problem in four years time. Will he have to pay tax for 1983, 1984, 1985 and 1986? Is it not possible to get out all the profile forms as soon as possible rather than sending 20,000 at random? Is it possible that the process could be speeded up next year? It appears we will have to deal with 90,000 farmers but we are only sending profile forms to 20,000 this year. I am afraid that this problem may arise.

Mr. Dukes

I want to assure the Senator that the problem would not be as big as he thinks because the profile forms sent out this year would not be sent out on the basis of a random sample. We will be starting with the people most likely to have taxable incomes——

Mr. Connor

That clarifies a lot.

Mr. Dukes

——so that as we progress through the 90,000 and if it is done properly as we hope it will be, it will be less likely that a large proportion of the people getting the profile forms for the first time in a particular year would be likely to have taxable incomes. The problem to which the Senator refers is not as big as he thinks. In the early part of the operation we will tend to identify most of the 90,000 people likely to have taxable incomes.

On the question of family labour, we will have the kind of situation similar to that of people keeping accounts. If members of the family are working on the farm as members of the family, and not being separately paid for their labour, no separate accounting is done of the cost of the remuneration of family labour, but if a member of the family working on the farm is being paid and social insurance contributions are being made, those payments, social contributions and so on, would fall to be treated in exactly the same was as wages and salaries paid to somebody working on the farm who is not a member of the family. The payments made in those circumstances would be deductible business expenses in the same way as they are if the person employed is not a member of the family.

Senator Kiely mentioned the production unit accounting system. I am not sure if we should prolong the debate on that but there are disadvantages in the system. Extra units mean extra taxation in the terms Senator Kiely is talking.

Mr. Kiely

I am talking about extra expense on the farm——

Mr. Dukes

That is a different question. We have invited submissions from professionals and other groups on the simplification of the accounts required for taxation. I would be anxious to find ways of simplifying the accounts that must be presented by all small businesses, not just farmers. I do not know what the extent of the simplification would be, because we have not seen any submissions on it yet, but the more we can simplify accounts the better the service will be for everybody, both taxpayers and Revenue. The fewer pieces of paper Revenue have to deal with the more expeditiously they can deal with cases. Senator Kiely's concern is one I hope we can cover by looking at the simplification of accounts.

Question put and agreed to.

Section 12 agreed to.

SECTION 13.

Question proposed: "That section 13 stand part of the Bill."

Mr. O'Toole

The note reads: "Farming: provision relating to relief in respect of increase in stock values." Could the Minister explain what that means?

Mr. Dukes

This section covers stock relief for farmers. It is a temporary relief available to cover the case where stock values are increasing. We have a provision in relation to agriculture. The purpose of this section is to continue that provision in operation. It is also provided that, as long as we have stock relief provisions in other sectors, we will continue to have stock relief provisions in agriculture. It is a technical point so that we do not have to re-legislate for it each year which has been the case up to now.

Question put and agreed to.

SECTION 14.

Question proposed: "That section 14 stand part of the Bill."

Mr. O'Toole

This section applies in a case "where farming is carried on other than in the case of an individual who has sustained a loss...." What type of farmers is the Minister talking about?

Mr. Dukes

For example, the case of a company involved in farming operations but with other operations outside of farming also.

Question put and agreed to.

SECTION 15.

Question proposed: "That section 15 stand part of the Bill."

Mr. O'Toole

This section refers to farm buildings and capital allowances. If you are building a farm unit, a slatted house or whatever, on a phased basis, if it is being built over a period of four years the building allowance is not taken into consideration except for one year. Could the Minister explain this section?

Mr. Dukes

If the taxpayer elects to have the full allowance made in a particular year, there is no carry forward by definition in that case. The other purpose of this section is to ensure that, where tax was assessed on the notional basis of assessment and a building allowance would have been made in that year but for the fact that the notional basis of assessment was used, if there is a change over from notional to actual assessment, the allowance that would have been made in the year that the notional assessment was made cannot be written into a year when an actual assessment is being made. In other words, as far as the application of the allowances is concerned, the slate is wiped clean for previous years as if the actual system had worked in previous years rather than the notional system.

Question put and agreed to.

SECTION 16.

Question proposed: "That section 16 stand part of the Bill".

Mr. Smith

We will be opposing this section on the grounds that it is an inequitable way of raising finance, though I do not doubt that it has advantages on the basis of its simplicity. However, at a time when we have been discussing for a very considerable length of time ways and means of ensuring that all sections of the community pay according to their means, to put on an imposition which takes no account of one's ability to pay is grossly unfair. The Minister indicated last night, and in recent months, that he expects the deficit on our current account will be in the order of about £900 million.

The information which seems to be available on the basis of returns on VAT for the first five months, and income tax, is that they are running at about 40 per cent higher than this time last year. The increased rates became effective quite recently. When the Minister said earlier this year that he wanted to have the deficit at £750 million — and he is not the only one who picked that particular figure — he ran into some difficulty with the Tánaiste. I do not know whether he was able to persuade his colleague that the figure was not £750 million but £900 million. The fact that he has been able to get his own way is in character with his general approach here and in the other House. However strained relations may be with the Labour Party and the Tánaiste as a result of having to accept the punitive measures we discussed here earlier, they were accepted on the basis that, if they were not acceptable, the deficit would be of the order of £900 million. That now seems to be off course. Is the Minister still standing over the statement that the deficit will be of that order, or is it now more likely, as quite representative organisations have indicated, that it will be substantially lower?

Mr. Dukes

Representative of what?

Mr. Smith

Substantially lower in terms of being back at £750 million and still leaving room for concessions. It leaves some leeway for the Minister at a time when there is rampant frustration among the PAYE sector of the community arising from this additional burden at a time when income tax is already quite high. In the light of all this the Minister should be in a position to lessen this further burden.

Dr. O'Donoghue

I should like to support the opposition to this form of levy. It is important to recall, since we are discussing a Finance Bill which is stated as having equity as one of its major objectives, that this kind of tax is not of itself equitable. The background to it is that the notion of an across the board levy starting at 1 per cent, and, perhaps, rising in later years first emerged in the context of National Understanding discussions in 1979. The whole point of such a crude, broadly based tax was because one was seeking to get support for the notion that those who were fortunate enough to have employment — in the majority of cases they were certain to have income — should be invited to make a contribution, to make a conscious financial sacrifice, in order to support employment opportunities, particularly for young people. On the first occasion a levy of this type emerged it was described as a youth employment levy and it was introduced at the rate of 1 per cent. In the Bill not only have we an increase from 1 per cent to 2 per cent but it is also being changed over to a general form of tax. All the references to the youth employment levy are disappearing and the levy is simply becoming part of the general contribution to the Exchequer. That is missing the whole spirit of the idea. It will be detrimental in the long-term.

Yesterday, in my contribution on Second Stage I made the point that, looking down the road, if we are to tackle the combination of economic and financial difficulties successfully we will have to forge some sufficient degree of support and acceptance throughout the community. I do not believe we can do that if we are going to continue with the traditional notion that Governments impose taxes, that trade unions fight their comer for wage increases, that farmers make the case as to why they should get more grants or not pay taxes and that the self-employed or employers should look after their own interests. We must show people that, while the present arrangements may force them into having a short-sighted and immediate concern for their circumstances, in the longer term we will have to develop some form of national policy which will command sufficient support to get the necessary changes in our attitudes and actions.

If we are to have such progress — I would like to think we will — and if we are going to revive something along the lines of a genuine national understanding we will be looking for some sort of acceptance on the part of trade unions and others that they should be seen to be making a sacrifice by a conscious levy — in effect, an agreement to take a smaller pay rise — in order to allow that type of financial contribution to go into an employment generating fund with regard to which they, with the other parties, would have a say in how it was spent. However they will have to be satisfied that their contribution was being used for the purposes they had in mind. If they are to do that it is unfortunate that in such a short period of time we should have distorted or perverted the original intention and spiral behind the levy.

One should move away from the notion of it being a broadly based agreement to contribute to employment programmes. Once one views it as it is here, as simply a tax collecting device I do not see how one can justify it on equity grounds. It is the worst possible form of crude levy. What makes it more inequitable is that, apparently, so far neither the self-employed nor the farmers appear to be making their contribution but the bulk, if not the whole, of the burden is falling on those who are——

Mr. Dukes

That is not true.

Dr. O'Donoghue

I am delighted to hear that. I would be pleased to know the up-to-date position regarding the actual receipts. I was given to understand from an earlier statement, not in this House, that there was this apparent relative level of arrears from some sections.

Mr. E. Ryan

That is what the trade unions believe.

Dr. O'Donoghue

That is certainly what the trade unions believe. I would be pleased if the Minister would correct that impression and put the true situation on the record. Even if that is the case it would still be true that the accrued income levy, not taking account of any circumstances, has to be inferior on equity grounds to any other possible forms of alternative general taxation.

Mr. Lanigan

One of the problems I see about the levy is that it is an imposition of tax on gross income. Employers in their returns must fill in two sections monthly, PAYE and PRSI; but in fact they return PAYE, PRSI, a 1 per cent health levy, a 1 per cent youth employment levy and the new 1 per cent income levy. The new levy is most inequitable because account is not taken of the differing circumstances of those who pay tax in the PAYE sector. The PAYE contribution takes account of various factors such as whether a person is single or married and if that person is entitled to allowances. Those with big commitments, family or financial, can claim allowances under the PAYE system but they are not given any concessions under the levy system. Where will the money go to? Will it go to the general fund? We are all aware that the youth employment levy was to be used for the purpose of creating jobs for young people and to help training agencies such as AnCO. The 1 per cent health charge goes towards a specific programme but we do not know where the money collected under the income levy will go. If the Minister intended introducing a levy in any other way he would have to take account of the circumstances of people. All other forms of taxation make allowances but this levy is on gross income.

Mr. Dukes

The total revenue from this levy is estimated this year to be £47 million, or £80 million in a full year. We are talking about a substantial sum of money. Senator Smith was flattering in that he gave me credit for being a great deal more machiavellian than I believe I deserve. I will temper my appreciation of his flattery by reference to the source of the information on which he based his statement. As far as I can see Senator Smith is operating on the same assumptions as his colleague, Deputy O'Kennedy, the forecast by the ERSI that the level of the current budget deficit at the end of the year is likely to be nearer to the actual out-turn than my forecast. Having examined the ESRI forecast and the differences between the assumptions on which they are based, and my assumptions, I would think I am far more likely to be nearer the final outturn than the ESRI. I would point out to Senator Smith also that in making that argument, he talks about income tax and also value-added tax whereas earlier this morning, when he was advancing a different argument about revenue, he talked about excise duties and drew the opposite conclusion. Of course the more accurate way of looking at them is to look at total tax revenue in the round. Looking at total tax revenue in the round I am bound to say I would expect that the outturn in terms of the current deficit this year, broadly speaking, will be the one I predicted in my Budget Statement.

Of course, I say that with a number of people present who know the errors of estimation in this area can be several millions one way or the other. To use that as an argument for relieving this particular levy seems to me not really to be a valid way of arguing it. I do not think we will end up with a deficit considerably below that forecast. That would indicate to me that we would require to be sure that we get the kind of tax revenue implicit in the forecast of that deficit; to do that a sum of £47 million, which is the expected revenue from this levy, would be a very important factor.

I have not — nor indeed has any other member of the Government — ever pretended that this levy is being taken in order to favour youth employment or any specific purpose. It is not like the youth employment levy in the sense that it is not earmarked. The youth employment levy, of course, is being used for the purpose for which it was intended. This does not bear a particular label and it is therefore correct to say — as did Senator O'Donoghue — that it is part of the general take of taxation. Members on both sides of the House have already said what they think about the general level of the take of taxation. I think I made a few remarks about that myself last evening which would indicate that I have a great deal of sympathy with people who feel that our overall level of taxation is perhaps higher than we would like it to be. But, having said all that, we have to deal with a specific problem this year, and over the next three years.

For that reason we need both to raise revenue and to control expenditure and borrowing in the way that I indicated during our discussion on Second Stage. As far as the payment of these levies is concerned, of course, there cannot be any criticism of the amount of this levy paid by any group in the population since this is the first year in which it applies. There have been difficulties experienced in collecting the health levy and there have been delays in collecting the youth employment levy. It is important that these things be appreciated, and I am not the first to explain what these difficulties have been, but of course it seems much easier to get publicity for the difficulties that exist than it is to get publicity for the reasons they exist.

We spent some time here this afternoon talking about the situation created in relation to income tax by the High Court decision on PLV. Of course that did not affect income tax only, it affected the health levy also because it was being collected on a PLV basis. Once that court decision supervened obviously it became difficult to collect the health levy from the farming section of the community on the basis intended originally, that is to say PLV. For that reason we experienced particular difficultues in 1982 in collecting the health levy. The amount collected in 1982 was less than had been expected for that year because of the difficulty arising from the PLV case. We are now working in this year on devising a better means of collecting both the health levy and the youth employment levy from the farming community. In a short time I hope we will have resolved the difficulties there and that we will be able to collect them efficiently. The other point about the youth employment levy was that, in many cases — due to some administrative difficulties — numbers of self-employed people did not actually receive requests to pay the youth employment levy for 1982 until February of this year. Therefore, the difficulty that arose there, in terms of contribution, was not one that arose from any unwillingness of people to pay but simply from the fact that, for various reasons, they were not asked to pay it in 1982 and the system did not produce their assessments for it until the beginning of this year. I would like to have it made clear and recorded that though that difficulty arose it was not in any way a question of people being unprepared to pay but simply that they were not asked to pay because assessments had not been raised on them until after the end of the calendar year in which the levy should have applied. It is important that that point be made because we have enough difficulties in operating our tax system as it is without inventing new ones that do not exist.

Senator O'Donoghue made a wider point about the need to get a consensus on what kinds of contributions are made to resolving our difficulties. I fully accept the reasoning lying behind that. There is no doubt that we will remain in difficulty, particularly from the point of view of getting an effective and equitable tax system, as long as the temptation persists, and is given into, to treat the process of government as being one of balancing out the competing claims of different interest groups. That has been part of our problem for many years. It requires a lead not just from the Government, although clearly that is necessary, but an acceptance of that also on the part of interest groups. We have all experienced the operation of various interest groups who put forward their legitimate claims for consideration in one way or another. Most of us in politics, have felt, at one stage or another during discussions we have had with groups like that, that we have come to the point where we have said, inwardly, if not outwardly, to the people to whom we were talking: "All right, you have made your point, but I know, and you know, that you are exaggerating the point. You have a legitimate interest, but perhaps you have gone too far with it." We all recognise that that happens but, as long as we do not say it to one another, then we are in a process of trying to even out the balance between groups and the general interest is not being properly served. Therefore, I would simply take the philosophical point that has been made there. The lessons from it have to be drawn not only in the way the Government approach their job of achieving a consensus but also in the way the interest groups concerned approach the same task.

Mr. E. Ryan

The Minister is somewhat in the same position as some of these pressure groups. He made the point that he needs a good deal of taxation this year but some previous speakers made the point to him that perhaps he was looking for more than he really needed. In the context of the levy he may be something like the pressure groups. We accept that he needs a good deal of taxation this year but perhaps in regard to this particular aspect he is looking for more than he really needs.

In general terms one would have to accept we are in a critical situation. The Minister needs money and this is one way of raising it. However, as a way of raising money it must be one that is most unacceptable. It is described as a temporary levy. I know the Minister will not answer me if I ask him what "temporary" means in this context. Does he mean one year or two years? What does he mean? The danger is that "temporary" may end up meaning up to ten or 15 years. At least the levy for youth employment was earmarked for a specific purpose. It could not be increased very much. The Minister had to show exactly how it was being spent and there was probably a limit on what could usefully be spent in that respect. Consequently, the levy would be curtailed to that figure.

However, in respect of a levy that is not earmarked for any special purpose and which is open-ended, it is rather horrifying to think what could happen. It must be a very attractive way to raise money for the Revenue Commissioners. There are not the same rules, regulations and curtailment that there is with ordinary income tax. Consequently, one would not be surprised if the levy were with us for a long time. The awful possibility is that not only will it be with us for a long time but that it will expand and become 2 per cent, then 3 per cent and 4 per cent.

Having regard to the circumstances of this year, if the Minister were to say that something special was required for one year to get him over this particular problem, probably it would be accepted. It would not be accepted with any great pleasure but it would probably be accepted. The most horrifying thing about it is the possibility that it will be with us for a long time and that it will increase.

The Minister should give some indication of what he has in mind for the future. Perhaps he might give some indication that if the budget is not quite so difficult next year the levy will be the first item that will be taken off rather than reducing other taxes while keeping the levy. A recognition that the levy is quite unusual and is quite objectionable in many ways and that it will be removed the first time there is any easing of the requirements of taxation would make it more acceptable. It would remove many of the fears people must have about this open-ended levy which has no restrictions and which could become something quite formidable in the future.

Mr. Lanigan

Section 16 (2) (b) (iv) states that:

references in the Act and in the Regulations to Youth Employment Levy shall be construed as references to income levy.

Does that mean it is proposed to substitute the youth employment levy with this income levy and that the two levies of 1 per cent each are going into the income levy rather than into the youth employment levy? What is the meaning of this provision?

Mr. Dukes

I can understand the concern expressed by Senator Ryan about the nature of this levy even if I would not share his opinions. I have already said that the taxation raised by this Finance Bill is, in my view, necessary to achieve the budgetary targets we have set for this year. Perhaps the Senator does not agree with that but it is my belief that we require all the taxation that is raised in order to meet those targets.

The Senator used the word "attractive". I do not think there is any taxation measure what any Minister for Finance would find particularly attractive, and I speak here in the presence of one of my predecessors. It is not the kind of word that would come to my mind in the discussion of any tax measure. There are far more attractive ways of relieving tax than there are of raising tax. I can assure Members that I would not regard this method of taxation, or any other method of taxation, as being attractive.

Senator Lanigan asked a question regarding section 16 (2) (b) (iv). That is a purely technical provision that applies to the operation of this levy, the same rules and definitions mutatis mutandis that apply to the operation of the youth employment levy. The section is written so that we do not have to write all the regulations again: we just take over the regulations that apply to the youth employment levy and apply them in this case. The other details simply provide for the necessary changes so that people will not have the impression we are collecting the youth employment levy all over again. It is simply a technical provision to ensure that we collect it in the same way.

Question put.

The Committee divided: Tá, 21; Níl, 13.

Tá

• Belton, Luke.
• Browne, John.
• Bulbulia, Katharine.
• Burke, Ulick.
• Connor, John.
• Daly, Jack.
• Ferris, Michael.
• FitzGerald, Alexis J.G.
• Fleming, Brian.
• Harte, John.
• Higgins, Jim.
• Higgins, Michael D.
• Howard, Michael.
• Kelleher, Peter.
• Loughrey, Joachim.
• McAuliffe-Ennis, Helena.
• McDonald, Charlie.
• McMahon, Larry.
• O'Brien, Andy.
• O'Leary, Seán.
• Quealy, Michael A.

Níl

• de Brún, Séamus.
• Ellis, John.
• Fallon, Seán.
• Fitzsimons, Jack.
• Kiely, Rory.
• Killilea, Mark.
• Lanigan, Mick.
• Lynch, Michael.
• O'Donoghue, Martin.
• Ross, Shane P.N.
• Ryan, Brendan.
• Ryan, Eoin.
• Smith, Michael.

Tellers: Tá, Senators Harte and Belton; Níl, Senators de Brún and Fitzsimons.

Question declared carried.

Mr. Lanigan

Maybe my knowledge of Standing Orders is not as good as it should be, but when the question was put, the vote on the opposite side of the House was three and the vote on this side was eight and the Leas-Chathaoirleach deemed this side to have lost. When the vote was taken eight Members had voted níl and three had voted tá. Why was that considered to carry the question? The Chair was only giving an opinion at that stage.

An Cathaoirleach

The Chair bases his opinion on his knowledge of the reality.

Mr. Lanigan

The reality is there were eight votes against the section——

An Cathaoirleach

The reality is that the Government Party have more Senators than the Opposition.

Mr. Lanigan

Has a verbal vote no value?

An Cathaoirleach

No.

Mr. Ellis

Why is the question put?

An Cathaoirleach

It is always done. The Chair gives his opinion and Senators then challenge a division if they wish.

Mr. Ellis

On a point of order, how many Members are required to call a vote——

Mr. Ferris

I thought we were serious about discussing the Finance Bill but now we are discussing voting procedure in a jocose manner even though the Opposition know exactly what the position is.

Mr. Ellis

How many Members are required to stand up for a vote to be called? I understood it is five.

An Cathaoirleach

I will discuss Standing Orders with the Senator privately.

Section 17 agreed to.

SECTION 18.

Mr. Fallon

I move recommendation No. 2:

In subsection (1), line 8, to delete "inspector" and substitute "inspector of taxes", and in line 9 after "Commissioners" to insert "not lower than inspector of taxes".

I should like to remind the Minister that the building societies are responsible for 70 per cent of the total national housing programme. They have roughly three quarters of a million investors and play a vital part in the economy. Most people save with building societies to try to buy their own homes but I admit they have some hot money as well. They provide a confidential link between the investor and the building society concerned. I feel very strongly that if the Revenue Commisioners examine the books of one depositor as a result of a court order it will have very serious and detrimental effects on all building societies. The Minister should consider this matter very carefully. The building societies seem to have thrown in the towel in so far as they have accepted that this is going to happen and they are asking now that the person who inspects the books should be at least at the level of tax inspector. They are concerned that a junior employee in the Revenue Commissioners would have this authority and they feel that a tax inspector would provide some protection for the entire movement. They argue that if there is no control the whole thing could fall flat and would cause very serious problems in future.

The building societies, as I said earlier, collect £50 million per year which is handed on a plate to the Government. How is a court order going to be worked? For example, if you are looking for information on a certain taxpayer and you serve him with a court order — we must remember that there are five major building societies and possibly seven or eight smaller ones — do you levy the order on all the building societies? Reference was made to the Central Bank Act, 1971, which, I understand, includes building societies, credit unions, trustee savings banks and Post Office savings banks. Is it to be levied on them also? Can we possibly be specific when it comes to implementing a court order? I ask the Minister to agree to my recommendation because the building society movement have been fair over the years towards various Governments. The Minister knew when he said in his budget speech of 9 February that he was going to examine the books of building societies that they could not allow the Revenue Commissioners to look at depositors' accounts because confidentiality is the key to the whole movement. Rather than allow the Revenue Commissioners to look at the books they have agreed to the increase of 2 per cent which the Minister imposed. That will be passed on to the person looking for a mortgage as was the levy of 1 per cent on insurance companies last year. That levy is now being paid by the ordinary person in his motor or fire premiums, the Minister should at least play ball with the building societies on this recommendation and I ask him to agree to it.

Mr. Dukes

The main concern expressed by Senator Fallon does not arise in section 18. It is a different provision which concerns the general question of disclosure of information by the building societies and the change in the composite tax rate. Section 18, and the recommendation which has been put down, deal with cases in which the Revenue Commissioners, having reason to believe that a taxpayer was not disclosing full information about his income and not disclosing information about an account which he had, could apply to the High Court for an order to require the financial institution to disclose that information. This is a completely different point from the one which the Senator is making about the building societies.

The recommendation as put down seeks to ensure that a person appointed to acquire this information would be of a rank not lower than inspector of taxes. I would point out that the definition here of the authorised officer, who would have to be authorised by the Revenue Commissioners, is the same as that used in section 34 of the Finance Act of 1976 which empowers an authorised officer to enter premises where a trade or profession is carried on and to inspect books and records. The provision which we are making here does not depart, in that respect, in any significant way from the provisions which are already in tax legislation, allowing the Revenue Commissioners to require and collect certain information about a taxpayer.

The other provision to which Senator Fallon has referred concerns the calculation of the composite rate of tax on building societies. I remind this House, as I reminded Dáil Éireann, that the provision was made in the Corporation Tax Act of 1976 for the system which is used, under which tax is remitted by building societies to the Revenue Commissioners on the interest they pay on deposits. As I said yesterday, the system set up in that Act is designed to ensure that the existing system would produce the same amount of revenue as nearly as possible as would be produced if there were no special system and if all information relating to interest paid to individual taxpayers by building societies were fully declared and disclosed to the Revenue Commissioners. To make the point, as Senator Fallon has, that this is an interference with building societies is really an exaggeration. To suggest, as the Senator has, that if we were to operate the system in another way we would collect more than the present total of tax revenue from the building societies, as he has, is to suggest that we should never have adopted the system which was set up in the Corporation Tax Act, 1976. I am not sure that that is true. We will never know until we try it. However, the argument which Senator Fallon has just been making, contrary to what he appears to think, is in fact, an argument for more disclosures than are provided in relation to interest paid out by building societies.

The provisions of that Act laid down that a sample survey would be made from time to time in order to determine whether the composite rate was the one that should apply. It would be a sample survey, not a survey of every single account in the building society. Claims which have been made that this is frightening people out of building societies turn out, on examination of the facts, not to be sustainable. I gave some information yesterday on what happened in the first four months of this year to deposits in building societies, compared with the same period of last year. We have seen a very substantial increase in total inflow into the building societies.

Mr. Fallon

What I said, I am quite certain, is that, in effect, the building societies are the most efficient tax collectors in the country. They will collect and hand over this year £50 million to the Department of Finance. If this were to be collected by the Revenue Commissioners through PAYE it would cost a lot more than the £50 million. This is easy money handed on a plate to the Revenue Commissioners. Everybody in a building society movement, as we know, pays at the rate of 35 per cent and it is money that is handed over free and easy with very little administration cost.

Mr. Dukes

They do not pay 35 per cent.

Mr. Fallon

In the building societies?

Mr. Dukes

They pay 24 per cent odd. 70 per cent of 35 per cent.

Mr. Fallon

At that rate, anyway, I hold the view that this recommendation is appropriate to section 18. In that section "authorised officer" means an inspector or other officer of the Revenue Commissioners authorised by them in writing to exercise the powers conferred by the section. I am asking that that be amended to read:

Authorised officer means an Inspector of Taxes or other Revenue Commissioner riot lower than Inspector of Taxes.

Also, that they would exercise the powers conferred by the section. It then refers to the financial institution concerned and to the person who holds or has held a licence under section 9 of the Central Bank Act of 1971. Do building societies not come under that Act? I was of the opinion that they did.

Any interference or change from the past way of life of building societies would be regrettable. If there is a court order and one or a number of books are examined, the building society movement will suffer greatly. The reference by the Minister to the fact that there was a deposit increase over the last four months followed on his statement on 9 February in the budget speech after which, very quickly, the building societies said that as far as they were concerned not one book would be examined. It was their acting fast to indicate clearly that the books would not be examined that, more than anything else, brought about the normal increase in the normal way. If this confidentiality link is touched in any way, it can have very serious consequences for the whole building society movement.

Mr. O'Leary

Could I ask the Minister one quick question? When he speaks about the authorised officer, will an officer be authorised in general, or in respect of a particular investigation or case?

Mr. Dukes

The officer would be authorised in each particular case.

Mr. O'Leary

Good.

Mr. Dukes

In reply to Senator Fallon, I again say that the point which he was making has to do with a different section of the Bill. As far as this section is concerned, I make the point that there is already provision for disclosure in certain circumstances by banks under the Bankers' Book (Evidence) Acts of 1879 and 1959. In those cases, inspections or information can be required where proceedings are already in a court. The purpose of the authorisation under the section that we are now discussing is to allow the Revenue Commissioners access to information about a specified individual taxpayer who, in their opinion they have reason to believe is not disclosing information that would allow them to complete their assessment of his income. It is not, in any sense, a general power of inspection or disclosure.

Mr. Fallon

Having regard to the fact that there is a particular taxpayer in mind, and I accept that totally, how is the court order then introduced? The Revenue Commissioners believe that he has money in a building society. Is the court order issued to every building society operating in the country? How would the performance of the duty continue after that?

Mr. Dukes

That would depend on the case. The application has to be made to the High Court by the Revenue Commissioners. They would have to satisfy the court that they had sufficient case for believing that the taxpayer in question was withholding certain information and that in order to get that information an order should be served on a specified financial institution or financial institution in relation to that taxpayer's account.

Recommendation, by leave, withdrawn.

Section 18 agreed to.

Sections 19 to 27, inclusive, agreed to.

SECTION 28.

Question proposed: "That section 28 stand part of the Bill."

Mr. O'Leary

This is an appalling way to legislate. If I am correct what it does is to repeal what was previously included. The Minister is re-establishing an Act which was repealed. The way it is being done is by repealing the first amendment. The section should be enacted afresh otherwise to define legislation will become progressively more difficult.

Question put and agreed to.

Sections 29 to 80, inclusive, agreed to.

SECTION 81.

Question proposed: "That section 81 stand part of the Bill".

Mr. Smith

I know this case has been made before to the Minister. How much is it expected to raise? Why was this incentive to transfer property introduced in view of the general reluctance on the part of many farmers to transfer their property?

Mr. Dukes

We are on section 81 which deals with the changes in the rates of VAT. I am not sure Senator Smith's question relates to this section.

Mr. O'Leary

What has happened is that Senator Smith is using the explanatory memorandum. The numbers of the sections were changed on Committee Stage in the Dáil.

Mr. Ferris

We welcome the reduction in VAT.

Question put and agreed to.

Sections 82 to 95, inclusive, agreed to.

SECTION 96.

Question proposed: "That section 96 stand part of the Bill".

Mr. E. Ryan

This section relates to the tax on residential property. The Minister may plead it was essential to raise taxes in some form. He was very anxious to mollify those complaining about PAYE. This is a form of capital taxation. However, the form it takes is somewhat crude. There had to be some taxation on property and, as a result, there had to be some taxation on residences. This is the form it took. There is much doubt as to whether this tax will work in a smooth way. Some taxation will eventually be raised and it will come under the heading of a capital tax. To that extent, the Minister will be able to claim it is a successful feature of the Bill.

It is rather crude. It does not pretend to have regard to the circumstances of the owner of the property, the number of people in the family or mortgages. There would be a big difference in the capacity of a person to pay this tax who owns his house and a person who had a mortgage to pay. To that extent, it makes no allowance for the capacity of the person to pay or for the circumstances of the owner of the property. It is certain to be inequitable and people will suffer more under this tax than under other forms of taxation.

The aggregation of income is extraordinary. It means the income of all those living in the house has to be taken into consideration. If the father of a household has slightly under £20,000, and one of his children earns a very small salary, the owner of the house is immediately assessed for tax although he may have no means whatever of recovering a portion of the tax from the member of his family who has been responsible for putting him over the limit. I do not think there can be any real answer to that. It is just a rather crude means of raising tax and in a situation such as I have mentioned there is no regard whatever for the fact that the head of the household may be made liable to pay this because of the income of a member of his family and not even a member of his family but perhaps somebody who is a far distant relation or even no relation at all. Nevertheless he is put in the position of having to pay the tax because of this.

There is also the position in general, that a person of limited means may have bought a house some years ago and the value of the house will have gone up at a far quicker rate than his income. That person, though pehaps still of limited means will then be liable to pay tax on a house that he bought not for a large sum but a house that has been in his possession for a long time and has in fact gone beyond the limit laid down in the section. There is no relationship in the section as it provides between the capacity of the person to pay and the value of the property in which is he is living and again he may be in a position where this will be a most unfair tax. There is no sliding scale. There is no provision to make allowances for that kind of situation. The section meets two objectives so far as the Minister is concerned. It is capital tax. I suppose he feels he must have some capital taxation in the Finance Bill and this will raise some taxation.

The question of valution of property is left very much in the air. The owner has to give his valuation and it is not clear in what circumstances the Revenue Commissioners will not accept this valuation and exactly what they will do. The method of doing this has been criticised very severely. I do not know whether that is as severe or as unacceptable as is suggested, but it leaves the position open to some very serious invasions of the privacy of the home. What I am saying is that whereas a section that had been introduced with a good deal more care, consideration and effort to make allowances for the different circumstances of the person who is going to be assessed might be acceptable as making a serious effort to have regard to the difficulties and circumstances of the owner of the property, this is most unacceptable in the sense that it is very crude in its approach to this question.

Mr. Dukes

Earlier, Senator Ryan objected to a tax because it was attractive; now he is objecting to a tax because it is crude. The two do not seem to go particularly well together. The remarks he has made about this tax relate to a number of different sections in the Bill and I assume it is in order for me to reply on these. He said first, that it makes no allowance for circumstances. There is a provision in the Bill which provides for a reduction in the tax to take account of the number of dependent children in the family. There is a 10 per cent reduction in the amount of tax payable in respect of each dependent child. The Senator says, quite rightly, that there is no allowance in the tax for the existence or not of a mortgage on property. The tax essentially is one on the use and enjoyment of the property and the taxable capacity is determined by reference to the incomes of the people who are using and enjoying the property. To that extent it is related to a number of establishable criteria and those are the ones on which the tax is very clear.

On the specific point of the aggregation of the incomes of the persons who are enjoying the property, we are not introducing a new principle here. I would recall to the House that we have a similar provision in the calculation of rents for local authority houses where it is not simply the income of the head of the household that is taken into account when determining the level of rent. We take account also of the incomes of other members of the household. Therefore, we are not introducing a completely new principle in making the provisions in these sections that are made for the assessment of the income for the purpose of determining whether tax is payable in a particular case.

Mr. Lanigan

Do I understand the Minister to say that the calculations are going to be based in the same way as are the calculations for rent of local authority houses?

Mr. Dukes

No. I said that we are not introducing a new principle.

Mr. Lanigan

I should like to get this one straight.

Mr. Dukes

We already apply the principle of taking account of the income of members of the family in determining the level of local authority rents, so the fact that we are operating a similar principle here——

Mr. Lanigan

Rents on local authority houses are based on the income of the principal earner less deductions for overtime earnings and so on.

Mr. Dukes

Not solely: account is taken also of the incomes of other members of the family who are in an income-earning situation.

Mr. Lanigan

There are a number of allowances.

Mr. Dukes

I am making the point about the principle. You already have a system in which reference is made to the incomes of other members of the family in determining in that particular case the level of rent that is payable.

Senator Ryan criticised the provisions here in that they do not allow for a sliding scale by which I presume he meant some measure that would take account of the degree to which the tax should be applied. I would draw his attention to section 102 of the Bill which provides for marginal relief where the value of the property and the amount of income exceed the limits by a small amount. The question of valuation, he said, is left in the air. We have deliberately applied here a system of self-assessment in that it is the owner of the property or the taxable person who will make a declaration as to what the value of the property is. They are in a better position to know than anybody else. Self-assessment is a principle which appears to have gained some attraction in other quarters. We provided for it in this case because it seems to be the most convenient and the most realistic way of having a declaration made as to the value of the property. Obviously we have had to provide for cases where there is a disagreement between the taxable person and the Revenue Commissioners as to the valuation of the property and in such cases one of the means that the Revenue Commissioners might use to settle the disagreement would be to provide for a visit by a qualified person to the property in question. The circumstances in which that would happen are restricted and it is not the only means of allowing the Revenue Commissioners access to the information that would be required to settle that dispute. Members will be aware that I resisted suggestions made in the Dáil that it should be the only means. I want to avoid a situation in which we would be obliged in all cases where there is a disagreement to send an authorised qualified officer to collect information. I would refute the suggestion that there is an excessive invasion of privacy and I would hope that situations of that kind would not arise very often. A visit by an authorised qualified person is not the only means we have given the Revenue Commissioners to get the information required to settle a disagreement.

Mr. Lanigan

Where there is an aggregate of income the total income may exceed £20,000 because of a son's income. What would be the position if the father charged his son a rent for living in the house, thereby turning the house into a dual dwelling? He would be letting a flat to his son.

Mr. Dukes

A different relationship would exist. The eventual outcome in terms of tax liability would depend on a number of factors. We would have to decide whether the subtraction of the son's income from the total income falling to be considered would bring it below £20,000 and then we would have to add as part of the father's income the amount of the rent the son would be paying. The whole operation would become futile if the total so adjusted still came to over £20,000. The amount of the rent would become part of the father's taxable income and he would normally have to declare that income and pay tax on it. If people were to follow that line they would have to be very careful to make sure that the last state would not be worse than the first.

Mr. Lanigan

It has been suggested to me that this has already caused conflict within families where the father cannot afford to pay this tax. It has been put to him by his son that he will leave the house and go into a flat. The son will not pay an income to his father and conflict is created. There is nothing to prevent a family house being turned into flats and it is highly unlikely that rental income would be as high as the aggregation of the son's salary.

Question put and agreed to.

An Cathaoirleach

I understand that some agreement has been reached regarding the conclusion of the Bill.

Mr. Ferris

I have already put on the record the agreement we have reached and it is a matter for the Leader of the Opposition to concur.

Mr. Lanigan

We agree.

An Cathaoirleach

In accordance with the wishes of the House I will put the questions necessary to bring the proceedings on the Bill to a conclusion.

Question "That sections 97 to 122, inclusive, stand part of the Bill", put and agreed to.

Question "That the four schedules be the Schedules to the Bill", put and agreed to.

Title agreed to.

Bill reported, without recommendation, received for final consideration and ordered to be returned to the Dáil.