Wednesday, 5 December 1956
Dáil Éireann Debate
Mr. S. Lemass: The section sets out to improve the rules governing the  determination of wear and tear allowance for plant used in the case of mines and smelters associated with mines. It seems to me that the improvement proposed here is required in the case of all concerns which are working wasting assets. I cannot see that there is any justification for a distinction in that regard between a mine and a quarry. The basic considerations which apply in both cases are precisely the same. The rules should, it seems to me, conform to sound commercial practice and, any company operating a quarry would, in accordance with sound commercial practice, endeavour to write off the cost of the plant in a reasonable time, having regard to the period in which the quarry will be worked out and with allowance for the scrap value of the plant at that time. The amendment of the rules in relation to plant used in a mine is justifiable and desirable, but I cannot see that there is any justification for not applying a similar amendment to a quarry or any concern working wasting assets. It is to enable the cost of plant to be written off during the lifetime of the asset. In that regard, I cannot see a difference between a mine and a quarry.
Mr. Sweetman: There is this difference between plant normally used in a mine and plant normally used in a quarry. Plant used in a mine is far less capable of being shifted from one place to another after a particular mine had been worked out. In the nature of events, machinery in a quarry is moved on all the time. That, I think, is an undoubted fact, but I do not think it matters much in this respect because it is made clear in the provisons that the transfer value, if I might term it such, could be taken into account in the assessment. Having regard to that, I am quite prepared to accept the amendment.
This amendment is for the purpose of  ensuring that it is the machinery related to the physical mine or quarry, as the case may be, that is assisting the work and development, rather than the ownership. It is the same as Deputy Lemass's amendment, but better drafted, if he will permit me to say so.
This is part of the same matter which was considered in relation to those other amendments. This provision will mean that the wear and tear arrangements now will be related to what I might perhaps term the life of the smelter rather than the life of the mine which might not be exactly contemporaneous. Therefore, I think it is better that it be put in this way.
Mr. S. Lemass: As regards Sections 4, 5, 6 and 7, I have some comments to make but I think it will be more convenient if I make them on Section 8 in connection with the amendment which I have put down to that section. SECTION 8.
“‘standard output of coal’ means the average output of coal from the existing coal mining operation in each of the three periods of 12 months ending on the 30th day of September, 1954, 1955 and 1956.”
The Bill purports to give certain tax reliefs to coal mining concerns which increase their output. There is remission of 50 per cent. of the tax payable on the profits in the case of new concerns and a similar remission of tax upon additional profits earned by an existing company which increases its output. In order to determine whether a coal mining concern has increased its output a standard year is taken, the year ended on the 30th September, 1956. If, in the period during which this Bill is operative, a company produces more coal than it produced in that period of 12 months, then it will earn the relief, and if it does not, it will not. The profits made by the company do not matter. It may have made a loss in the 12 months ended in September and it may make profits on a smaller output in subsequent years. The entitlement to relief, however, turns entirely upon the question of the volume of coal produced in that year.
In every coal mining concern there is always a possibility of temporary factors causing a rise or a fall in the output of coal in a certain year. The volume of production can increase if work is proceeding in a particularly favourable section of the seem and if a minimum of development expenditure is required. In every coal mine the coal face has to be opened up to enable coal to be produced and, as sections of the face are worked out, new development work has to be undertaken to open up a new face. The production of the mine depends entirely in any year upon the accident whether that development work was completed before the beginning of the year so that production could continue uninterruptedly during the year, or whether  the company in that year had to do a great deal of development work opening up new production areas and getting itself organised to expand its output. There are, of course, always the possibilities of curtailed output due to strikes, breakdown in plant and factors of that kind.
In the circumstances, it seems to me to be undesirable to pick a particular year as the standard year in determining the entitlement of existing coal mining concerns to these tax concessions. My suggestion in the amendment is that the standard output should be the average annual output of the past three years. In the case of coal mining that is the better basis. However, if the Minister preferred to adopt the proposal I am putting forward in relation to export industries, that the concern should be entitled to choose one of a number of years as its basic year, I would not object. In the case of coal mining it is a comparatively easy matter to determine the actual quantity of coal produced, and the average output over a period of years is a fair indication of what the mine is capable of producing. If the period is long enough—and I think three years would be long enough—it would tend to eliminate all those purely accidental factors to which I have referred.
The Minister need not be apprehensive of adopting this suggestion on the grounds of what it will cost. I do not think the proposals in this Bill will cost very much. I have already expressed here the view that the factors limiting coal production are not likely to be affected at all by this Bill. The present position is such that every coal mining concern is trying to produce coal in the maximum volume. The price has gone up; the demand is strong, and there are far more substantial inducements operating at present to expand production than this Bill affords. The mere enactment of this Bill will not increase coal production at all. The limiting factor at present is inability to get a sufficient number of competent workers on the coal face. If any new concern is induced to get into coal mining by reason of this Bill it will only be able to increase production by drawing workers from existing  concerns and reducing the output of the existing concerns.
Let us assume that the Bill does operate to increase the output of coal or that the combination of the Bill and of the other factors I have mentioned, the higher prices prevailing and the very strong demand for coal, secures a position in which coal mine proprietors will be able to overcome those practical difficulties of expanding output and get an increase in production of, say, 10 per cent., and see what that involves. The total quantity of coal produced from Irish coal mines during the 12 months specified in the Bill would be about 150,000 tons. No official figures are available but having regard to past experience and relating that to knowledge of the situation during the past year, 150,000 tons are in or about what the output probably was. A 10 per cent. increase in production would, therefore, be 15,000 tons. It is fair to assume that a coal mine would be doing quite well if it earned taxable profits at the rate of 10/- per ton produced. There are coal mines that are not making 10/- per ton and some of them are doing better than that, but taking the average of all coal mines, it would probably be regarded as optimistic to assume that they would make taxable profits at the rate of 10/- per ton. The total additional profits earned at the rate of 10/- per ton would be £7,500. The tax on that might amount to £3,000 and a 50 per cent. remission of the tax would cost the Exchequer £1,500.
With present inducements of rising prices and active demand, there is a stimulus to output far stronger operating now than the possibility of gaining £1,500 in tax remission. In view, however, of the very small cost of this proposal to the Exchequer, I think the Minister can afford to be fairly reasonable in the determination of the basis year in relation to which the increase in output would be measured. I do not know whether I would be in order in extending my arguments, but I think there would be a much better chance of expansion in coal production and a greater investment of capital in Irish coalpits, if  there was a change in the tax laws which would provide for the introduction of a reasonable, even a generous, depletion allowance so that those who put their money into coal mines would have a reasonable possibility of getting that money back.
As I said on Second Reading, the greater part of the capital outlay required to permit of coal production takes place before a ton of coal comes out of the ground. All that outlay has to be recovered in appropriations from profits during the lifetime of the deposit. Our laws do not provide for any deductions from profits against that expenditure before tax is assessed by which the capital investment can be recovered, except out of taxed profits during the lifetime of the mines. I urge that there should be on the part of the authorities responsible for the enforcement of the laws—the Revenue Commissioners—a more realistic interpretation of what constitutes capital expenditure on a coal mine. Expenditure which does not anticipate increasing the value of the output is not an investment and it is not capital expenditure to be regarded as such, but a necessary working cost. In the instance I gave, the information came to me from the managing director of the mines concerned. The expenditure, which had necessarily to be incurred upon the extension of the conveyor system, because over the years the coal face had gone further and further away from the shaft, was classified as capital investment, although it did not increase the output of the mine by a single ton and, indeed, involved an increase in the operating costs.
If the new equipment, the new plant installed, tended to increase production, then it would be properly classified as a new investment, but, as every coal mine manager knows, it is an unavoidable working cost and should be so regarded. If there was introduced into the law a depletion allowance, coupled with this improvement which has been introduced in the rules regarding depreciation, plus a more liberal interpretation of working costs, then the inducement to production would be far greater than the tax allowance proposed here.
 I am not saying that the tax allowance will not be welcomed. I think the Minister would be well advised to have a consultation with the Minister for Industry and Commerce in that regard, because I know he has had an opportunity recently of meeting the representatives of the various Irish coal mines who have put their difficulties to him, difficulties which are in some instances completely removed from any operation of the tax laws, but, if the whole position were examined thoroughly, it would be possible to help these companies to expand output. They are all willing to do it and there is certainly every reason at the present time that they should, but they are up against real difficulties. They regard it as sarcastic to offer them a tax concession if they increase output when they are trying to do so and find themselves up against real practical difficulties.
It is a bad principle to pick one year in relation to this industry as a basis year. An average of a number of years should be adopted or, alternatively, the company should be allowed to pick itself one of three or five years which would be the basis year for that individual company.
Mr. Sweetman: I take it that, when the Deputy was framing his amendment and used the words “average output of coal”, he did not intend thereby to mean anything other than the word we have used-“volume”?
Mr. Sweetman: I must confess, as I said at the conclusion of the Second Reading, that I was a little amused at Deputy Lemass suggesting at this stage that what I should do is to introduce an amendment to the 1946 Finance Act provisions in relation to depreciation and average over a period, which he was not able to get through at that time because the 1946  Finance Act deliberately excluded acquisition, as the Deputy is probably well aware.
Mr. Sweetman: I do not think I was going to go on that. I do not think it is desirable that either Deputy Lemass or I should discuss what might be identified as individual concerns across the floor of the House, any more than it is desirable that I should comment on the Deputy's description of himself in regard to that coal mine on the last occasion.
The purpose of this part of the Bill is to endeavour to get an increased output of coal. It is quite inevitable that that must be the overriding viewpoint to be considered rather than the individual concern of any particular company. I can see from Deputy Lemass's point of view that perhaps a company from its own point of view might find it more satisfactory to work on an average of three years rather than the basic period which I have determined. It might be a matter which one could only decide in relation to each individual company, seeing the figures of each individual company.
Let me take the example in Deputy Lemass's amendment, the case of the company that produced 40,000 tons in 1954, 30,000 tons in 1955 and because they ran into a bad period only 11,000 tons in 1956. The average would be 27,000 tons. If it came back a bit, it would lose on Deputy Lemass's amendment by everything between that average and the 11,000 tons.
Mr. Sweetman: I want to come back to the type of mine which I think will be assisted by this legislation. The other type that is gradually going forward all the time has got its impetus. That impetus will carry it forward and it will also get a benefit under this Bill. Its impetus is carrying it forward and each year it has a rising output. The other type of mine that has met with difficulty will, I think, have a  chance of being brought back to its earlier output.
I do not know anything about the figures in the individual case the Deputy mentioned. If they were making profits in 1946 of the sort the Deputy suggested, presumably their output must have been better then and under this Bill they will get a chance of coming back again with benefit to themselves. The essential thing we all want at the present time in the interests of the national economy is greater output. Greater output really means greater output and it is from the point of view of endeavouring to achieve greater output, rather than from the point of view of considering the affairs of individual companies, that this Bill and this part of the Bill is brought before the House. I do not think it unfair to say that Deputy Lemass is considering this, not from the point of view of greater output and the benefits it would bring to the economy as a whole, but from the point of view of individual concerns. That is not the purpose of the Bill.
Mr. S. Lemass: Let me say I recognise that taking a three-year average instead of the single year's figure would operate to the benefit of some companies and the disadvantage of others. I do not know how individual companies would be affected. In relation to one company I know about, the provisions of the Bill would probably be the better. I think the Minister's argument is based on an understandable lack of knowledge of the problems that arise in the Irish coal mine——
Mr. S. Lemass: The periods of maximum and minimum production alternate fairly regularly. In the manager's report that will come up before the board of directors there will be an indication that a new face 100 yards or 200 yards long has been opened up; that production is in full swing at that face and is likely to continue for 12 or 18 months or perhaps 24 months. But at that stage no planning by the  management or no increase in managerial efficiency will avoid a curtailment of production.
At that stage the new development work has to be undertaken anyway. Periods of maximum and minimum production are an inevitable feature of the working of Irish coal mines. Apart altogether from new companies, it is unfair to pick a particular year as the base year. It would be far wiser to take an average over a number of years. I do not want to press the point because I might find myself in argument with the representatives of some coal mines adversely affected by the change. From the point of view of enacting good legislation here, however, the Minister would be well advised to take an average period rather than a particular year.
This part of the Bill deals with relief from income-tax on profits earned on increased export business. The Bill proposes that that relief shall operate only for a period of five years. I think it is perfectly futile to expect that any inducement will be provided to engage in a substantial way in new export business on the basis of a small tax relief extending only over a five-year period. Again it is necessary to bear in mind that the actual cash benefits secured by industry are fairly meagre and the Minister need not be worried about the possible extension of the provisions of the Bill costing the Exchequer very much money.
According to my calculations, the total value of all the categories of goods that might be regarded as manufactured goods within the meaning of the definition of the Bill—including  beer and spirits and commodities of that kind, the export of which is not likely to be affected very much by the Bill—would be about £25,000,000. It would be a considerable achievement to get a 10 per cent. increase in the export of these goods in any period of time and that would mean that the value of the exports of these industries would increase by £2,500,000.
Again let me say that the company that made net taxable profits equivalent to 2 per cent. of the f.o.b. value of its exports would be doing very well. In the majority of cases the taxable profits earned would be a smaller percentage of sales value than that. Assuming that the profits earned on exports average 2 per cent. of the f.o.b. value of the goods shipped, then the total additional profits of all these manufacturing companies in the country would be about £50,000. The tax on that would be £20,000 and the 50 per cent. remission of tax would cost the Exchequer £10,000.
That is the measure of the inducement which has been given to Irish industry under this Bill to expand its exports. Even that inducement is considerably reduced by the Minister's proposal that this remission will apply only for a period of five years. It seems to me that the inducement is very slight and the effect is not likely to be even as considerable as I suggested. Any chance it has of leading directly to an expansion of production is greatly minimised by the curtailment of the period. In my first amendment the proposal is that the firms concerned, who may engage in new export business or endeavour to expand existing export business, should at least be given the assurance that this system of taxation will apply for ten years.
Mr. Sweetman: This is not the end of discussion on Finance Bills. The Deputy and I will both agree in that respect. I think that for the purpose of an appraisal of the benefits that will accrue if industrialists go out and look for export markets, my period of five years rather than the Deputy's, would be quite sufficient; and I think it would be quite sufficient at this stage to deal with this on that basis of time.  The Deputy will remember himself when he was speaking on the Second Stage that he was worried from another angle—an angle which I agree he covered in the amendments—as to what people might say three, four or five years hence. They might forget the circumstances in which it had been deemed necessary to bring in proposals of this kind. Without in any way committing myself as to what I would feel coming up to the end of the period, one way or the other, I think at this stage it would be desirable to keep it on that basis.
There is another point of view also which should be brought into it. In relation to exports, because of the variety, as apart from the question of coal, which is a homogeneous or virtually homogeneous commodity, for the purposes of this Bill at any rate, we must work on the basis of value. Values change a great deal. It is desirable, therefore, that we should have our provisions tied as far as possible to the most recent value available. The standard year we have fixed here is one that may perhaps, I admit, be out of date in five years' time. Whatever may be the position about that, it will certainly be out of date in ten years' time and if one were considering it on a ten-year basis, one would have to consider it on an entirely different basis from that which is included in the Bill.
Mr. S. Lemass: I do not think the Minister has begun to understand the mind of the average industrial manager. The main deterrent, as I understand it, to the development of export trade in manufactured goods is the disposition of our industrial managements to think of exports as merely a depository for surplus produce. A firm organises its output mainly in relation to its anticipated sales in the home market and only if it finds that, for some reason, it can push output ahead of its target figure, or that sales on the home market are less than they anticipated, does it look around for possibilities of selling some of that production abroad.
What we need to get in this country is a complete change round of that outlook of managements. We have to  get as many of them as possible thinking of exports as the normal outlet for their goods, even if it should mean that, in circumstances, they will forgo the opportunity of home market sales in order to expand exports, to open up new contacts, to build up the possibility of permanent trade with some customer abroad. I do not think there is any likelihood of producing that change of outlook on the part of our industrial leaders, unless the indocements given to them are considerable and there is a reasonable expectation of their permanence.
It is true that trading conditions change and that trade that may be possible to-day may not be possible at all in five or ten years' time, but the whole purpose of our tax laws should clearly be to develop that spirit of enterprise in relation to exports which, with the exception of a few firms, does not generally exist at the present time. That is why I think the proposals in the Bill are completely inadequate, on the one hand, and that they are being made less effective than they might otherwise be by the various limitations and restrictions which the Minister has thought fit to impose.
I do not think the argument about the unsuitability of the basis year for determining the increased exports really applies. In the first place, it clearly does not apply at all to firms that go into export business for the first time. So far as they are concerned, there is no question of a basis year at all; they get the 50 per cent. remission on all their profits, provided they do not pay any dividends to their shareholders.
Mr. S. Lemass: In the case of existing companies, I agree fully, that the  adoption of a single year as the basis year is likely to lead to anomalies and inequities, and that is why I propose that that should be changed and my suggestion in this case, which I think is justified in all the circumstances, is that the company should be allowed to pick for itself any year in the past five years as its basis year. That certainly would not operate to penalise those companies who have responded to the many appeals already made to them to take a chance and get into export business. However, I will stick to the one amendment now.
Mr. S. Lemass: The first one. The Minister says that this is not the last Finance Bill. That is perfectly true. He said that as implying that this concession can be continued in five years' time. That prospect is not likely to induce anybody to invest a penny in industrial expansion, but that argument cuts the other way. I fully accept the right of the Government to change the tax laws and to withdraw tax concessions if changing circumstances justify that. If this drive to increase export business in manufactured goods should go ahead to such an extent that the maintenance of this concession involved a serious loss of revenue to the Exchequer, then the Exchequer would be quite entitled to reconsider that position, but the total loss that is anticipated here is something about £10,000 a year, and, while the Government may be in dire financial straits, it is not in such a situation that £10,000 more or less will make the slightest difference to it and, if we got a 10 per cent. increase in export trade by the expenditure of £10,000, it would be the best value that this country ever got for £10,000. That is why I think the Minister can quite reasonably commit the Government and all future Governments to continuing this concession for at least ten years.
Mr. Sweetman: There is no question of the consideration of limiting the period to one of five years being the consideration of the amount involved,  as has been suggested by Deputy Lemass. I am not going to be drawn by him with his red herring about financial straits. It does seem to me that it would be quite outrageous for anybody to suggest, or for it to get any currency as a suggestion, that there was any possibility of any Government —this or any succeeding Government— withdrawing a concession of a type like this that had been given for the purpose of getting people to go into any particular trade.
Mr. Sweetman: I do not think that suggestion was the least bit worthy of Deputy Lemass—not the least bit worthy. On the basis of the experience of the past 35 years of this State, where people have been deliberately induced to go into a particular type of thing as a result of specific legislative action, any commitment so made has always been honoured by succeeding Governments.
The question of general taxation is one that is entirely different. The question of general taxation is not involved in this amendment or in this Bill. The Deputy is quite well aware of that and I suspect that he just threw out that last little suggestion of his for  the purpose of a rather dirty innuendo and causing trouble.
Mr. S. Lemass: May I suggest this to the Minister—introduce this relief without any date and say that it will continue as long as, in the opinion of the Government of the day, it is necessary to continue it, so long as it is in the national interest that we should use these inducements to increase trade in manufactured goods?
Mr. Sweetman: The Deputy is contradicting himself. A second ago he said that, on that basis, nobody would consider the concessions. This concession is introduced for a period of five years and I am quite certain that it will be left there for five years, no matter what Government there is and people have that certainty of knowing it but, under the Deputy's suggestion, there would not be that certainty. I think a period of five years is better than a period of ten years because it may be quite easily found that the experience of the next five years is such as to warrant some change.
Burke, James J.
Costello, John A.
Crotty, Patrick J.
Dillon, James M.
Dockrell, Henry P. Mulcahy, Richard.
Murphy, Michael P.
O'Higgins, Michael J.
O'Higgins, Thomas F.
|Donegan, Patrick S.
Esmonde, Anthony C.
Flanagan, Oliver J.
Hession, James M.
Kyne, Thomas A.
Lindsay, Patrick J.
Morrissey, Dan. O'Reilly, Patrick.
O'Sullivan, Denis J.
Palmer, Patrick W.
Pattison, James P.
Blaney, Neil T.
Burke, Patrick J.
Calleary, Phelim A.
Childere, Erskine H.
Corry, Martin J.
Crowley, Honor M.
Davern, Michael J.
de Valera, Eamon.
de Valera, Vivion.
Egan, Kieran P.
Hillery, Patrick J.
Moher, John W.
Ó Briain, Donnchadh.
Tellers:—Tá: Deputies O'Sullivan and James Tully; Níl: Deputies Ó Briain and Hilliard.
Question declared carried.
Mr. S. Lemass: I move amendment No. 9:—
In the definition of “goods”, lines 36 and 37, to delete “by the person who exports them”.
The proposal in the Bill is that this relief from income-tax should be given to a company that increases its export of goods, goods being defined as “goods manufactured within the State by the person who exports them.” I am moving to delete “by the person who exports them.” I am at a complete loss to understand why that limitation should be imposed, why only a firm which itself exports the goods it manufactures should be entitled to this relief. I mentioned the point during the course of the Second Reading debate. I expressed the view that it was desirable to encourage the development of merchanting houses which would seek to handle for export the products of a number of Irish concerns. I pointed out that the operation of this definition would be to discourage, if not absolutely prevent, any such development.
One of the main difficulties in securing export trade for Irish products is the relatively small size of the individual manufacturing units. Córas Tráchtála, the Department of Industry and Commerce and other organisations which have from time to time examined the possibility of increasing exports have all turned their minds to the possibility of grouping the exports of all firms in a single industry through one wholesaling organisation, which would represent all the producers concerned in foreign markets.
 One disquieting development in recent times in connection with Irish exports has been the tendency of Irish firms to market their goods abroad through British merchanting houses. That was the old practice in the woollen trade where the products of Irish woollen mills were sent around the world in the sample books of English merchants, without its even being indicated on them that they were of Irish manufacture. The inclusion of these samples in the books of the English merchants may have increased the trade of the English merchants, but it brought no goodwill to Irish industry and no hope of retaining the trade secured on the strength of the samples, if the intervention of the British merchanting houses was, for any reason, unavailable.
The effect of this limitation in the section is to give the premium to the firm that markets its goods abroad through the British merchants as against the firm that sells through an Irish merchant. If it exports its goods to the warehouses of the British merchant, it qualifies for tax relief. If it sells through a merchant here, a merchant who ultimately exports these goods, then it does not qualify. The whole effect of the section is to force development of Irish export trade into the wrong channels.
There is another consideration which I want to bring to the attention of the Minister. I happen to know of the plans of a particular firm. These plans involve export business. The firm in question has a subsidiary sales company. The central company does the manufacturing, but the sales are conducted through a subsidiary company which is the selling organisation. For income-tax purposes, the accounts of the two companies are combined. If I understand the possible effect of this provision correctly, that company will not be able to qualify for tax relief, unless it changes its selling methods. The company which it is contemplated will sell the products abroad is a different entity in the legal sense from the company that manufactures. I do not know whether an administrative decision can be made by which the  subsidiary company can be classified as the same person for the purposes of this concession.
If that is the intention, then I think it should be made clear in the section, but, on the whole, it seems to me that the limitation is both unnecessary and undesirable; that it tends to limit the inducement to firms to enter the export trade, and, in the case of those who do, to encourage them into the wrong type of development. Quite a number of our firms who have been doing an export trade in recent times have established warehouses and selling organisations in England. There is undoubtedly a clear advantage to them in so doing, because London is one of the great merchandising centres of the world, but it seems to me that there is no reason of public policy why they should be benefited by so doing as against the firm that tries the more difficult task of merchandising its goods through Irish wholesale firms.
I would like very much to see the establishment in this country of enterprising wholesaling merchants who would seek orders abroad for the products of Irish factories, get these products made to suitable design by Irish manufacturers, and who would deal with the manufacturers and suppliers of commodities and themselves be responsible for the successful sale of the products in export markets. On many occasions in the past, I have tried to consider the measures that might be adopted by the Government to encourage a development of that kind. This measure, however, is going in the opposite direction and that is why I urge strongly that it is undesirable and that the words should be deleted from the paragraph and the section.
Mr. Childers: I should like to press the Minister to reconsider this also. Apart from the cases mentioned by Deputy Lemass, there are other examples of cases in which it is virtually impossible for a manufacturing firm to do direct exports itself. In the case of firms using certain types of international trade mark, or, shall we say, foreign trade marks, frequently the company which has control of the  trade mark will not allow the firm that makes the goods to export them under that trade mark. The reasons are of a technical character which relate to trade mark laws, and the firm insists on establishing a separate marketing company to administer the marketing of those goods in this country, and any goods manufactured for export have, first of all, to be purchased and resold by the company which has the right of exploiting the market in this country.
That applies not only to trade marks, but in many cases to machine processes and to various technical devices. It is all linked with international recognition of patents, trade marks and licences, and the Minister must be aware that, if we are to get increased industrial exports of the magnitude required to solve this country's problems, any legislation that is passed must be highly flexible in order to admit of our particular circumstances.
I would also like to reiterate what Deputy Lemass said about encouraging the merchant converter of textiles. There is a great number of small hosiery and woollen concerns here for whom the cost of sending an expert abroad seeking attractive designs and indulging in all that promotional expenditure is utterly impossible. If, for example, we are to have the maximum expansion of textile exports there should be a place for the merchant converter, the merchant who specialises in designing cloth for export to various countries or even to a group of countries and who has the capital and the facilities to send his people abroad so that they can come back and give orders to a number of different manufacturers to supply that cloth.
I am not saying that is the only way by which we can export textiles: they can be exported individually by firms at the same time, but it is quite obvious that if large-scale manufacturers in Great Britain, with her enormous tradition of textile exports, find it impossible to export individually and work through converters, if we are to get a genuine expansion of exports, we must make use of all those  devices and give encouragements which are far beyond the ambit of this Bill to our firms so that they can do it.
Mr. MacEntee: I should like to support what Deputy Lemass and Deputy Childers have said in relation to this amendment. I know personally that there are manufacturing concerns that have established separate subsidiary companies for the special purposes of their export trade. These, as Deputy Lemass has pointed out, are, for the purposes of the income-tax code, separate persons and therefore subject to separate assessment, but these companies have built up separate organisations to handle their exports and to explore the possibilities of new and hitherto untried markets. With the definition as it stands, I fear all these companies would secure no benefit at all from Part III of the Bill. I think, perhaps, the definition has been drawn without adverting to these facts and I am sure that the Minister, when the matter has been brought to his notice, will see that so far from encouraging industrial exportation the definition, as it stands, will in some instances, not discourage them, but certainly not give that relief which he is seeking to give to those who engage in the export trade.
Mr. Sweetman: There are, of course, as the three Deputies opposite have said, many cases in which manufacturing concerns here have set up subsidiary companies for the purpose of carrying out sales in the export and even in the home markets. Those subsidiary companies are acting as agents for the principal or primary manufacturing company, and, so long as that is the situation, I think it is virtually certain—certainly it is the case in regard to all the subsidiary companies I know in that respect—if it is the position that they are merely acting as agents who have built up a specialised type of service to which Deputy MacEntee referred, then they will be able to qualify for the relief under this Part of the Bill.
I want it to be quite clear in that respect that, in so far as they are subsidiary companies acting as a sales organisation of that sort for their  parent company, I intend, where they deal with the goods as agents for the parent company for the export market, that they shall be covered and if there is any difficulty in the drafting, and if any alteration is necessary to make sure that that is clear, I shall have the matter examined between now and Report Stage. I most certainly intend to cover subsidiary sales companies of that sort.
Deputy Lemass's amendment, however, goes on a wider front than that. We must remember, particularly when dealing with our industrial arm, that a great deal of it is not based, shall I say, on home-grown materials. It would seem to me that if I adopted the suggestion contained in the amendment of Deputy Lemass, I would be putting a premium on the least possible manufacture and processing of goods that might be imported here and re-exported. I do not think that is desirable and I honestly do not think Deputy Lemass intended that effect.
There may be a certain amount to be said in favour of the line taken by Deputies opposite that we should have wholesale purchasing here and that that should be dealt with by re-export sales. I do not think, in fact, however, that exists here at all at present and I certainly do not think the special provisions of this Bill are the appropriate medium at this stage for introducing that system.
I will not argue for or against the system. As things are, however, that does not arise. What does arise is that there are certain firms here who act as commercial agents for Irish manufacturing concerns who are concerned with placing their goods abroad. That position is dealt with on a commission basis. Offhand, I can think of two such cases where the goods remain the property of the manufacturing company and are placed abroad by persons who are paid on commission for that work. The concessions given to manufacturing companies under this Bill will enable the manufacturing company, if it so desires, to arrange the terms of the commission it will pay and will enable that type of commercial agent to build up contacts on the export  market, if that is the way the company concerned wants it.
If I were to accept the Deputy's amendment, it would mean that the manufacturing company might not get any benefit under the provisions of the Bill. I think it is desirable that the manufacturer of goods should be the primary person to get relief so that he would gear his market in that way. I accept the view put forward by Deputy Lemass that in the past there has been far too much of an acceptance of the soft home market under tariff protection and not enough expansion into outside export markets. I do not think this amendment would serve to reverse that trend. Rather to the contrary, because the benefits would not necessarily go to the manufacturer at all. Be that as it may, I want it to be quite clear that I feel that subsidiary companies, acting as agents for their parent company, should be covered. I believe they are, and, if they are not, I shall certainly take steps to correct the matter between now and the Report Stage.
Mr. S. Lemass: The Minister has produced some curious arguments, if I may so describe them, to counter the case put forward for the deletion of the words. I do not know if it is correct to say that a subsidiary company would be regarded as the agent of the manufacturer. That would apply only in the case where the subsidiary company was handling the produce of one manufacturer only. I do not feel I should deal with any existing organisation in this matter, so I think I should go back a few years when there was quite an export trade in sweetened fat and minced meat.
Mr. Sweetman: An unfortunate example.
Mr. S. Lemass: I think it will suit my point all the same. It will help me to emphasise the matter I have in mind. A very large number of firms engaged in the production of these commodities but exported none of them. It was other merchant concerns and single individuals who gave the manufacturers the orders, bought the  goods from them and exported them. Such manufacturers could not qualify under the terms of this Bill for tax reliefs. A similar situation may exist in quite legitimate trades to-day. I think I am correct in saying that Córas Tráchtála, in the course of exploiting the American markets, induced manufacturers of similar lines of goods to combine and set up a central organisation to handle the sale in America of the produce of more than one Irish manufacturer. As I understand it, that organisation, set up in the interests of the manufacturers by Córas Tráchtála, might now operate to prevent these manufacturers from getting reliefs under this Bill.
Mr. Sweetman: An organisation in America?
Mr. S. Lemass: No; an organisation here.
Mr. Sweetman: The Deputy said in America.
Mr. S. Lemass: No; to export to America.
Mr. Sweetman: The Deputy said: “To set up an organisation in America.”
Mr. S. Lemass: I said that Córas Tráchtála advised manufacturers of similar lines of goods to combine in the establishment of an organisation here to sell in America certain produce in greater quantities than any one manufacturer could produce on his own. Whether that organisation is functioning now, I do not know, but I do know an effort was made by Córas Tráchtála to have such an organisation established. If there is any trading of that kind being done, the definition now in the Bill would prevent the manufacturers from getting the tax reliefs proposed. The Minister talked about the desirability of preventing goods being imported for the purpose of re-export qualifying for these reliefs. In my calculation, the total amount of money involved is about £10,000.
Mr. Sweetman: I hope the Deputy does not think everybody will accept his calculations.
Mr. S. Lemass: If I were drafting this Bill, I would provide a definition of the term “manufacturing”. I am quite certain that administrative difficulties will arise in the application of this Bill, unless there is a better definition. However, that has nothing to do with the question of whether the goods must be exported by the manufacturer or through some marketing organisation.
The Minister has made no case whatever for the retention of the words. If the Minister can show the House that there is some issue of policy, some safeguard, which makes it desirable that goods should be exported by manufacturers, then we can argue with him. I think the Minister will admit there is no issue of policy, no safeguard, involved. Then why retain the words? Their retention will restrict the benefits of these provisions to certain firms, or, alternatively, require firms not to use independent selling organisations or operate through wholesale firms.
Mr. MacEntee: What the Minister has said in regard to the export subsidiary which acts as an agent for the parent company is satisfactory in so far as it goes. However, what would be the position of the export company which was acting not merely for the parent company, but also for sister subsidiary companies which are manufacturing goods different in kind from those made by the parent company? There, you see, there will be this relationship. There will be the export subsidiary of the parent company and this export subsidiary is a sister subsidiary of another subsidiary producing company. How will they stand in relation to this matter? That is very important because, in most cases, the subsidiary manufacturing company is, in fact, a large customer—not always the principal customer, but a large customer—of the parent concern.
The Minister has referred to the export subsidiary as the agent for the parent concern. Would he consider the position of an export subsidiary—I must keep on qualifying the various subsidiaries, in order to make myself quite clear—which buys from the parent company, most often on a nominal  margin just above the all—in cost of production, and then sells to the customer abroad at the best price it can get? The profits of that export subsidiary are not derived from commission in the way in which an agent will derive his income or revenue but from its ability to sell goods at more than was paid for them. That, I think, is of particular importance.
Another aspect of the matter arises. Very often there are companies which are not related in the sense that one company has been formed by a parent company or that the parent company owns a controlling interest in the second company but which are associated by interlocking directorates, by the fact that the directors of one company may be shareholders and directors in another company. Where these companies decide that, for their own purposes, they will avail for the purposes of export trade of the organisation which has been brought into being for that particular purpose, that is of the export subsidiary which has been formed by one of them——
Mr. Sweetman: I must confess I am getting somewhat confused by the Deputy's family of companies.
Mr. MacEntee: These are all very practical points.
Mr. Sweetman: Quite.
Mr. MacEntee: Perhaps I will put it in more or less chronological order. One company as been established: we will call it the parent company, the first company. It finds that, in order to charge certain members of its organisation with the special duty of trying to develop an export trade, the most convenient way of doing that is to set up a separate company and call it an export company. Then the parent company decides it will enlarge the scope of its operations. It begins, perhaps, by taking a minority interest in another concern or establishing another industry in co-operation with some people from abroad. As time goes on, the parent company, the first company, becomes the sole holder of the shares in the second manufacturing company. Then it decides that the  second manufacturing company will utilise, for the purposes of its export trade, the services of the first export subsidiary. This is a commonplace of recent industrial development in this country. Then the matter goes a stage further. Some of the people, interested in the first and second companies, establish other industries. In the course of time, the directorates, which are more or less common—there are shareholdings which are not common but where there are directors of the associated concerns, that is concerns some of whose directors may have shareholdings in some other of the companies—say to the parent of the export company: “We are anxious to develop an export trade. Can we have the services of your original export subsidiary company?” Then the question is what will happen the profits?
This export subsidiary will not be so closely associated with some of the manufacturing concerns as it was to its parent. It was quite clear originally that it was, in fact, a part of the parent's organisation. It is now, however, in this position in relation to the associated concerns. It may happen that there are members of the boards of the other companies and these members being familiar with the organisation which has been established for export purposes, knowing that the staff of that organisation is efficient and that it has a wide knowledge of export markets, will ask: “Can we use your subsidiary for the purpose of our export trade?” The export subsidiary will naturally endeavour to develop an export market for these other concerns which are coming along and anxious to avail of its services. What will be the position in relation to the profits which that export subsidiary will make? I think, in all cases, at least, in all cases which I can visualise, it will buy from the manufacturing concerns at prices which would naturally leave the manufacturers very little profit, it is true, but the manufacturing concern will seek by selling abroad at the best prices it can get from the export concern to reduce the unit burden of the overheads upon the goods offered for sale in this country.
The point I want to make is this: Will an export subsidiary with these  associations—the direct affiliation with the parent company, the direct affiliation with the sister subsidiary, then with arrangements with other concerns in which there is no interlocking of shareholdings or indeed complete identity of directorates but where there nevertheless is a very definite association with each other, an association of common interest in a number of concerns which, so to speak, circle around or form around the export subsidiary and try to avail of its services —will an export subsidiary with these arrangements be entitled to relief?
Mr. S. Lemass: Here is another six-marker.
Mr. Sweetman: The last, I think, would be a 12-marker.
Mr. S. Lemass: Suppose there is a company which prints textiles. Suppose it buys the cloth which has been woven by a second company and prints it and exports it. Which is the manufacturer, assuming that 75 per cent. of the export value comes from the weaving?
Mr. Sweetman: In the first part of his speech, Deputy Lemass said that if he were dealing with the definition of “manufacturer” in this Bill he would do so by way of providing that goods were only manufactured goods after a certain percentage of their value had been processed here. I shudder to think of the administrative army any such definition would build up. I would have to get very much larger premises for the Revenue Commissioners if I were to operate on a definition like that. It would virtually mean that you would have to have an examination of every single export invoice. That examination would mean getting the breakdown of the particular goods in question and, perhaps, with that breakdown, analysing it right down the line. That definition suggested by the Deputy would be utterly and absolutely unworkable.
Mr. S. Lemass: That definition will be made. The Revenue Commissioners must make some definition for themselves.
Mr. Sweetman: That definition would be utterly and absolutely unworkable. The definition of “manufacturer” is, I think, clear enough. Processing is a manufacture. I think we can all visualise quite simply what is going to be dealt with under this section.
Mr. S. Lemass: Dressed chickens.
Mr. Sweetman: If the Deputy looks at the definition of manufacturer anywhere, he will find that dressed chicken would hardly be raised in relation to this. Perhaps if Deputy Corry were here, he might even raise it seriously. I do not visualise any difficulty at all in relation to the definition of manufacturer, and I am quite clear on this, that the widest scope given to the definition of manufacturer here in this Bill will be to the benefit of the firms concerned and any limitation such as Deputy Lemass has suggested would be against the interests of the firms concerned.
So far as the trilogy of companies raised by Deputy MacEntee are concerned, I think it is a question which I must consider, and, though I rather pride myself that I am able to understand arguments thrown at me across the House, I am afraid that in relation to this series of companies, I will have to wait until I read the Deputy's speech in the Official Report and then call the companies A, B and so on, and see where I am. It seems to me that in relation to the company that was not either a brother or a parent company, but only an “in-law” in association, the line, in practice, would be more likely that they would work on commission rather than on direct sales. I am quite prepared to consider the point raised by Deputy MacEntee. We will number the companies and trace them to the ultimate conclusion.
Mr. MacEntee: Perhaps the Minister might consider whether he could not bring in a specific definition of an export company, say, a company in which the shares were held by the manufacturers who are availing of its interests. That might be one way out of the position which I have tried to outline.
Mr. Sweetman: I am interested in the manufacturers getting the concession and in ensuring that they do. In the last suggestion by Deputy MacEntee, I think there is a prospect in that way of the manufacturers getting the concession, but on Deputy Lemass's amendment I do not.
Mr. S. Lemass: Does the Minister not decide who gets it anyway?
Mr. Sweetman: I will certainly consider it between now and the next stage. I want the manufacturer to get this concession.
Mr. S. Lemass: Who else can get it? The definition is quite clear. There must be a process of manufacture before the company is entitled to claim for relief. Does it matter to the Minister or to the country whether the individual manufacturer sends out the goods himself or sells them to some wholesale organisation? Again, I put my six-mark question. Where there are two firms who combine in processing a manufacture and where one firm does one part and the other firm another part, who is the manufacturer? Is it the final exporter or the manufacturer who makes the article?
Mr. Sweetman: It is the final manufacturer.
Mr. S. Lemass: Even though he might only add a small bit to the selling value? I think it is a limiting provision which is completely undesirable.
Mr. MacEntee: In relation to the case Deputy Lemass mentioned, could the Minister not consider introducing some provision to provide for the sharing of the reliefs as between the two manufacturers?
Mr. Sweetman: The Deputy can see the difficulties of administering that and of going down right through the chain. If Deputy Corry were in the House, he would go right down to the farmer who produced the ewes, the lambs and the wool. I think the only way of dealing with it is to provide it for the last manufacturer.
Mr. S. Lemass: Even if the final manufacturer merely puts the article into a box?
Mr. Sweetman: I would not call putting an article into a box manufacturing.
Mr. MacEntee: Supposing he were merely to finish the article? In Britain, in relation to the cotton industry, there is a process of finishing which does not add anything more than, say, 5 per cent. to the manufactured content of the article. Supposing that position were to obtain here, would the person who adds 5 per cent. be entitled to all the relief on the export business? He could not export unless he was supported all along the line by the person who makes the article. The finisher could not possibly export.
Mr. Sweetman: May I make this quite clear? One person gets all the relief or no relief. It is not a question of dividing the relief. You could not divide the relief.
Mr. S. Lemass: Let the matter stand over. We may have another go at it.
Amendment, by leave, withdrawn.
Section 10 agreed to.
Mr. S. Lemass: I move amendment No. 10:—
In lines 48 and 49, to delete “the period of one year ending on the 30th day of September, 1956” and substitute:—“any one period of 12 months, as the company may select, ending on the 30th day of September in any year between 1951 and 1956, inclusive.”
This is a question of the base year. The Minister's proposal is that a company which, in any year of the next five years, exports more goods than it exported in the base year, will get the relief which the Bill contemplates. If a firm exports only the same amount, or a lesser quantity, it gets no relief. I think that is very unfair to companies which have already pioneered in export markets. This is not the first time that the Government of the country has urged manufacturers to increase export trade. We set up Córas  Tráchtála, Teoranta, a State organisation, with substantial funds to develop exports and gave it powers to help them in various ways. Some manufacturers responded to these urgings; others did not. The Minister's proposal means that the manufacturers who responded already can get no advantage or only a very slight advantage under this Bill, whereas those who delayed until this tax concession was held out to them can get full advantage. It seems to me to be a device for penalising those who are most enterprising and most responsive to appeals to them in the national interest to do what they can to increase their exports.
My suggestion is that instead of taking the past 12 months as the basic year and calculating the increase in export business, and so forth, in relation to that basis, we go back over five years and say to any company that qualifies for relief under this Bill that it may base its claim on any one of those years chosen by it. It would also mean that those who got into the export business in that period and countered the initial difficulties involved will not be penalised because they moved too soon.
I want to emphasise that the cost of that modification cannot be very much. The maximum inducement which can be secured and which can be held out to industries under this Bill will cost a very trifling sum of money. If my calculation is correct, the enactment of the Bill will not cost the Exchequer £10,000 a year. The Minister, therefore, need not be afraid that this suggestion will cost any serious sum of money. It will provide that those who have been most active in this field will not find themselves at a disadvantage as compared with newcomers in it. They can be at a disadvantage. Two firms making the same class of goods, seeking sale for those goods in the same market, may be contacting the same customers. One will be getting a substantial tax remission; the other will not, and the newcomer will be able to offer terms which will take the customers away from the firm that was supplying before.  It is quite wrong from the point of view of good national policy that this discrimination should be allowed to operate. I believe that the effect of maintaining this provision in the Bill will be to negative it completely in its effects.
Everybody knows there will be a change of Government some time and everybody knows that the new Government coming in considers the provisions in this Bill inadequate to achieve any substantial results and seeing the effect of establishing this principle that those who move too soon will be penalised, it may mean that the more cautious firm will still hold back.
Mr. Sweetman: Is that what the Deputy is trying to get them to do?
Mr. S. Lemass: I am not. I am trying to get the Minister to see sense.
Mr. Sweetman: That is the second time to-day the Deputy has taken that line, of trying to prevent people doing things in the national interest.
Mr. S. Lemass: The Minister has a very easy way of circumventing that if that is my purpose, and that is by accepting my amendment. If the Government wants to do something real instead of appearing to do something, then all the proposals I have made for amending this Bill will be accepted by him. It seems to me the Government do not care whether the action they take has any results or not so long as they can present it to the public as well conceived. The Minister has introduced a Bill here which he says is designed to increase exports and increase production, and which is so surrounded by limitations and restrictions that it is quite clear that the Government do not expect it to produce any results or perhaps do not even want them. They are quite satisfied as long as they can go to the public and say: “Look what we are doing to increase exports.” They are doing very little in this Bill and my efforts are directed towards amending the Bill in some degree so that it will not be completely ineffective. The Minister sits there and produces  foolish arguments which show he has not given any serious consideration to this matter and has no idea as to the machinery needed in order to produce the results which he stated as desirable.
Mr. Sweetman: Deputy Lemass at times even surpasses himself in the white heat of annoyance which he can reach at his own failure to persuade his colleagues to introduce similar provisions in the past. I do not propose to discuss this amendment on that basis at all. There is always the danger when you introduce a tax concession that its very introduction means that people who have gone before have not got the benefit of that concession. Take, for example, the discussion we had in relation to the initial allowances in the Budget. It was clear then that there might be two factories at any point of time, one of which had modernised its machinery and the other which had not. The one which modernised its machinery before. the operative date was admittedly a go-ahead concern but inevitably it meant that such a concern would not obtain the benefits as from the operative date on which initial allowances were introduced. That is always the case in respect of any tax concession. It is inevitable that there will be some date that will have to be taken as the overriding date and that those who did the particular job concerned, whether it is in installing new machinery or obtaining exports, will not be in quite as good a position as those who had sat back up to that point. That is what does happen in relation to every tax concession and always has in relation to concessions on the broad industrial front of which this is but an example.
What is really wrong is that the Deputy is looking at this from the point of view of the company rather than the point of view of the national economy. The Bill is not from the point of view of giving individual concessions to individual concerns. The purpose of the Bill is to give concessions in the interest of the national economy, where exports are increased. Obviously, the concession that the Deputy suggests is a concession considered  from the point of view of individual companies, not from the point of view of increasing national exports as a whole. That is where the specific difference between the Deputy's point of view and mine arises.
In relation to his remarks as regards whether it is desirable to choose a fixed datum year ending 30th September last or whether it is desirable to pick another period, there might perhaps be arguments but I think it is better to take as the datum year the last period before the announcement was made that the concession would be introduced. This is slightly different from the Deputy's earlier amendment in relation to coal where he suggested an average. He does not suggest an average here but an option. Is it not the very essence of the suggestion of an option that he is looking at it from the point of view of the concern rather than from the point of view——
Mr. S. Lemass: The force of the inducement.
Mr. Sweetman: ——of increasing exports as a whole ? I can give the Deputy examples easily enough where it would be better for the concern to accept my datum.
Mr. S. Lemass: That is not possible.
Mr. Sweetman: It is quite definitely possible.
Mr. S. Lemass: Not in this case.
Mr. Sweetman: I am talking on an average. So far as the Deputy's optional question is concerned, he is using that from the point of view of the company rather than from that of the economy. I think it is better to take the firm line that the 30th September, 1956, is the datum period and do what I have done, give the concern after that the choice of the point at which it brings that into operation. That is the better way of doing it.
Mr. S. Lemass: The date of the establishment of Córas Tráchtála is the date of the time a practical effort was made by the Government to get manufacturers  into the export trade. Does the Minister suggest that anyone who responded then should be penalised, that the clever fellow who did not move at first is to get the maximum benefit and that the man who was a pioneer in this respect is going to be penalised? Will that be an inducement to people to go ahead in the future? No consideration has been given to the provisions in this Bill at all. I am thinking in terms of the advantage of the company which is the only factor that matters. The Minister has little business experience but he can visualise a board of directors sitting round a table and deciding only whether they are going to invest——
Mr. Sweetman: The Deputy's personal experience does not enter into this but I am quite prepared to match my experience against the Deputy's—also its propriety.
Mr. S. Lemass: Can the Minister visualise a board of directors sitting round a table to decide whether they are going to allocate a substantial part of their reserve funds for the purpose of extending their export business? They will ask whether it will be to the advantage of the company to do so or not. Some of them will perhaps be more responsive to appeals to make the effort in the national interest than others but that will not do if they are going to incur losses. They will have a duty to the shareholders to avoid those losses. It is foolish to think of any appeals addressed to business people producing results unless it can be shown that the individuals will benefit. That is why it is futile to talk about framing this Bill without regard to its effect upon the outlook and actions of individuals. The individual cannot be left out.
Mr. Childers: It is evident that the Minister for Finance has not yet seen the point in this amendment.
Mr. Sweetman: The brothers and sisters of the company.
Mr. MacEntee: The Minister will get the whole family.
Mr. Childers: Unless this amendment or at least the spirit is adopted  to some degree, those companies which have been most successful which have reached a certain point in regard to their exports, and have run into difficulties—those companies which have run greater risks and greater difficulties in exploiting the markets—are not going to get the advantage of this Bill. They will only get the remission of taxation on the exports. They will get no advantage from the success which they had from the time they started to export.
The Minister should know that of our total industrial production our industrial exports are negligible. They are tiny and yet the whole future of this State is bound up with a massive increase of industrial exports no matter what the difficulties and no matter what are the problems involved. The Minister knows that, since the war, we have invested less capital in industry than most other European countries and our production has increased less. The Minister should realise that the companies which succeeded are the ones likely to go on succeeding. The Minister will lose nothing by accepting this amendment. All the companies which up till now have exported will still be encouraged to export. All the companies that will come into existence in the future and want to export will be able to do so and get the benefit of the relaxation of taxation. At the same time, the small groups of companies which have already succeeded and have shown initiative will be encouraged.
Looking at the whole field of export and examining it in the light of trade statistics—I wish I had them with me —it is quite obvious that those who have been in the business spent money on sales efforts abroad, experienced difficulties, and triumphed. The Minister ought to include that small group and let them go from success to success. That does not prevent other companies from taking part and going ahead also.
Mr. MacEntee: I think there is something to be said for this amendment from the point of view of trying to reward those who had the enterprise to break into the export market and  not merely maintain their position but to expand. The position is rather curious because five or six years ago we had a sellers' market everywhere and there was a demand for some products made in this country which were easily sold abroad. I am referring to more durable articles than those mentioned by Deputy Lemass. It was comparatively more easy then, in the trading conditions obtaining, to sell. As time went on it became more difficult and the people who had developed an easy and profitable business allowed it in many cases to taper off and are doing comparatively little export business at the moment until they get this inducement. There will be a definite encouragement for the people who took the easy money and the markets when they were available and did not seek to retain the foothold which they had secured in those markets because of the easy trading conditions to which I referred.
Take the case of another company which went into the market perhaps induced by the firm set of circumstances and found their trade dwindling but fought to retain their markets and ultimately began to expand their business in the export market. They will get less advantage from the provisions of Part III than the first class of person to whom I have referred. The people who went into the market, fought to hold their place there and eventually began to expand their export trade, will get a relief which will be based on the period of one year to the 30th September. The other people who also went into the market but allowed their business to taper off will probably be in a position to secure greater relief under this section than the enterprising exporters who maintained and expanded their business in the export market. That is the case for the amendment. In equity those who have shown their ability to expand should be given such an option in relation to the choice of period as will give them some advantage or reward for the fight they made to maintain their export position.
Mr. Sweetman: I think the case Deputy MacEntee has in mind would  get some advantage by reason of the method of the choice of period for the commencement of the relief to which I have referred. I could think of one particular case myself where it could be operated in such a way as to give benefit to the person who was building up, as the Deputy said, but would not give the benefit in the other case.
The case put by Deputy MacEntee was put on a slightly different basis from that put by Deputy Lemass. His case—again from the point of view of the concern—was that it was desirable to give a reward to those who had shown a pioneering spirit. Deputy MacEntee can appreciate as well as I can that, without going into the amount involved, whatever amount is involved in any remission of taxation always has to be made up elsewhere. It is a question of holding a balance as between those who need a concession and those from whom the money has to be taken. It has always been one of the fundamental precepts of the basis of taxation that it is not right to take money in taxation from persons who are perhaps hard pressed and to give it to those who do not require it. As I understand the basis of the Deputy's argument, the concern building up over the years does not require it.
On that basis it would seem very difficult indeed for me to justify what the Deputy has in mind. However, I do not mind admitting quite frankly that, in relation to any tax concession, there is always the hard case on the border line when the concession starts. One particular case worried me very much when I was introducing the initial allowances this year. It is a case of an industry that I happen to know had gone out to modernise itself but had done so at an earlier date and was not entitled to the benefit of the initial allowances. One has to draw the line somewhere and at some point of time. Even if I took the five-year option in this, I am quite sure I would meet hard-luck cases of people who had gone on even earlier than that and who would come to me and say: “When you took five years, why not take six, seven or eight years?” People will say: “You should take  1947, the first year after the virtual termination of the emergency period.” No matter where you start, there always will be some hard-luck story.
Mr. S. Lemass: The Minister will at least admit that if some such device as I suggest here, a choice of a limited number of years, is given, the chance of hardship is substantially reduced, if not entirely eliminated. Surely it  should be his desire to minimise the prospect of hardship rather than to stick pat on his own scheme even when it can be shown it will have undesirable consequences generally?
Mr. Sweetman: One can always be shown that in relation to any concession.
Question—“That the words proposed to be deleted stand”—put.
The Committee divided : Tá, 67; Níl, 59.
Burke, James J.
Costello, John A.
Crotty, Patrick J.
Dillon, James M.
Dockrell, Henry P.
Dockrell, Maurice E.
Donegan, Patrick S.
Esmonde, Anthony C.
Flanagan, Oliver J.
Hession, James M.
|Kyne, Thomas A.
Lindsay, Patrick J.
Murphy, Michael P.
O'Higgins, Michael J.
O'Higgins, Thomas F.
O'Sullivan, Denis J.
Palmer, Patrick W.
Pattison, James P.
Blaney, Neil T.
Burke, Patrick J.
Calleary, Phelim A.
Childers, Erskine H.
Colley, Harry. Hillery, Patrick J.
Kennedy, Michael J.
Corry, Martin J.
Crowley, Honor M.
Davern, Michael J.
de Valera, Eamon.
de Valera, Vivion.
Egan, Kieran P.
Harris, Thomas. Maher, Peadar.
Moher, John W.
Tellers:—Tá: Deputies O'Sullivan and James Tully; Níl: Deputies O Briain and Hilliard.
Question declared carried.
Section 11 agreed to.
Mr. S. Lemass: I move amendment No. 11:—
In sub-section (1), to delete paragraph (d).
Amendments Nos. 13, 14 and 15 all refer to the same point. It seems to me that this is the most futile and unworkable provision in the Bill. I do not think it is possible for any firm doing any sort of substantial business to keep entirely separate in its accounts the profits earned on export and on home sales. When a firm has to try to segregate, in a form which will be acceptable to the Revenue Commissioners, profits earned upon increased exports, it becomes a completely impossible operation.
No one who had given any thought to the practical day to day working of industry would conceive of this provision. What is there in it? The Bill proposes that a company which enters export business for the first time will get, in respect of profits earned upon its export business, a 50 per cent. remission of taxation, or a company already engaged in the export business will get a 50 per cent. remission on any increased profit it may earn through the increased operations of the company, provided that no part of the additional profit so earned is distributed by way of dividend but has been used for the development of the company's business in the State.
I said on the Second Reading that a child of ten would think out a way of evading that obligation, but why it is there at all is a complete puzzle to me. Take the case of a company which makes, one year with another, profits of, say, £100,000. That company, in the normal working of its concern, would probably allocate £50,000 of those profits to various reserves and distribute the other £50,000 in dividends to its shareholders. Now, let us consider that company doing an increased export business and still making £100,000 profit and still wishing to appropriate half of that to reserves of one kind or another and distribute the other half. In order to qualify for the relief under this Bill, it merely has to ensure that out of the profits attributed to exports or increased exports goes the whole of the reserve allocations, and that out of the remainder of the profits goes the whole of the dividend distribution. How it is thought the section can be made workable I do not know.
What is the purpose of the section? Surely the Government appreciate that any firm, if it is going to get into export business for the first time or to increase its activity in the export market, will have to get increased capital from somewhere. If it goes to its existing shareholders with a supplementary issue of shares, to get more capital for its contemplated extension of business, is it going to have to tell them there and then: “We are asking you to put up more capital, but we want you to understand that, under  the law, no dividends can be paid upon these additional shares”?
I do not know if it is likely that we can, by any modification of our laws here or by any tax concessions that might conceivably be given, induce foreign firms to come here, to use this country as a base for their export trade, firms that might not be interested in the home market at all but which would do the manufacturing here of goods intended for markets all over the world. I know some members of the Government have known that I have interested myself in that possibility; and, while nothing has come of it yet, there is, I suppose, the chance that something might come of it some time, if our tax laws are modified sufficiently. What is the hope of getting that done if we have to tell those firms: “Of course, the concessions which we give under those tax laws of Ireland are conditional on your shareholders never getting a dividend from their operations in this country.” Surely it is a nonsensical provision, unworkable on the one hand and misdirected on the other. Therefore, I urge strongly that these amendments be accepted, that these limitations should be removed.
I hope Ministers and their advisers do not think that the people controlling the business of this country are irresponsible people who cannot be trusted to manage their affairs properly and that they must be told what to do by some Government Department. The great majority of business concerns will not allocate to dividend purposes funds which can be used for the extension and development of the business. The practice has grown up in most other countries of utilisation for dividend purposes of only a proportion of the profits earned in any year. Indeed, most of our existing Irish concerns have reached the present stage of their development because of the conservative policy of their boards in holding back for utilisation in their concerns a substantial part—if not the bulk—of the profits earned. There is no need to devise this legislative signpost to good business management—at any rate in respect of the concerns likely to take  any interest in the provisions of the Bill, or which have the enterprise and ability to enter export trade with a chance of success and a chance of earning profits.
I cannot think of any reason why this paragraph is put in this section, unless there is some belief in the minds of the Government that business people cannot be trusted to manage their affairs properly. The type of firm that will go into export, the type of firm that will make any profit in the export trade—and there can be no concession under this Bill, unless they are making a profit—can be trusted to look after the affairs of their companies without any legislative restrictions of this kind.
Mr. Sweetman: The position which Deputy Lemass has indicated in respect of this amendment is not the accurate position at all. I agree wholeheartedly that it is desirable that companies should make reasonable profits and I accept the view without question that many companies are at present able to expand in business because of the fact that, over the years, they have ploughed back profits into their businesses. I think it is entirely desirable that that should be so and it is entirely desirable that the practice so built up in that way should be continued.
In relation to this concession, what I want to ensure is that a person who gets into the export business will get into it to stay, that he will not get into it merely for a very transient period in which he might just see one opportunity and, having seen and taken that single opportunity, not bother himself about it any more. One of the desirable things in that respect is that one should utilise the effect of this concession—and it is a concession— towards building up similar business in the future.
I agree, of course, with Deputy Lemass that the effect of this amendment is that the total overall allocation of profit to reserves is what is covered rather than a specific part of it. But I do not propose in this section to measure what allocation to reserves was made prior to the obtaining by the person concerned of the excess  export profits. I do not think it would be desirable to do that. It is by quite deliberate intent that I am enabling the switch from existing reserves to be made in place of these excess export profits.
There is another point apart from the desirability of ploughing back profits into business, which Deputy Lemass accepts as so desirable. There is another point and it is that, if the situation were not such that the reserves that were taken out of profits were of such a figure that the distribution was restricted to the amount of the gross profit otherwise earned, you would at once get into a very, very obscure dividend distribution problem. You would have a situation then in which one company might be deducting tax from its dividends at 7/3, another at 7/-, another down to 6/6, and so forth. The whole basis of our income-tax code, in so far as it affects companies, is based on the provision that the company pays the tax and, having paid the tax, deducts it from its dividend payments. If the provision were not in this Bill that there would be sufficient so paid by the company before distribution of dividends to account for the full tax to be deducted from the dividends distributed one would have to have dividends paid under varying rates of income-tax. I think that would be undesirable——
Mr. S. Lemass: Why? What harm is there in that?
Mr. Sweetman: ——quite apart from its administrative difficulty because then, when one goes from the actual payment of the dividend concerned to the grossing up that I have provided so as to ensure that the relief is carried right through, one would have considerable further difficulties and one would arrive at a situation in which the administrative cost would be quite out of proportion to the benefit involved for the individual company.
The Deputy will notice that I have taken a different line in this respect in relation to coal, partly because a coal mine is a wasting asset and I do not think it would be desirable to introduce this provision where there is  a wasting asset, and also because the number of coal mines is so small, and is likely to continue to be so small, that the administrative problem created would be very great. I think it is desirable, in so far as this restriction is concerned, that people should plough back profits particularly when they obtain those profits by way of tax concession. From what I can gather, Deputy Lemass differs from me on that. His point of view is that I should not signpost by statute what is a desirable practice. I think by doing that we are achieving very, very desirable economies and it is desirable to do it from that point of view so as to avoid cases in which people might go into business on a transitory basis only and get out again just as quickly. What I am anxious to do is to establish the principle that those who go into exports will go into them on a permanent basis because, as a result of the concessions they will get here, they will have to plough back such profits as they may make through that concession.
Mr. S. Lemass: Does the Minister seriously contemplate the picture of a company being established here who do an export business only, never paying a dividend without losing this concession? Does he think it is likely any company will be established on that basis? There have been companies of that kind in the past. In my time, as Minister for Industry and Commerce, I gave new manufacturing licences on the basis that the entire output would be exported. If any such proposition arises in the future one will have to tell those interested: “But, of course, if you ever pay a dividend to your shareholders you lose the tax concession.” Does the Minister think that is a feasible proposition?
Am I seriously to believe that the reason why no profits, to qualify for this concession under this Bill, can ever be distributed to shareholders is because some slight trouble might be caused for the companies concerned in determining the appropriate rate of tax deduction from the dividend warrant? I should imagine most companies will be delighted to be able to tell their shareholders that, because of  increased export trade, their rate of tax deduction has been reduced. No doubt that will have a very considerable repercussion on the value of the shares concerned on the stock market.
If this proposition is to work at all it must work on some rational basis. Again, I emphasise the need for getting more capital if more business is to be done. Any concern of any size which wants to get into export trade on a substantial scale will have to raise money somewhere. A few of the more fortunate will have to use resources they have which they can devote to that purpose. Most will have to get more money by going to their existing shareholders, to the public or to friends of the directors to ask them to put up the additional money required to enable the increased export trade plan to be financed. That additional capital cannot be remunerated unless the total amount available for distribution is increased as a result of these operations.
Apart altogether from its repercussion on the amount of dividend, it must be open to companies to remunerate the additional capital. The question of the desirability of a company appropriating a reasonable part of its earned profits to the maintenance of its assets and to develop its business is there. But companies will do that of their own accord. Ministers do not have to tell them to do it, and, therefore, that cannot be the reason why this section is here. If there is some idea of administrative convenience it seems to me strange to introduce a Bill which is purported to be directed towards encouraging increased exports and then nullify the whole thing for an administrative reason. That seems to me a foolish proceeding.
Mr. P. Byrne: Is the Deputy speaking of a company engaged purely in export trade?
Mr. S. Lemass: Yes. It can never pay a dividend under this Bill.
Mr. P. Byrne: The Deputy seems to imply that because a firm is engaged in export trade it is impossible to develop business at home.
Mr. S. Lemass: No.
Mr. P. Byrne: Development expenditure can still surely be incurred by extending the business.
Mr. S. Lemass: I gave the instance of firms operating in this country under a Control of Manufactures Act licence, when it is a condition of the licence that they will sell none of their products at home——
Mr. P. Byrne: They can still incur development expenditure at home.
Mr. S. Lemass: They can incur expenditure anywhere, but they cannot pay dividends.
Mr. P. Byrne: They are not completely debarred.
Mr. S. Lemass: They are completely debarred from paying dividends to shareholders if they get the concession.
Mr. Sweetman: I did not hear the Deputy's last remark.
Mr. S. Lemass: I said they were completely debarred from paying dividends without surrendering this concession because it is one of the conditions on which the concession is granted.
Mr. Sweetman: The question arises in respect of two types of company, the existing concern that is operating both in respect of——
Mr. S. Lemass: I mean a new concern of that class would not be able to pay a dividend.
Mr. Sweetman: ——the home market and in relation to its export market. That is an existing export trade. There is a second type of concern that has already a home market but has never had any export market and now goes into the export market for the first time. I cannot see any difficulty in respect of either of these types at all.
Mr. S. Lemass: How can a firm go into the export market without getting more capital?
Mr. Sweetman: The effective method, as the Deputy himself explained a few minutes ago, of dealing with that situation in relation to either of those two types of company is perfectly simple  and will not in any way affect the rate of dividend.
Mr. S. Lemass: All the Minister means is that a clever business man can evade the obligation, but is it desirable that we should put him in that position?
Mr. Sweetman: Not at all. The competent business man in that type of business is not going to pay out in dividends more than the reasonable proportion that will be involved. If he does, he does it because he wants to wreck his company, and I do not think——
Mr. S. Lemass: Surely that is his concern?
Mr. Sweetman: ——the Deputy is making his case on that. I suggest to the Deputy that as far as that is concerned where you are giving a concession, you are entitled to make a provision in relation to that concession which you would not be entitled to make if there was another concession there. But Deputy Lemass has put a third case to me, that is in relation to the new company which does solely export business. My understanding of that position is that in relation to that I would be entitled to deal with it on the basis of 50 per cent. plough-back, because the basis of tax remission is 50 per cent. If, however, that does not appear to be the case, and if there is an obligation in relation to a new concern so entering on the export business and solely export business, I must confess at once I see there might be a new concern given a new manufacturing licence solely on condition that they would engage on the export trade and——
Mr. S. Lemass: Why solely?
Mr. Sweetman: ——so far as that problem emerges, I shall certainly consider it between now and Report Stage. But on general principles, it is desirable that firms when they get a special concession from the State should utilise that concession to plough-back into the business or to build up the business. I do not think  there should be any disagreement on any side of the House on that.
Mr. S. Lemass: I am only instancing the case of a company doing nothing but export trade merely to simplify the picture, but the Minister cannot be unaware of the fact that during the past year some people came here associated with big concerns elsewhere because they were asked to consider the possibility of transferring some part of their world trade to a manufacturing concern in this country. They might sell something here. For instance, if the Du Pont Company that is coming to Derry had come here instead, no doubt 97 or 98 per cent. of their products would be sold abroad but some percentage would be sold here. It is because of the possibility that we may be able, at some time, to attract people of that kind through holding out the inducement of remission of tax that I do not want to see that possibility defeated by this unnecessary condition, that in order to qualify they must never pay dividends. They come here to make a profit and they get money from their shareholders on the assumption that they will pay dividends. This strikes at the whole possibility——
Mr. Sweetman: There certainly should not be a provision that they should never pay dividends.
Mr. S. Lemass: However, if the Minister says he will reconsider it, I shall hold my hand.
Mr. P. Byrne: I am somewhat perturbed at the prospect of the wrangling that may arise between the taxpayers and the revenue authorities in regard to development expenditure. I think it would be desirable to be a little more explicit as to what we mean by development expenditure. Have we in mind capital expenditure only? Is advertising on the foreign market, for example, development expenditure? I do suggest that the term should be more explicitly dealt with. I can see the Minister's reluctance to accept this amendment in full but I would strongly urge him to the view that the three words “in this State” are completely out of accord with the  aim of the Bill. Surely it is possible to develop a company's business outside the State? Surely a company which, for example, opens an export office incurs expenditure? Perhaps it may acquire premises——
Mr. Sweetman: I think that means that the company is in the State; it may have business outside the State.
Mr. S. Lemass: It can develop business in the State outside the State.
Mr. P. Byrne: Perhaps I am misunderstanding the point.
Mr. Sweetman: The only thing it cannot do is use the money to establish a branch factory somewhere else. Anyway, in the case of advertising expenditure, would not that normally be expenditure deductible from current profits rather than capital expenditure?
Mr. P. Byrne: I think it could be fitted into both categories.
Mr. Sweetman: The explanation of this clause is that it means anything that the company does for its purposes.
Mr. P. Byrne: I am very glad to hear it.
Amendment, by leave, withdrawn.
Mr. S. Lemass: I move amendment No. 12:—
In sub-section (1), to delete all words from and including “so” in line 16 down to the end of the sub-section and substitute: “shall be reduced by 100 per cent. in respect of such proportion of the total profit on the sale of goods manufactured by the company as the goods exported by it bears to the total quantity of goods sold by it”.
I do not know to what extent it is possible to get the Minister to consider this proposal now. I presume he has considered it already because this was the proposal put to the Commission on Industrial Taxation by the Irish Exporters' Association. Admittedly, adoption of this amendment would alter in a fundamental way the proposal in the Bill. The Bill proposes  that a company will get a 50 per cent. remission of tax on new export business, export business it has not had previously, in excess of anything it did before, subject to that business yielding taxable profits. The proposal here, I think, is justifiable on two grounds. So far as the Bill is concerned, many business people have criticised it on the grounds that it provides a very complicated method of determining the amount of tax relief given in any individual instance.
A company which had 75 per cent. of its sales on the home market and 25 per cent. abroad and increases that 25 per cent. until it is doing, say, 72 per cent. of its sales at home and 28 per cent. abroad would have a most complicated procedure to follow before being able to calculate the amount of tax relief which it could obtain. Communications addressed to me by some firms and organisations have criticised the Bill on that ground. They urge that tax laws should be simple so that members of the public will know exactly what they are obliged to pay and that they should not have to depend on the Revenue Commissioners' interpretation of the position. One of the advantages of the change in the Bill which I propose is to give a simpler code of tax laws.
Mr. Sweetman: The Deputy will permit me to differ from him on that.
Mr. S. Lemass: Surely. The proposal in the amendment is a very simple one from the point of view of the individual firm. Instead of a 50 per cent. remission of tax on export trade profits, my proposal is that they should get a complete remission of their total tax bill in the same proportion as their exports are to their total sales. A firm which had 90 per cent. home sales and 10 per cent. export sales of their total production would be entitled to 10 per cent. remission, and a firm exporting 50 per cent. of their total production and selling 50 per cent. on the home market would be entitled to a 50 per cent. remission. In the same way, a firm that exported its entire output would be entitled to 100 per cent. remission.  That would be a very substantial inducement to firms to export. It would be a simple method of determining the extent of the remission and would be immediately understood by business managements. If the Minister would agree to accept the amendment, it would bring a number of business firms very quickly to the detailed consideration of the possibility of doing an export trade, even in the case of firms who did not think they could do it very profitably. I do not know whether it is fully appreciated by the Government that any new export business in manufactured goods is not possible without a considerable outlay, not merely on production equipment, but upon market research, upon the establishment of a sales organisation, upon advertising abroad in a number of instances, and that risks in the export trade exist on a sufficient scale to discourage many Irish business firms from operating other than they have been doing up to now in a protected market.
If we are to have any substantial increase in our export trade, we have got to give quite substantial inducement. We must give something far more substantial than £10,000 or £15,000. We have got to be prepared to take risks with the revenue, if necessary, for a time, until the industrial firms have been given every chance of exploring the export market possibilities before incurring the initial risks which will arise in getting an export trade established.
When Irish export business in manufactured goods is as well founded as the export trade of other countries, then we might withdraw some of these concessions in whole or in part, but if we are to have any substantial upward trend in industrial exports conditions we have got to do something far more extensive, something far more dramatic than the Minister proposes here. My proposal is that the tax of firms should be remitted in the same proportion as their export trade is to their total output.
I do not think there would be any substantial difficulties in administering an arrangement of that kind. From  my own contacts with firms who have export possibilities, I believe such an arrangement would get them thinking seriously. It would not get them all into the export trade, but, as I have said, it would get them thinking seriously, whereas the proposals set out in the Bill will produce very inadequate results.
Mr. Sweetman: I take it Deputy Lemass agrees with me it would be quite impracticable in ordinary business to keep exact separate accounts so as to show the exact separate proportion of the profits that were related to the export trade.
Mr. S. Lemass: I am not proposing that.
Mr. Sweetman: I am fully aware the Deputy is not, but I take it he would agree that it would be administratively impossible to do so—to segregate their profits from exports from profits on home sales.
Mr. S. Lemass: That is what they will have to do under the Minister's Bill.
Mr. Sweetman: No, because under the provisions of the Bill it is the excess of value that goes in for apportionment purposes. The Deputy should look at the provisions of subsection (1) of Section 12. What occurs there is that the excess of exports over and above exports in the datum year——
Mr. S. Lemass: The firm will have to calculate the part of their profits attributable to the excess exports.
Mr. Sweetman: By a proportion basis and not by an individual costing basis.
Mr. S. Lemass: It does not say that here.
Mr. Sweetman: The Deputy will find it is there all right. He can take it from me that is the basis. It will not be an individual costing of each item that is sent for export. I think the Deputy must agree, as anybody who has any business experience must, that that would not be desirable. If it is not done in that way, there is the way  the Deputy has suggested, which is that the total profits from the sale of goods manufactured by a company would be divided in the ratio of the volume of exports to the volume of the total goods sold. The effect of that would be that goods can be sold at a loss on the export market and that the loss would have to be borne by profits on home sales.
I can easily see how objectionable that would be. If there is to be an express subsidy paid for exports, it should be the Government and the House who determine that subsidy rather than the individual companies. Under the Deputy's amendment, any company would be entitled itself to determine that it was going to subsidise its exports, sell them at a loss and that the loss would be met out of the profit on home sales. That would be the precise effect of the proposed arrangement of Deputy Lemass.
It does not relate the proportion of profits on exports to the proportion of total profits. It does not do that, probably for the reason I indicated. Deputy Lemass merely takes the value of goods sold in the export market and relates the value of concessions solely to that as the proportion of the total goods sold. If, therefore, a company, trading both on the home front and on the export front, wished in any year to bring down its rate of home taxation for its own benefit it could achieve that by selling on the export market at a loss, and under Deputy Lemass's amendment the Exchequer would have to provide the subvention to meet that export sale so carried on at a loss. Obviously, no Minister for Finance and no Government could expect that. If there is to be any subsidy on exports, the determination of that subsidy must be made by the Government of the day and not by the individual concern, and that is what the Deputy's amendment would mean.
Mr. S. Lemass: I shall not press the point any further. I think that is the worst case the Minister has made yet.
Mr. Sweetman: It happens to be the truth—perhaps sometimes a thing that is foreign to the Deputy.
 Amendment, by leave, withdrawn.
Amendment No. 13 not moved.
Section 12 agreed to.
Amendments Nos. 14 and 15 not moved.
Sections 13, 14 and 15 agreed to.
Question proposed: “That Section 16 stand part of the Bill.”
Mr. S. Lemass: This section provides for the introduction of the initial allowance of 10 per cent. on capital expenditure incurred on the provision of industrial buildings. I have already asked the Minister to indicate whether the introduction of this part of the Bill in this form is to be taken as meaning that the other recommendations of the Industrial Taxation Committee have been rejected by the Government.
As the Minister will remember, the committee made recommendations governing the definition of industrial buildings for the purposes of the introduction of a depreciation allowance and also recommended the granting of an annual wear and tear allowance of 2 per cent., in addition to the initial allowance of 10 per cent. The Minister did not act upon these recommendations in the Finance Bill of this year on the plea that he then had not had time fully to consider these recommendations. Presumably he has had time by now and the introduction of this Bill, of itself, is an indication that the other recommendations have been rejected. If not, it is desirable that the Minister should make that clear, if it is intended to act upon these recommendations in the main Finance Bill next year.
Mr. Sweetman: I am not prepared at this stage to commit myself one way or the other in respect of the remaining recommendations in the Report of the Industrial Taxation Committee. I have introduced this section and this provision because I think it is desirable, in relation to new building construction, that people should know at once where they stand and should be  induced and encouraged to carry out new industrial building by means of the very substantial concession given in this section.
Mr. MacEntee: Perhaps I have not read the Bill correctly but I should just like to be quite clear as to what this section provides. Are we to assume that, in every year, one-tenth of the expenditure will be made as a deduction in charging the profits against the trade? Will it be one-tenth of the cost of the building for every year or is it only in respect of the year in which the expenditure has been incurred?
Mr. Sweetman: Does the Deputy think it means that in ten years a person would get 100 per cent.?
Mr. MacEntee: I am scarcely optimistic enough to think that.
Mr. Sweetman: In that case, I think the Deputy must have been translated into Elysium.
Mr. MacEntee: Unfortunately, I am still here in Dáil Eireann. Now that I re-read the section it is quite clear to me that I had not read it sufficiently closely.
Mr. Sweetman: The section is a bit complicated and requires rather careful analysis.
Mr. MacEntee: That is merely conforming to all the precedents which are a well-established part of the income-tax code.
When we were on the Second Stage of the Bill, I asked the Minister if he could not see his way to fix the qualifying date as 30th June. I think most people anticipated that any allowance which would be given would run as from that date. I do not know whether or not the Minister has considered it but, in existing circumstances, I think it would not be a very costly concession and it is one which might, say, compensate some concerns which, despite the rather doubtful outlook, did proceed to incur expenditure on new industrial buildings. Perhaps the Minister would say whether he has given any consideration to that point?
Mr. Sweetman: In view of the dulcet  tones which the Deputy has used, if this date were to be considered alone in relation to Section 16 he might have been able to succeed with his blandishments. He will recollect that the 30th September is the date I have taken right through the Bill. I do not think it would be right to change that date in one section and to hold to it in another section.
Question put and agreed to.
Sections 17 to 21, inclusive, agreed to.
Question proposed: “That Section 22 stand part of the Bill.”
Mr. MacEntee: To my mind, this is a very objectionable provision. I assume the Minister is committed to this project of the prize bonds. As I said on the Second Reading, it is a very unfortunate thing for the country that we have been reduced to these straits. One cannot discuss the proposal in terms of ethics. I do not think there is any harm in any person having a gamble or speculation if he so wishes.
I have never taken the line that a person ought not make a wager but I do think there is something distasteful in the Minister for Finance, as representing the Government, entering into what amounts to a wager with members of the public who will subscribe to these bonds. We have taken steps in relation to games of chance and lotteries and subjected them to very strict regulation. We have done that because of the social evils to which these undertakings have given rise. I do not suggest that people are going to reduce themselves, by purchasing these bonds, to the same straits as some people have done by gambling. What I am pointing out is that I do not suppose that those who participate in the purchase of prize bonds with the hope that they will at some time or another draw a big prize are going to reduce themselves to the same straits as those generally do who engage excessively in gambling, but still the two undertakings are of the same nature. A bookmaker may bleed a silly  improvident client. I do not suppose the Minister for Finance will bleed those who subscribe to these bonds but still the bait is the same.
The unwise gambler gambles because he hopes to get a large and easy return. The subscribers, or nearly all of them, to these bonds will be precisely in that position. It will be the lure of the big prize, and not the intrinsic value of the bond, that will attract them. Formerly, the attraction of our national loans was their intrinsic value; subscribers knew that each unit of stock was certain of a secure and, in the conditions of the time, a fair and adequate return. That feature does not characterise the prize bonds. As far as I know, there will be no specific rate of interest attached to any of the bonds. Their one attraction, as I have said, will be the possibility that the holder will draw a substantial prize. If he does this, however, he will draw it at the expense of his fellow-contributors to these bonds; it will not be at the expense of the State. He will enter into a gamble in which the Minister for Finance will be, in one way, the beneficiary, but in which the great majority of those who participate with him in the scheme will be losers.
I find it difficult to speak on this matter because I realise that the Minister is himself a victim of circumstances. I am perfectly certain that, were it not for the financial straits in which the country finds itself, the Minister would not have sponsored a scheme of this sort. I do not want to apportion blame to the Minister. As I have said so often in this House, it is the public demand for expenditure which the community as a whole could not afford, could not continue to maintain, that has reduced us to this condition. At the same time, looking at it from the point of view of the general public interest, it would have been better for the Minister for Finance to eschew a scheme of this sort. It would have been better if he had made his issue for the last loan on more attractive terms than to have created this precedent which others may follow but which I sincerely hope they will not.
 A great number of matters could be raised in relation to these bonds and there is one which I would like to raise. Is it fair to the community as a whole, to the Minister, or to his successors, who may find it hard to terminate this scheme, to have established a principle that Government stock, having been issued a little while before at a discount, should be accepted by the Minister at its par value in subscription to bonds of this sort? I do not think that the Minister, even for the purpose of making either the loan or this scheme—which is a complementary part of the borrowing operation— so attractive was wise or justified in giving an untaxable capital appreciation of £2 per cent., to the subscribers to the last national loan. It is very hard to be specific but I think he has again created a very undesirable precedent there.
I assume that if a prize is drawn under this scheme, it will not be subject to tax, that it will be regarded as a windfall and accordingly will go tax free. I think it has been the custom and the tradition that where a windfall occurs the Revenue Commissioners do not pursue the person who has experienced the good fortune too rigorously in relation to tax. I hope that will continue to be the situation, but it seems again in this connection that the prize drawn is gained at the expense of the general body of subscribers.
The tax remission in the same way is gained at their expense also, in, I grant you, a rather indirect way. They derive no immediate income from their bonds. I suppose in that way they are not subject to tax. If, instead of having an arrangement of that sort, we had pursued what was the more normal way—to use the Minister's own phrase—of providing funds for the Exchequer by the issue of a loan which would carry a rate of interest, then the interest, if the person was otherwise assessable, would be subject to taxation. That, of course, is not the case here. He escapes taxation if he draws a prize and it is that fact which makes me say that even his exemption from income-tax is secured at the expense of those who participate with him in  the pool. It is very difficult, having regard to my general attitude towards betting and games of chance and things of that sort, to formulate the precise way in which one feels this is not the sort of thing we ought to do, that it is not the sort of thing we are justified in doing. It invokes in me at any rate a very strong feeling of dislike and distaste.
Mr. J. Brennan: I want to endorse what Deputy MacEntee has said in regard to the distaste which this section of the Bill has caused in the minds of the people. At the time the British Chancellor of the Exchequer introduced a similar measure, there was a good deal of unfavourable comment throughout this country and in Britain. One is always led to believe and led to expect that the most important thing in State finance is public confidence. The introduction of the word “gamble” into State finance does not make for confidence and, goodness knows, confidence at the present time is a minus quantity.
When the Minister flattered his counterpart in England by introducing this measure—imitation is the sincerest form of flattery—he had, I am sure, examined what were the results accruing from the measure in force across the water. He must have been very much enthused by the result when he embarked on the gamble in the finances here. I do not know what the people in the cities think about it but in the country we have known a system whereby, when you wanted to raise the wind for any project that was in a shaky form, you resorted to what was known as a raffle. At the time this system was introduced by the British Chancellor it was being sneered at by many people in this country as the raffle system in British finance. They tried to justify it at the time by pointing out that the gambling instinct had grown in the minds of the people. They were inclined to gamble and it was to capture some of the results of that inclination to send money after the chance of winning a prize and thereby capture some of the loose money floating around, that this measure was introduced.
 I do not think even the British people themselves were satisfied, after the scheme was introduced, that it would be worthwhile. The Minister should be able to tell us otherwise but it does seem to be a matter of creating a feeling of distrust to introduce gambling into State Finances. A gamble is all it is. One takes a chance and one may win a prize. Deputy MacEntee has said a prize has to be provided out of some finance and the money which goes to the making of a prize must be the public finance. Somebody stands to lose as a result of the good luck of those who will be fortunate to win a prize.
I have not yet heard the Minister making any statement in defence of the introduction of these prize bonds. Perhaps there is something in it that does not meet the eye but it certainly would need to have a lot if it is to counteract the feeling of distrust that has been aroused by resorting to what in the minds of the country folk is the last resort, the raffle. If the results are not worthwhile this is a section which the Minister might be well advised to delete from the Bill.
Mr. Sweetman: I find considerable difficulty in remaining in my seat listening to the hypocrisy expressed by Deputy Brennan. He commenced by saying that it was essential in the national interest to have confidence in money matters—this from the Deputy who is a member of the organisation which has deliberately gone out through the country in the last six months to endeavour to destroy confidence, from the Deputy whose colleague was caught writing in an endeavour to destroy that confidence.
Mr. S. Lemass: It is a little embarrassing for the present occupant of the Chair but I think the Minister is out of order.
An Leas-Cheann Comhairle: I do not think it arises on the section.
Mr. Sweetman: It arises on the issue of confidence that was raised by Deputy Brennan.
An Leas-Cheann Comhairle: We are dealing with the question of bonds.
Mr. Sweetman: Deputy Brennan was allowed to raise the question of confidence as the basis upon which it was essential to carry on State finances. However, I do not mind in the slightest dealing with it now or on any other occasion, but if I might turn from the remarks of Deputy Brennan to those of Deputy MacEntee. Deputy MacEntee said at the beginning that he liked a little flutter, as indeed I do myself, as indeed does the present occupant of the Opposition Front Bench. We all have that weakness, shall we call it, but perhaps one of the essential differences in relation to any such scheme of prize bonds, a scheme which, I may add, was suggested by the present Taoiseach long before the system of premium bonds was introduced in England, is that there is not the same element of complete gamble or the same element of lottery underlying this scheme as underlies the other things that were mentioned.
The essential thing here is that the applicant's money remains intact and that the subscriber to the prize bond scheme will be able to get back his subscription at any of the stated periods on giving the prescribed notice. It cannot, therefore, have the same effect on the person throwing away his substance, so to speak, on a wild gamble. On the contrary, this scheme provides that the person's substance will be kept intact. If he is not successful in obtaining a prize, he will still have his funds kept intact. If he subscribes £100, he will still have his £100 which he can draw out of the fund at a later stage, if he gives the prescribed notice. It seems to me that that is a fundamental difference and is the answer to the point made by Deputy MacEntee.
Particularly in present circumstances and quite apart from the capital concerned, I think it is desirable to utilise every means that keeps a person's savings intact to get them to increase their savings. That is one of the things that the prize fund or scheme will, I hope, do. It is clearly, in my view, desirable at present that every inducement that can reasonably be offered should be offered for the purpose of getting people to save more.  If we are to be able to channel their funds into savings of this sort, it is far better that they should do so than that they should put their money into football pools, or some type of coupon arrangement such as that, because in this case the money is held there for them in the fund and they can withdraw it.
Mr. J. Brennan: I thought the Minister's reference to the question of confidence came very badly from him. When Fianna Fáil were in a position not nearly so bad as the present Government is in but bad enough, and when they were telling the people of the measures they took to correct the serious state of the balance of payments, the Opposition said they were entirely unnecessary and that Fianna Fáil were introducing a hair-shirt policy. Deputy Lemass gave a warning in Letterkenny in 1947 as to what was in store for the people if they were not prepared to do certain things to bring about a better position with regard to exports and promote greater efficiency.
An Leas-Cheann Comhairle: The Deputy is getting away from Section 22.
Mr. J. Brennan: On the question of confidence, I should like to remind the Minister of a few things.
Mr. Sweetman: We are going to get into it in real earnest.
An Leas-Cheann Comhairle: The Deputy will not be allowed to go outside the ambit of the section which deals with the issue of prize bonds.
Mr. J. Brennan: I should very much like to get a little latitude on that subject. If the reading of personal letters in this House is to be resorted to, all of us can take part in that game.
An Leas-Cheann Comhairle: The Deputy cannot reply to the Minister's irrelevant remark. It does not arise.
Mr. J. Brennan: Does the Minister still want to repeat that? If Fianna Fáil had introduced the prize bonds, they would have been told that they  were slavishly following the British Chancellor of the Exchequer. I do not think this scheme has created any feeling of confidence whatever in the country, nor has it done anything for the community. If anything, it has done harm. The money may be withdrawn without any loss to the individual concerned, but the money must come from somewhere and it will have to come from public funds.
Mr. Sweetman: I do not know whether I am in order in going back to the White Paper on exports or the balance of trade in 1951, but I can quite easily do so.
An Leas-Cheann Comhairle: The Minister may not develop his remarks on it.
Mr. Sweetman: Very well. I want to make it clear beyond question in relation to this section and to this scheme of prize bonds that it is a scheme by virtue of which moneys will be obtained by prize bonds, premium bonds—call them what you may—for the purpose of financing the capital programme. It was suggested by the present Taoiseach some two years before this Government was formed when he was on the opposite benches and when Fianna Fáil were over here. That was long before Mr. MacMillan ever introduced any such scheme.
Question put and agreed to.
Sections 23 and 24 and the Title agreed to.
Bill reported with amendments.
Report Stage ordered for Wednesday, 12th December, 1956.
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