Committee on Finance. - Finance Bill, 1958—Report Stage.

Thursday, 10 July 1958

Dáil Éireann Debate
Vol. 170 No. 3

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Minister for Finance (Dr. Ryan): Information on James Ryan  Zoom on James Ryan  I move amendment No. 1:—

In page 5, Section 2, to delete lines 32 to 35.

I should explain that, under existing law, before this Bill would become law and before this section would become law, industrial and provident societies are normally exempt from income-tax under Schedule D in respect of trading profits, but they are not entitled to exemption under Schedule B in respect of market gardening profits. We are transferring income from market gardening from Schedule B to Schedule D. The sub-section was put in to leave provident societies as they were, that they would be subject to income-tax under this section, but now, on consideration of representations made by Deputy Haughey and others on the Committee Stage, I have decided to ask the Dáil to remove this sub-section (6) and put provident societies on the same basis in market gardening as any other trade. In other words, they are free from income-tax in this as everything else.

Mr. Haughey: Information on Charles J. Haughey  Zoom on Charles J. Haughey  If sub-section (6) is deleted, how will charities be affected?

Dr. Ryan: Information on James Ryan  Zoom on James Ryan  Charities are also covered. They are free of tax also.

Amendment agreed to.

An Leas-Cheann Comhairle: Information on Cormac Breslin  Zoom on Cormac Breslin  Amendment No. 2 has been ruled out of order.

Mr. Sweetman: Information on Gerard Sweetman  Zoom on Gerard Sweetman  So I was told, but I do not think it matters very much in this case, though I do not accept the principle. I take it that there must be no pending case and, if so, there is no use wasting our time.

Dr. Ryan: Information on James Ryan  Zoom on James Ryan  There was a certain doubt about this.

[325]Mr. Sweetman: Information on Gerard Sweetman  Zoom on Gerard Sweetman  Nobody has ever raised it?

Dr. Ryan: Information on James Ryan  Zoom on James Ryan  No.

Mr. Sweetman: Information on Gerard Sweetman  Zoom on Gerard Sweetman  I put it down only for the purpose of getting that assurance.

I move amendment No. 3:—

In page 5, lines 56 and 57, to delete “refrain from giving notice under this paragraph or may”.

We had a great deal of discussion on this during the Committee Stage, and I am still in some doubt as to the method adopted. If the appeal is put in the Special Commissioners' list, notice of that appeal must be given to the taxpayer. I could not possibly accept a suggestion that it should be in the discretion of the inspector as to whether an appeal that was listed was notified to the taxpayer or not. I think what is intended in this case is something that is slightly different, but I am not a bit happy about its expression, and it has only come to me as a result of the discussions on the last occasion.

If an appeal is lodged to an assessment in the ordinary way, I think the inspector is bound to give notice. It is fair enough to provide that if the appeal is not going to be listed at all, an inspector may refrain from giving notice. That is perfectly fair, but if the appeal is listed, as I understand the way the section has been framed, then the inspector must give notice. I do not see where the proviso in Clause (2) takes it only to the cases in which an appeal has not been listed. Clause (b) says that notice must be given and then it goes on to say that notice need not be given in a case that might be settled, but it covers the case that has already been listed. As far as I can see, if a case is put in the Special Commissioners' list, then the taxpayer must be informed as of right. There must not be any discretion.

Dr. Ryan: Information on James Ryan  Zoom on James Ryan  I find myself in this instance dealing with a Deputy who knows the procedure much better than I do. As far as I can learn in regard to this item, first of all, the case is not listed because the giving of notice is [326] the same as listing. That is the first point that must be kept in mind. If the Deputy's amendment were accepted—first of all, let me give an example—it would cause unnecessary trouble and would really lead to an unworkable method of dealing with cases in which an inspector thought the appeal would be settled by agreement. He would have to give notice and he would then have to withdraw the notice. If he did not withdraw the notice, the taxpayer would have to appeal before the Special Commissioners to seek an adjournment. I believe these are the salient points.

Let us go back to Section 3 for a moment. Section 2 (a) says that the Special Commissioners are to appoint times and places for the hearing of appeals, that is, generally speaking, and the clerk to the Special Commissioners is to give notice of such times and places to the inspector of taxes. Under sub-section (2) (b), the inspector of taxes has to give notice in writing to each person who has given notice of appeal. This, however, is subject to the proviso set out in (2) (b) (i) and (ii). One relates to the case in which the appeal has been settled by agreement. I do not think there is any difficulty there.

Paragraph (ii) deals with a case where settlement by agreement is likely. I think that is the case we are dealing with. As long as the inspector has refrained from giving notice or has withdrawn notice already given, the appeal is still open. I do not think there is any doubt about that. If the inspector comes to a conclusion, a settlement will be arrived at. He would then have the appeal listed and would send notice to the taxpayer of the time and place appointed for hearing. Paragraph (ii) would no longer apply. Instead, the opening words of (2) (b) would take effect. It should be added also that the inspector could not have proceedings taken to recover tax where there was an open appeal. Consequently, he would be most anxious to have the appeal heard.

Mr. Sweetman: Information on Gerard Sweetman  Zoom on Gerard Sweetman  That is exactly my point. He would be able to do it in the absence of the taxpayer.

[327]Dr. Ryan: Information on James Ryan  Zoom on James Ryan  He must come back to have the appeal heard.

Mr. Sweetman: Information on Gerard Sweetman  Zoom on Gerard Sweetman  I think that is what is intended.

Dr. Ryan: Information on James Ryan  Zoom on James Ryan  If he comes to the conclusion that a settlement is not possible, he must start the appeal again and get it before the commissioners. He must give notice to the taxpayer to that effect.

Mr. Sweetman: Information on Gerard Sweetman  Zoom on Gerard Sweetman  I do not think that is the effect of the section as drafted. I think that is what happens and what should happen. If it does not happen administratively, there must be a little trot off to the court some day.

Dr. Ryan: Information on James Ryan  Zoom on James Ryan  As I say, it is a very complicated thing.

Mr. Sweetman: Information on Gerard Sweetman  Zoom on Gerard Sweetman  Very; I agree.

Amendment, by leave, withdrawn.

Mr. Sweetman: Information on Gerard Sweetman  Zoom on Gerard Sweetman  I move amendment No. 4:—

In page 7, line 27, to add at the end of the sub-section:—“Provided that the rank or status of the officer signing the notice is therein stated.”

This is a very simple thing. I think it is the practice for all notices of this sort to be signed “Patrick Murphy, Inspector of Taxes”, “Patrick Murphy, Assistant Secretary”, or whatever it may be. It is perfectly proper that the notice should be taken as prima facie evidence. It should not be signed “Patrick Murphy”. The rank of the person signing ought to be clear. Once the qualification is there, it is easy enough for the taxpayer to verify it. If he has to go chasing around to see whether Patrick Murphy is an inspector, chairman of the Revenue Commissioners, a Special Commissioner in certain circumstances or a principal officer in a tax office, it would be most unfair.

Dr. Ryan: Information on James Ryan  Zoom on James Ryan  If it is signed by an inspector of the Revenue Commissioners, that would be borne on the notice and if it is an authorised officer, that fact is stated.

Mr. Sweetman: Information on Gerard Sweetman  Zoom on Gerard Sweetman  If the Minister is prepared to say that it is done as a matter of administrative practice, I am quite happy.

[328]Dr. Ryan: Information on James Ryan  Zoom on James Ryan  I am afraid there is a difficulty there. If you put in the rank, you may have to prove the person's rank. However, we will look into the matter.

Mr. Sweetman: Information on Gerard Sweetman  Zoom on Gerard Sweetman  I am not quite so happy about it like that.

Mr. Booth: Information on Lionel Booth  Zoom on Lionel Booth  You have to prove his name.

Mr. Sweetman: Information on Gerard Sweetman  Zoom on Gerard Sweetman  I was all sweet reasonableness until the Minister's last intervention. I am beginning to think there is something wrong.

Dr. Ryan: Information on James Ryan  Zoom on James Ryan  I would be prepared to put in the rank if the legal difficulty did not arise. It might be necessary to prove it.

Mr. Sweetman: Information on Gerard Sweetman  Zoom on Gerard Sweetman  I do not think you will find any difficulty there. It is prima facie evidence. How is the Minister going to put in the rank?

Dr. Ryan: Information on James Ryan  Zoom on James Ryan  Under the Bill he is described as an authorised officer.

Mr. Sweetman: Information on Gerard Sweetman  Zoom on Gerard Sweetman  There is nothing in the sub-section which says he must be described as an authorised officer.

Dr. Ryan: Information on James Ryan  Zoom on James Ryan  In practice, he is an authorised officer.

Mr. Sweetman: Information on Gerard Sweetman  Zoom on Gerard Sweetman  Is the Minister going to warrant that the practice will be continued administratively?

Dr. Ryan: Information on James Ryan  Zoom on James Ryan  I am quite prepared.

Amendment, by leave, withdrawn.

Dr. Ryan: Information on James Ryan  Zoom on James Ryan  I move amendment No. 5:—

In page 7, line 38, Section 6, to delete “1957” and substitute “1958”.

There was a lot of discussion on one point—the point about retrospection— on part IV of the Bill. I said I did not think there was retrospection in it. I said that if there was, I did not intend it to be there. It depends upon what one means by retrospection. If you mean that we charge income-tax now on what came in last year, that is done under many income-tax codes, whether you call it retrospective or not. To make things simple, I have decided that this part of the Bill will [329] not come in until the 6th April, 1958, so that there cannot be any doubt about it, and this is preparing for that.

Mr. Haughey: Information on Charles J. Haughey  Zoom on Charles J. Haughey  That is only where you get the information.

Dr. Ryan: Information on James Ryan  Zoom on James Ryan  If we do not get the information, we cannot do anything about it.

Mr. Sweetman: Information on Gerard Sweetman  Zoom on Gerard Sweetman  I am glad that the Minister has accepted the contention that was made really in relation to Section 21 of the old Bill but which is brought in under this section. I think the necessity for the amendment was amply proved on the last occasion and we need not add anything to it to-day except that I say again that I am glad the Minister has done it and congratulate him for having done it, having listened to the comments that I heard and not having listened to the comments that I did not hear.

Amendment agreed to.

Mr. Sweetman: Information on Gerard Sweetman  Zoom on Gerard Sweetman  I move amendment No. 6:—

In page 7, line 49, to add at the end of the sub-section:—“but does not include sums disbursed by such employed person as an agent for his employer.”

I am genuinely worried the more I look at this section as to what is intended here. Take a case of my own. I send a court clerk to court and he is given money before he goes to court. He brings affidavits with him to court and stamps half a dozen affidavits at 2/6 apiece. Then he files the affidavits. Those are expenses that he has to meet in accordance with his job. He pays the moneys as my agent or as the agent for my client but they are expenses that he meets in the ordinary course of his business. I do not think anybody intends that returns would have to include matters such as that but I cannot see how you can differentiate disbursements of that sort as the Bill is framed. We agreed on the last occasion that, be they individuals or companies, 95 per cent. of the taxpayers are honourable, honest people, endeavouring to discharge their obligations under the law to the best of their ability. I am concerned with [330] people who are reading this section and who are endeavouring to the best of their ability to see what they are bound to return. It seems to me that under Section 6 now they have to include in that special return disbursements of that sort.

I mention the solicitors' disbursements purely as a technical case. I can see exactly similar cases. Take the man in the company whose business it is to keep the company abreast of modern information and who goes down to a book seller in accordance with his job and buys half a dozen technical books for circulation amongst the technical officers of the company. Instead of having the account sent to the company, he pays for them in cash there and then. These are expenses which now he must return under Section 105 though the books are not bought for him but are bought for the use of other members of the company. There must be some method in the statute of differentiating in order to ensure that the type of expenses about which the Minister wishes the Revenue Commissioners to have information should be taken out from those expenses about which he does not wish them to have information. Otherwise, it will mean that the 95 per cent. will have to keep innumerable records that are of no avail to anybody and which merely cost time, trouble and annoyance.

I go back to the solicitors' case because it is the case I know myself. There are three court clerks for an office who go down to court every day. All of them have to expend money on stamp duties and fees for the solicitors. All officers work on an imprest system. When they come back, they report to the cashier the moneys that have been expended for clients A. B. C. D. and E. The moneys are debited to those clients accordingly and the duties and fees that have been expended are recovered from the clients concerned. It is immaterial to the client whether those moneys were expended by court clerk W., X., or Y. and no record, therefore, would be kept by the solicitors concerned as to which court clerk did so expend the money.

Under this section, the moneys that [331] have been given to the court clerk to expend in that way are expenses that must be returned by the individual clerks in their returns and then they must go back and get exemption from them. The employer must equally return that, of the amount spent, £X was spent by Clerk Y., £Z was spent by Clerk W., and so forth. That is not the type of expenditure that should be included under Section 105 of the Income-Tax Act, as amended by this Section 6. Yet, if this section is left as it is, I shall have a statutory duty in future to determine and to return which of my clerks paid a fee for my client, Patrick Murphy from Naas. It is of no possible use to anybody that my books should be cluttered up in that way.

Dr. Ryan: Information on James Ryan  Zoom on James Ryan  It is difficult to discuss amendment No. 6 without reference to amendment No. 7 also because one would be inclined to use arguments against amendment No. 6 that might be held against you on amendment No. 7. First of all, with regard to amendment No. 6, I think this amendment is far too wide.

Mr. Sweetman: Information on Gerard Sweetman  Zoom on Gerard Sweetman  If it would ease the Minister's mind, I am prepared to discuss amendments Nos. 6 and 7 together, if it would be easier for him.

Dr. Ryan: Information on James Ryan  Zoom on James Ryan  I think it might be better.

An Leas-Cheann Comhairle: Information on Cormac Breslin  Zoom on Cormac Breslin  Amendments Nos. 6 and 7 may be discussed together.

Mr. Sweetman: Information on Gerard Sweetman  Zoom on Gerard Sweetman  Amendment No. 6 is the wider amendment. Amendment No. 7 is a limitation of it. It is a method by which I thought one could limit it in some way. As a matter of fact, I had drafted amendment No. 7 first and then it struck me that amendment No. 7 would be too narrow. Take the case I have given purely because it is a case I know. Since the court fees were raised to such an extortionate degree by the Minister's predecessor in office, very much greater moneys have to be carried by court clerks and a figure of £2 would not cover it. As far as I am concerned, these were two ways that occurred to me. If the Minister has a better way, [332] I am perfectly happy to take it. What I want to provide is that firms and companies will not be asked to clutter up records that can have no possible use. As the section is framed I am afraid they will have to do so.

Dr. Ryan: Information on James Ryan  Zoom on James Ryan  The section is framed in a very comprehensive way to deal with every possible eventuality that might occur. I think it would be almost impossible to frame the section with the exception mentioned. From the experience we have had of making an exception at all, we know that it is likely to be availed of to avoid income-tax in one way or another. The section has, of necessity, to be wide in its application. I did say, on the Committee Stage, when this matter was raised, as reported in Volume 169, column 321:—

“The form which it will be proposed to serve on employers in this matter will be a prescribed form and it will be possible to exclude many of the irritating things to which employers might object, such as the inclusion of bus fares.”

I have no doubt that we can deal with the case of a boy sent out with urgent letters and given his bus fare. That can be excluded. However, I am not so sure about the law clerk mentioned by Deputy Sweetman. In that case the amount might be very big and it would be difficult to include it as an exception. In the working of this section it should be possible to deal with cases of that kind and make it easier for the employer to make a return. If it has been the practice that solicitors have to give a certain amount of money to law clerks for one reason or another, it should be possible to make it easier for the employer to give a return in that case.

Mr. Sweetman: Information on Gerard Sweetman  Zoom on Gerard Sweetman  It is outrageous to have to give a return at all.

Dr. Ryan: Information on James Ryan  Zoom on James Ryan  I do not know if a solicitor could be excluded entirely in that case. We shall go as far as possible in the matter.

Mr. Sweetman: Information on Gerard Sweetman  Zoom on Gerard Sweetman  Could the Minister tell us where is the statutory power for exclusion?

Dr. Ryan: Information on James Ryan  Zoom on James Ryan  The Revenue Commissioners may prescribe the form and [333] under that power they will be able to make the prescribed form easier. The first amendment would be too wide because it would be possible under it to give the employee £1,000. He would return £100 of that as expenses and, if he was found out, he would be able to say that the other £900 had been given to the employee on the employer's behalf to be disposed for entertainment. That, of course, would vitiate the whole part of the Act which is designed to deal with evasions of that kind. To conclude, therefore, my attitude is that I shall have to resist No. 6.

Amendment No. 7 will, to a large extent, be met by the prescribed form. That is as far as I can go.

Mr. Sweetman: Information on Gerard Sweetman  Zoom on Gerard Sweetman  Will the Minister tell us where, under Section 105 of the Income-Tax Act, there is any power to exclude people from complying with that section? There is no excusing power in the section.

[334]Dr. Ryan: Information on James Ryan  Zoom on James Ryan  I am told that there is no statutory power, but in practice they make the form as flexible as possible.

Amendment, by leave, withdrawn.

Mr. Sweetman: Information on Gerard Sweetman  Zoom on Gerard Sweetman  I move amendment No. 7:—

In page 7, between lines 49 and 50, to insert the following new sub-section:—

(3) Sums not exceeding £2 per week and being only sums paid in respect of reinbursements of amounts actually paid by an employed person shall not be included.

I think the Minister should accept this amendment.

Dr. Ryan: Information on James Ryan  Zoom on James Ryan  I could not accept it.

Mr. Sweetman: Information on Gerard Sweetman  Zoom on Gerard Sweetman  The Minister has been making the case about large expenses, but this is not the case of large expenses.

Question put.

Belton, Jack.
Burke, James.
Byrne, Tom.
Carew, John.
Casey, Seán.
Coburn, George.
Coogan, Fintan.
Cosgrave, Liam.
Costello, John A.
Crotty, Patrick J.
Desmond, Daniel.
Dillon, James M.
Esmonde, Anthony C.
Fagan, Charles.
Finucane, Patrick.
Hogan, Bridget.
Jones, Denis F.
Kenny, Henry.
Kyne, Thomas A.
Lindsay, Patrick.
Lynch, Thaddeus.
McQuillan, John.
Manley, Timothy.
Mulcahy, Richard.
Murphy, William.
O'Donnell, Patrick.
O'Higgins, Michael J.
O'Higgins, Thomas F.
O'Sullivan, Denis J.
Palmer, Patrick W.
Russell, George E.
Sheldon, William A. W.
Spring, Dan.
Sweetman, Gerard.
Tierney, Patrick.

Aiken, Frank.
Bartley, Gerald.
Blaney, Neal T.
Boland, Gerald.
Boland, Kevin.
Booth, Lionel.
Brady, Philip A.
Brady, Seán.
Brennan, Joseph.
Brennan, Paudge.
Breslin, Cormac.
Briscoe, Robert.
Browne, Seán.
Burke, Patrick. [335]Flynn, Stephen.
Geoghegan, John.
Gilbride, Eugene.
Griffin, James.
Haughey, Charles.
Healy, Augustine A.
Hillery, Patrick J.
Hilliard, Michael.
Humphreys, Francis.
Kenneally, William.
Killilea, Mark.
Kitt, Michael F.
Lemass, Seán.
Loughman, Frank.
Calleary, Phelim A.
Carty, Michael.
Collins, James J.
Corry, Martin J.
Cotter, Edward.
Cummins, Patrick J.
Cunningham, Liam.
Davern, Mick.
de Valera, Vivion.
Doherty, Seán.
Donegan, Batt.
Egan, Kieran P.
Egan, Nicholas.
Fanning, John. [336]Lynch, Celia.
MacCarthy, Seán.
McEllistrim, Thomas.
Medlar, Martin.
Millar, Anthony G.
Moloney, Daniel J.
Ó Briain, Donnchadh.
O'Malley, Donogh.
Ormonde, John.
O'Toole, James.
Ryan, James.
Ryan, Mary B.
Smith, Patrick.

Amendment negatived.

Mr. Sweetman: Information on Gerard Sweetman  Zoom on Gerard Sweetman  I move amendment No. 8:—

In page 9, to delete all words from and including “and” in line 11 down to the end of the sub-section.

This amendment was put down merely to show the Minister that he was incorrect when he said on Committee Stage that this could arise only for the benefit of the taxpayer. At the time, I suggested to the Minister that if it arose only for the benefit of the taxpayer, he should delete the penalty clause in sub-section (5). If the Minister is satisfied that it can arise only for the benefit of the taxpayer, he will agree to the amendment, and if he is satisfied now that his earlier explanation was not quite accurate, he will be able to give us the explanation.

Dr. Ryan: Information on James Ryan  Zoom on James Ryan  I am afraid I have not had an opportunity of checking up on what I said on Committee Stage. This provision in Section 9 of this Bill is mainly a repetition of Section 25 of the Finance Act, 1920. All the words which the Deputy seeks to omit were in Section 25 (2) of the 1920 Act. It is necessary, in my opinion, to insert them. Suppose we require a certain return and the return is not made. If there is no penalty clause when it is not made. I do not know what we could do next. I am afraid we must have the penalty clause there.

Mr. Sweetman: Information on Gerard Sweetman  Zoom on Gerard Sweetman  The explanation we had on Committee was not quite accurate, then?

Dr. Ryan: Information on James Ryan  Zoom on James Ryan  Possibly.

Amendment, by leave, withdrawn.

Dr. Ryan: Information on James Ryan  Zoom on James Ryan  I move amendment No. 9:—

In page 13, line 23, Section 20, before “the person” to insert “it is used when”.

I am assured it is purely a drafting change in order to perfect the text. It makes no difference, in fact, either to the person concerned or the authorities but the drafting was somewhat inadequate as it stood.

Amendment agreed to.

An Leas-Cheann Comhairle: Information on Cormac Breslin  Zoom on Cormac Breslin  Amendment No. 10 is in the name of Deputy Sweetman. Perhaps he would agree to take amendments No. 31 and No. 32 as well?

Mr. Sweetman: Information on Gerard Sweetman  Zoom on Gerard Sweetman  I shall be happy so long as I have a decision on amendment No. 10. I move amendment No. 10:—

In page 15, between lines 18 and 19, to insert a new section as follows:—

As soon as may be after the passing of this Act, the commission now considering the income-tax code shall be requested by the Minister to consider Part IV of this Act and to make an interim report thereon to the Minister who shall submit same to Dáil Éireann and this part of the Act shall come into operation three months after such report is so submitted.

[337] We have discussed this at some length already. I was not satisfied with the income-tax code as it was. I set up a commission to investigate the matter. I felt that the code was so complicated that nothing short of a commission could carry through an adequate investigation. For years, there had been a clamour for such a commission. The commission was appointed in the financial year 1956-57. The Minister is now unilaterally coming in and amending the code in a very comprehensive way without waiting for the report of that commission. If he is not prepared to wait for the general report of the commission he should submit the matter forthwith to the commission which is in being and ask them for an interim report.

None of us in this House is capable, no matter what technical knowledge we may have of business or of the application of the Income-Tax Acts or of the law surrounding the Income-Tax Acts, of judging whether the provisions introduced by this Bill are fair or reasonable. The proper thing to do, therefore, is to refer the whole matter to the commission that has been appointed for that purpose and let them come in with an interim report, if necessary. If it is a matter that cannot wait for their final report, let them come in with an interim report. If they say that the facts are along one line or along another, then those of us in the House will know what we are legislating about. Without that knowledge, I am afraid it is quite inevitable that Part IV of this Bill will, not withstanding the protracted discussion we had about it, be turned into legislation without many of us knowing the exact implications it will have for the 99 per cent. honourable people in the community who wish merely to carry through their lawful obligations.

Mr. Cosgrave: Information on Liam Cosgrave  Zoom on Liam Cosgrave  It is reasonable to ask that this amendment be inserted. The Income-Tax Commission was set up in response to a widespread demand for a revision of the income-tax code. It is generally accepted that the code as at present working is complex and in many respects archaic. To a very considerable extent it is adopted, as in the [338] case of earlier Acts, merely by continuing statutes which were in operation prior to the establishment of the State.

Whatever may be said in respect of the earlier years, because a number of other matters had to be attended to, there was probably quite a good reason for adopting and continuing British statutes. Now, after the passage of 36 years, we still continue in many cases to adopt some of the worst features of the British tax code and we do not incorporate in Finance Acts here some of the many improvements that have taken place there.

One of the extraordinary situations that has developed is that some of the Acts that have been amended or repealed in Britain continue here. It is possible in some cases that they are not enforced. Nevertheless, they are still on the Statute Book and have legislative effect if they are applied. Undoubtedly, because of the complex nature of the problem, a commission was the only method of dealing with it.

In many ways, income-tax is an unfair tax. Views have been expressed from time to time that it should be abolished. I do not think that is a view that, on examination, could be sustained as sound. The main difficulty is to provide an alternative tax which would yield equivalent revenue and at the same time not be even more unfair or press more harshly than the present income-tax code does.

It was for these reasons, among others, that the commission was set up. On a number of occasions, requests were made in this House to introduce desirable changes. In recent times, these requests have always been refused on the ground that the Income-Tax Commission was sitting and that, pending its report, any change could not or should not be made. One change advocated in many quarters is the introduction of the P.A.Y.E. system. Whether or not that is desirable in the circumstances of this country is a matter on which the commission will express a viewpoint. Industrial workers, persons whose incomes can readily be ascertained in advance, would probably welcome it. It is for that reason that it is peculiarly applicable to British conditions.

[339] In this country, we have a large number of self-employed people and a very large number of people who derive their livelihood from agriculture. In their case it is not obvious—certainly at first glance—how the P.A.Y.E. system could work. That is one of the matters which the commission is examining. Up to the present, any question of introducing that system here has been refused on the ground that it is being examined by the commission. Therefore, it is a surprise to a great many people and, indeed, a fact that is in strange contrast with the various claims that have been put forward recently that we are granting tax reliefs, that we are providing incentives of all kinds, to induce industrialists, particularly foreign industrialists or foreign technicians, to come in here and establish industry.

While that is being done we introduce Part IV of this Bill, which adds considerably to the already very drastic and comprehensive powers the revenue authorities had and gives them still greater powers, in anticipation of the report of this commission and in conflict with, and in sharp contrast to the policy that has been accepted generally as desirable by all sides of the House in the case of legislation promoted in recent years dealing with allowances for industrialists to export, and the recent measure, whether it achieves anything or not, which was designed to encourage external investment in industry here.

In those circumstances, and because of the general tendency to grant whatever facilities are possible to provide incentives, it is regrettable to enact these very drastic powers, which have not been shown to be necessary and which will add considerably to the expenses of the business community and will involve further problems, further additional administrative expenses which will cause unnecessary work. It is obvious from the various Acts at present in force that the revenue authorities have already adequate powers to deal with the problem; and it is both undesirable and unnecessary [340] that this measure should be enacted with Section 4 as at present framed.

In those circumstances this amendment requests the commission to consider Part IV of the Bill and to make an interim report to the Minister, who shall submit it to Dáil Éireann, and that three months after that report is submitted this section of the Bill should come into operation. That appears to anyone a reasonable request. There is no justification for these drastic powers, and there is certainly no justification for them in advance of the report of this Income-Tax Commission. Is it contended that the authorities feel that this commission will suggest that some amendments should be made, and that they are jumping the gun in order to take advantage of the present measure before the commission reports? The income-tax code is very complicated. It is quite likely that one of the recommendations of the commission will be that the law should be modified and a more simple code should be adopted. While it is an accepted legal maxim that ignorantia legis haud exousat, nevertheless it is only fair and reasonable that this House should not enact further legislation which will make the existing complex code even more complicated, and it is for that reason that I believe this amendment is reasonable.

Mr. Dillon: Information on James Matthew Dillon  Zoom on James Matthew Dillon  I have in my hand two large books dealing with the law on income-tax in Ireland. Deputy Cosgrave has said that there is an accepted legal principle which says that no man can plead his ignorance of the law in defence of his failure to comply with it. That is true of the citizen, but it ought to be 1,000 times more true of the Legislature. We have no right to persecute the citizens of this country and then excuse ourselves on the ground that we did not know what we were doing. I want to go on record now as saying that there is no Deputy, including the Minister for Finance, who knows that the impact of Part IV of this Bill will be on the commercial community of this country. But we do know that in the last 40 years the number of private companies has increased from 700 to approximately 7,000, and the whole trend of our law has been to encourage [341] people in family businesses to convert them into small private companies.

We have a situation here which is in no sense analogous to the situation obtaining in Great Britain. We have taken over from the British Finance Act practically en bloc these provisions in relation to income-tax and expenses of directors and employees of companies. Those provisions were drafted to meet a situation obtaining in Great Britain. I do not know how those provisions will impinge on the conditions obtaining in this country. We have a commission at present sitting which has all the powers that we have not got to get the necessary information. Deputies have no reason to rebuke themselves if they are obliged to state that they do not understand the full implications of Part IV of this Bill, because we have not at our disposal in this Chamber of Dáil Éireann the power to get the information we ought to have if we are intelligently to pass on these proposals.

The Commission on Income-Tax has that power, for it can send for papers and hear evidence and can invite anybody who feels—and there are a great many people who do feel—that this part of the Bill will create impossible conditions, to come before the commission and tell it what their anxieties are and why and how these proposals should be amended and adapted to Irish conditions. We have made this argument at great length on the Committee Stage, and the Minister has turned it down. We now make the proposal that Part IV of this Bill should be referred to the Income-Tax Commission for examination, discussion and report, and that for a period of three months this part of the Finance Bill should not come into operation, but that at the end of that period we should have another look at it in the light of the interim report of the Income-Tax Commission, supported by the minutes of evidence tendered to it.

It is a reckless, improvident procedure to legislate on this matter which none of us fully understands, and then spend the next ten years trying to remedy the very grave injuries we may have done to the mercantile [342] community of this country. The trouble is that one is speaking for the sections of the community who are not ordinarily very vocal, whose principal occupation in life is trying to earn their living and trying to conform to the law. As Deputy Sweetman has pointed out, 90 per cent. of them are concerned only to conform to the law. They will find it intolerably difficult to conform to Part IV of this Bill, but those who are concerned to avoid their common obligation to bear their fair share of the taxes are normally very well fitted to thread their way through the complex situation created by this part of the Bill with the assistance of highly paid technical advisers. The bulk of the 7,000 private companies represents small shopkeepers and small businesses up and down the country who are not normally in a position to grapple with this kind of problem and who will be put to very heavy expense and endless anxiety.

There could not conceivably be any frantic urgency about the enactment of Part IV. There ought to be, in the mind of every Deputy, a very high sense of urgency that we should not, by our legislation, create unnecessary inconveniences for the ordinary taxpayer. It has been argued that the existing income-tax code, rooted in the Income-Tax Act of 1918, with all the differentiations that have grown up about it, has already become an unbearable burden for the average taxpayer. That is as may be. That is a general question which the Income-Tax Commission is considering and about which they will perhaps make recommendations.

I do not think I exaggerate when I say the introduction of Part IV of this Bill, while the commission is sitting, is an offensive procedure and will create in the minds of the members of the commission the idea that nobody is paying the slightest attention to the herculean effort in which they are engaged. I do not think that is right. All the members of the commission are working on a voluntary basis, and rendering services which, professionally, would command very high fees, but for which they are getting no fees. The least the Legislature might do is to pay them the respect of waiting to hear [343] what they have to say on the code as a whole, but especially on Part IV of this Bill, a provision similar to which has so recently been enacted in Great Britain and which could, perfectly easily, be brought to their attention for review and consideration, in the light of the special conditions obtaining here.

I believe the Minister will do good service to the Legislature if he accepted, as a second best, the proposals before him in Deputy Sweetman's amendment. At this stage of the Bill I do not believe the revenue, or the community, would conceivably suffer any loss by the acceptance of this amendment. I want to make it perfectly clear that in pressing this view on the Minister I am not thinking of the case of the large public company which has all the machinery at its disposal to catch up with whatever the income-tax code turns out to be, after the passing of the Finance Bill. I am thinking of the 7,000 small private companies which are, in fact, family businesses, incorporated in order to make compliance with the law easier than it is, or would be, if they remained unincorporated, as most of them were up to 30 or 40 years ago.

Dr. Ryan: Information on James Ryan  Zoom on James Ryan  The object of this amendment is to postpone the operations of this part of the Bill until the Income-Tax Commission has reported upon it. What we are discussing, therefore, is whether the commission should be asked to consider Part IV of the Bill or not. The Income-Tax Commission has been set up and their first consideration would be whether or not income-tax should be replaced by some other form of taxation, either partially or wholly, and if wholly or partially, to suggest some form of revenue that might fill the void created. Apart from that they would be quite free, if they found income-tax was inevitable and had to be continued, to make a report on certain aspects of the income-tax code. But I cannot imagine their ever considering a matter of this kind. They might, for instance, as suggested by one Deputy, consider P.A.Y.E. as a system. They might conceivably suggest there should be a [344] higher limit, that is, that the lower income group should not be asked to pay income-tax. I do not think they would be likely to consider the issue of the expenses that should be allowed.

This part of the Bill deals with people who are either avoiding or evading income-tax—whether legally or illegally it does not matter. It is designed to meet that particular problem. The object of Part IV, as I mentioned both on the Second Stage and the Committee Stage, is to try as far as we possibly can to get equitable treatment for all taxpayers. We all know that the great majority of employers, and those working for them, make suitable, open and full returns of their expenses and that they are therefore meeting their obligations to the full under the income-tax code. We know, on the other hand, that there are certain employers not making full returns and not making returns of moneys they are giving to their employees for expenses and where, in some cases, the amount given is unjustifiable.

The object of Part IV is that the Income-Tax Commissioners, and their staffs, should be the judges of what is a fair amount of expenses, and not the employers themselves because there is no doubt that in this country the consciences of the employers vary very much. The great majority have strict consciences on these matters and make proper returns, and those working for them pay a full share of income-tax. A minority amongst the employers have not got that same conscience and do not make full returns and their employees are therefore getting away with expenses they should never be allowed. Part IV is designed to stop that inequality which is going on.

Deputy Dillon spoke of the 7,000 small private companies. What I have said would apply to them as to everyone else. I suppose if you take any section of the community, I do not care who they are—businessmen, employees, professional men, or anyone else—you will have a big proportion of honest people and a small proportion not so honest. The same applies to the 7,000 companies. One thing I would say about the small companies with an income of £7,000 or £8,000 is that the [345] obligation we are putting on them to keep these accounts is certainly not going to be very onerous. There would not be many people employed by that small private company getting money handed over to them in cash, to spend on behalf of the company. For that reason the extra book-keeping and so on, will not be very much. They cannot, therefore, object to it on that score. I am sure none of us will have any sympathy with them if they object on that score and try to get away in the future with things they got away with in the past. For that reason, I do not think we can be accused of being stricter with the smaller companies than the bigger companies.

Deputy Dillon and others said that this was a copy of the legislation in Britain. I do not know. I have not compared the clauses. It may be that we have largely followed the clauses in Britain, but I am quite sure we have not followed them completely. This scheme has been in operation in Britain for some time. They may have discovered its shortcomings by now, and we would have the benefit of that in drafting our legislation.

When dealing with companies, it must be remembered that we have given advantages to our companies here not given to companies in Britain. In Britain, for instance, they [346] have not given relief on excess profits; we have done so here. Neither have they given relief on investments in British companies; we have given Irish companies relief from income-tax on the yield from investments in Irish companies. That is an inducement to people to support Irish industry. We differ from the British in many other smaller matters. Even if we were more severe than the British in this case, we can claim to be more lenient in other directions. But we are not being accused of being more severe; we are accused of doing the same as the British.

Deputy Dillon says conditions here are not the same as those in Britain. I do not think the conditions vary very much where you have people trying to evade paying tax. The conditions are much the same. The Government concerned wants the tax, wants to see equity as between all taxpayers, and the methods adopted do not usually vary very much. I do not think much can be made of the point that conditions here are different from those in Britain. This abuse should not be allowed to continue. We should deal with the matter as quickly as possible. I do not think it is an appropriate matter to be considered by the Income-Tax Commission and, therefore, I oppose this amendment.

Amendment put.

Belton, Jack.
Blowick, Joseph.
Burke, James.
Byrne, Tom.
Carew, John.
Casey, Seán.
Coburn, George.
Coogan, Fintan.
Cosgrave, Liam.
Costello, John A.
Crotty, Patrick J.
Desmond, Daniel.
Dillon, James M.
Esmonde, Anthony C.
Fagan, Charles.
Hogan, Bridget.
Jones, Denis F.
Kenny, Henry.
Kyne, Thomas A.
Larkin, Denis.
Lindsay, Patrick.
Lynch, Thaddeus.
Manley, Timothy.
Mulcahy, Richard.
Murphy, William.
O'Donnell, Patrick.
O'Higgins, Michael J.
O'Higgins, Thomas F.
Spring, Dan.
Sweetman, Gerard.
Tierney, Patrick.

Aiken, Frank.
Bartley, Gerald.
Blaney, Neal T.
Boland, Gerald. [347]Brennan, Joseph.
Brennan, Paudge.
Breslin, Cormac.
Briscoe, Robert.
Browne, Seán.
Burke, Patrick.
Calleary, Phelim A.
Carty, Michael.
Collins, James J.
Cotter, Edward.
Crowley, Honor M.
Cummins, Patrick J.
Cunningham, Liam.
Davern, Mick.
de Valera, Vivion.
Doherty, Seán.
Donegan, Batt.
Dooley, Patrick.
Egan, Kieran P.
Egan, Nicholas.
Fanning, John.
Flynn, Stephen.
Geoghegan, John.
Gilbride, Eugene.
Gogan, Richard P.
Griffin, James.
Boland, Kevin.
Booth, Lionel.
Brady, Philip A.
Brady, Seán. [348]Haughey, Charles.
Healy, Augustine A.
Hillery, Patrick J.
Hilliard, Michael.
Humphreys, Francis.
Kenneally, William.
Killilea, Mark.
Lemass, Seán.
Loughman, Frank.
Lynch, Celia.
MacCarthy, Seán.
McEllistrim, Thomas.
MacEntee, Seán.
Maher, Peadar.
Medlar, Martin.
Millar, Anthony G.
Moloney, Daniel J.
Ó Briain, Donnchadh.
O'Malley, Donogh.
O'Toole, James.
Ryan, James.
Ryan, Mary B.
Sheldon, William A.W.
Smith, Patrick.
Traynor, Oscar.

Amendment negatived.

Debate adjourned.


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