Tuesday, 23 May 1967
Dáil Eireann Debate
Part 1 of the Bill deals with income tax. Under section 1 the rates of surtax  are increased by 20 per cent but these increases are offset in many cases by the new arrangement provided in section 10 whereby the first £1,250 of earned income will not be taken into account in calculating surtax.
This arrangement brings the amount of tax payable by persons in the professional and managerial classes closer to that payable in Britain and, indeed, slightly below it in the lower ranges. It goes some distance to restore the comparative position achieved in the 1959 Budget. It is contrary to the interests of our economy that persons with valuable experience in industry should be deterred from coming here, or should be induced to leave employment in Ireland, by a level of taxation substantially higher than in Britain. We are all anxious that persons possessing skills and abilities in scarce supply should play an active role in furthering Irish economic expansion. We badly need their services and while in most ranges tax will still be heavier than it is in Britain, I am hopeful that the relief announced in the Budget will be of some assistance in this problem.
Section 2 of the Bill, which was not referred to in the Budget speech, provides for the granting of the housekeeper allowance to a married woman who is deserted by her husband and who secures the services of a housekeeper to look after a child in respect of whom the child allowance is granted. It will be granted if the claimant is engaged fulltime in employment or in a trade or profession. The allowance is at present granted to a married man whose wife has deserted him and I consider it reasonable, therefore, to extend it to a married woman in similar circumstances.
Sections 3 and 4 improve the existing dependent relative and child allowances. Section 5 raises from 40 per cent to 50 per cent the initial allowance for capital expenditure incurred on the purchase of new machinery and plant in the year ending on 31st March, 1968. The increased allowance will apply to similar expenditure incurred in the three subsequent years up to 31st March, 1971.
Two other proposals not referred to  in my financial statement are contained in sections 6 and 7. Section 6 extends the industrial building allowance to capital expenditure on the construction of a building or structure incurred by a person who leases the building or structure for use by a trader. Section 7 raises from £300 to £1,000 the amount which a registered friendly society may assure to any person by way of lump sum without losing its existing exemption from income tax.
Section 8 raises from £50 to £70 the income tax and surtax exemption for interest arising on deposits with the Post Office Savings Bank, the Trustee Savings Banks or specified commercial banks. This increase is in line with the recent rise in the interest rate payable by the Post Office Savings Bank and the Trustee Savings Banks.
Section 9 and section 22, which is contained in Part IV of the Bill, provide for complete exemption from income tax and corporation profits tax, respectively, for a period of 20 years in respect of profits derived from the mining of certain non-bedded minerals. The 20-year period, beginning on 6th April, 1956, within which a company must commence to trade in order to qualify for relief, is being extended to 30 years.
Section 11 and section 23, which is contained in Part IV of the Bill, provide for a system of free depreciation for new machinery and plant used in the undeveloped areas. For income tax and corporation profits tax purposes, these sections permit the writing-off of the cost of such machinery and plant to be accelerated to whatever degree the taxpayer wishes.
Section 12 provides for a scheme of income tax relief, within certain financial limits, for medical expenses in respect of payments for the professional services of medical practitioners, for maintenance and treatment in hospital and for drugs, medicines and appliances prescribed by a practitioner.
Part II of the Bill relates to customs and excise. Sections 13, 14 and 15 provide for the increases already announced in the customs and excise duties on beer and tobacco and for  the imposition of a special excise duty on all duty-paid stocks of tobacco held by tobacco manufacturers at 5 p.m. on Budget day.
Because of recent developments in freight transport, particularly the growing use of sealed containers, merchants are considering the establishment of freight depots at points some distance from seaports and airports. Imports would be brought under customs supervision to these depots for clearance and export cargoes would be packed in containers there. This would speed up freight movements by reducing the congestion at docks and airports. Section 16 will empower the Revenue Commissioners to approve transit depots for goods not cleared from customs charge and to impose conditions and restrictions both in relation to the approval of transit depots and the removal of goods to them.
Under section 17 provision is made for the modification of customs law relating to documents to be submitted by masters of ships at arrival and departure. The new procedures will lead to a reduction in formalities and documentation for shipping companies as well as the customs.
In accordance with the Anglo-Irish Free Trade Area Agreement, section 18 provides for a further reduction of ten per cent in the protective element in road tax on cars. The first such reduction was made with effect from 1st July, 1966.
Two Statutory Orders are confirmed under section 19—the Imposition of Duties (No. 158) (Matches) Order, 1966 and the Imposition of Duties (No. 159) (Customs Duties and Form of Customs Tariff) Order, 1966.
Part III contains only one section which provides for exemption from stamp duty on instruments giving effect to the purchase of land made with the aid of advances under section 5 of the Land Act, 1965. This provision has the effect of freeing migrants from congested areas from liability to stamp duty on land purchased under the loans provided under section 5 of the Land Act, 1965.
Part IV contains three sections dealing  with corporation profits tax, two of which I have already mentioned in connection with Part I of the Bill. The third section, section 21, enables relief to be allowed where an excessive assessment to corporation profits tax has been made by reason of an error or mistake in the company's return.
Part V of the Bill contains miscellaneous provisions. Section 24 deals with the Capital Services Redemption Account. This section adjusts the annuity fixed provisionally last year for the redemption of debt incurred on Voted Capital Services in 1966-67. Also, it fixes provisionally a new annuity, to redeem estimated expenditure in the Voted Capital Services in the current financial year.
Sections 25 to 27 are self-explanatory. Section 25 repeals Section 100 of the Finance Act, 1963, and section 490 of the Income Tax Act, 1967. I propose, however, to examine the question of making somewhat similar provisions at a later stage in the interests of the efficient collection of taxes and duties.
Mr. T.F. O'Higgins: This is a Bill which is better discussed in Committee than on this Stage because most of the general provisions in the Bill are acceptable to us but I should like at this stage to indicate one or two matters which the Minister, perhaps, might deal with when he concludes on this Stage.
I note the provisions in section 12 which relate to the allowance for income tax purposes of certain medical expenses. This, of course, is a matter which has been the subject of debate here for a number of years and in fact amendments to previous Finance Bills were moved by Fine Gael Deputies, particularly by Deputy Patrick Byrne, to achieve this or a similar change in the law. Therefore what is proposed in section 12 is something which we accept and are pleased to see. At the same time, I note that the provisions in the section appear to vary in a rather definite way from the recommendation contained in the Report of the Commission on Income Taxation. That Report recommended that a taxpayer who incurs expense on himself or on  any dependant arising out of disability or illness which is serious or likely to be permanent should be allowed vouched expenses in excess of £50 per person per annum, subject to a maximum of £300 per person per annum.
In his Budget speech, I think the Minister adopted those words when he said that the House would recall that the Commission recommended that a taxpayer who incurs expense on himself or on any dependant arising out of disability or illness which is serious or likely to be permanent in excess of £50 per person up to a maximum of £300.... So that the Commission's Report and the Minister's Budget Statement indicated that this allowance would be confined to expenses arising out of a disability or illness which is serious and likely to be permanent. The section now in the Bill goes considerably further and, in fact, provides for relief in respect of expenses involved in any illness.
I certainly feel that is an improvement but at the same time, I should like to know what views the Minister has. I am sure he has considered whether this is likely to have an effect on the Voluntary Health Insurance Board's scheme and their activities. Is it envisaged that this may affect in any way the attraction of the Voluntary Health Insurance Board's schemes or is it felt that the confining of this allowance to expenses in excess of £50 will be a sufficient guard in that respect? I should like to have the Minister's views on it because, quite frankly, I would view with caution any proposal, however well intentioned, if it caused difficulties in the operation of the Voluntary Health Insurance Board's schemes. That is one matter with which perhaps the Minister might deal.
There is another matter which is not in the Bill but which might be raised on this Stage. It is not in the Bill because the Minister indicated in his Budget Statement it would not be before the House at this stage — the proposed repeal of Part VII of the Finance Act, 1965. The Minister has indicated that that Part will be repealed but he said that the details of what was to take its  place were so complicated that it would not be convenient to bring the legislative change before the House at this stage.
That is understandable, but I would like, and I think the House and the country would like, to get some indication from the Minister, perhaps in a general way, of the kind of new scheme he has in mind to replace that Part of the Finance Act, 1965. We are all aware that there has been in this country over recent years a considerable amount of speculation in land. This arises because of neglect, over the past ten years, in particular, by those having the responsibility to provide services and to provide serviced land for house development. Accordingly, speculation has taken place and very large profits have been made from time to time.
It was presumably with the objective in mind of providing a system of taxation on those benefits that this particular provision was introduced originally in the Finance Act, 1965. It was ill done. It was open to many criticisms. Indeed, in the course of the Committee Stage debate on that Bill, a number of amendments had to be accepted by the then Minister for Finance. At the same time, when we are told now that this entire Part of the Act is disappearing and we are not told what is to take its place, there is very justifiable ground for inquiries as to what is the nature of the new proposal. While the Minister has said that whatever is to operate in the autumn will be retrospective, in so far as the tax impact is concerned, he has not, at this stage, given any indication of the general scheme.
May I say, generally, that the various income tax reliefs contained in the Bill are welcome in so far as they go. I am glad to see, in particular, the new provision for the granting of the housekeeper allowance to a married woman in the circumstances set out in the section, who is forced to engage in employment. I do not know how necessary it is to the provision of that relief that re-employment should be fulltime. Many a deserted wife in circumstances of this kind can get only part-time employment and indeed may require the assistance which is envisaged in the  section in order to take up that part-time employment. However, I suppose that is a matter better dealt with on Committee Stage and we will discuss it further then.
I welcome also the other increases in the allowances. May I just raise this general matter now? Our income tax code, which is subject to change at this time every year, in this Bill, still remains a system of taxation which is generally regarded as being unjust and pinching hard in many places. I do not suppose we will ever reach the situation in which the general body of taxpayers will regard income tax in any other light. I feel, however, that the increase in allowances proposed in this Bill, and proposed from time to time, in certain Finance Bills, are generally wrung from a Minister for Finance rather than gladly given.
It must be appreciated that at the bottom of the income tax structure is a very parsimonious provision as to what amount of a person's income should be free of tax. Up to £240 is not taxable. In regard to the general provision for a single person, in so far as the income tax code is concerned, it is felt that a person can exist on £5 to £6 a week. It seems to me that at that level there is scope for a more generous and beneficial approach by the Minister for Finance, which I regret is lacking in this Bill. In so far as the Bill contains the allowances indicated, it certainly is welcomed by us. As I indicated, it is on Committee Stage that we will have certain matters to raise with the Minister.
Mr. James Tully: The Budget, having being passed, and the Finance Bill being a necessary part of the Budget, I suppose, as Deputy O'Higgins said, it is not necessary to go into too much detail on the Second Stage. However, I should like to make a few short comments, particularly with regard to sections 1 to 8. These sections give certain reliefs to people paying income tax, and particularly to those paying surtax. It is rather a pity that the Minister did not take the opportunity of trying to alleviate, at least, the  hardship caused to persons who are expected to exist on what is regarded as a fair income. I can never understand why the Department of Finance or the Minister for Finance have never gone to the trouble of checking on the obvious injustice which arises from income tax being charged on everything a single person earns over £6 a week and a married person earns over ten guineas a week in 1967.
Ten years ago, income tax was chargeable on the same amount. At that time I was representing rural workers and the average wage of a rural worker was £5 to £6 a week. In actual fact, at that time he could earn a full week's wages before he was taxed. If a married man he could earn much more than he can now earn in real money before being taxed. While the Minister has not done anything about this matter this year, he must take into account that this is something which will have to be dealt with.
It was also a great pity the Minister did not take into account the obvious hardship on people who, instead of going to the employment exchanges and getting employment benefit for at least six months, acquire very large type vehicles and drive 30 to 40 miles to building sites, work hard all day and drive home in the evening, only to find that they get no allowance for travelling. Whatever money they are spending—and it is a substantial amount—the Minister can be assured that his Department probably assessed their earnings without any tax allowance in this respect. This is one of the shortsighted approaches by the Department of Finance which the Minister has put in very bad odour in the income tax portion of the present Budget.
Deputy T.F. O'Higgins was quite right when he referred on section 2 to somebody who will qualify for the new housekeeper allowance, the married woman who is not living with her husband. She must be in fulltime employment. This shows an absolute lack of knowledge of the people who have to work for a living. I know many of those people, and unfortunately there are far too many in the country, who have to go out to work, not for a full  day because some of them are not able to continue to work for a full day, but for a portion of the day. Unless they put in a full week's work, they will not qualify. I am sure the Minister's approach to it would be different from what is in this Bill had this aspect been brought to his notice.
The question of raising the allowance from £120 to £135 for tax purposes in respect of a child not over 11 years of age is something that had to come. The previous decision to leave those out was a faulty one.
Section 4 raises the income limits which apply in relation to the dependent relative allowance. Here again there has been a lack of thinking, or of knowledge, about what actually happens to people with a low pension. This, in fact, prevents certain people who are drawing a contributory old age pension, or contributory widow's pension, from getting the benefit of the Act—relatives who are keeping those people, and it is something the Minister——
Mr. James Tully: It is graded only in the way that those who are in receipt of £140, or less, do not get the full allowance and when the income is up to £200, they are allowed a smaller amount. The amount of £200 represents under £4 a week. Many people retiring at the present time have combined pensions up to £6 a week. Those who look after any old person of 70 years of age, who requires to be looked after day and night would require more than that. It is overlooked that this is not a question of giving them the full allowance of £60. What is £60? At a rate of 5/3d, or 7/-, if you like, it is less than £20 in hard cash. The approach is all wrong. The Minister does not look at this in the right way. What he is saying in effect is that people, instead of sending their parents into the county home, can keep them at home and ensure that they are living in some comfort. If they have an income of over £200, slightly under £4 a week, they cannot get the £20 allowance which they should get. The approach is entirely wrong and it is  something that warrants rethinking. I should like to ask the Minister to do something about it or see whether there is something he can do to help in this matter.
The increase of the initial allowance of 40 per cent to 50 per cent applicable to capital expenditure on new machinery and plant is something we all welcome, if it is an encouragement. The same applies to the building allowance if it is given to the right people, not to chancers who come around and get out as soon as the building is erected.
Section 8 raises from £50 to £70 the income tax exemption in respect of interest on bank deposits. Savings certificates are included in this and it is wrong, because the amount is small. It is no incentive or encouragement. The Minister might have been far more generous when thinking about this the other day in regard to savings certificates. An increase from 2½ per cent to three per cent is no incentive. It is no incentive to say that it affords relief from income tax.
The concession given to mining of minerals is something to be welcomed. It is not generally known that the development of mining has not been encouraged by the State. The State burnt their fingers badly when someone attempted it and because of that, they got a grudge against everybody who attempted to start or develop mining. The result was that those who attempted to spend their own money, or their company's money, on it were treated with suspicion. They ask: Where are these fellows coming from; are they out to make a big kill? All of us are anxious to see the State profiting from our natural resources. Development is helping the State to such an extent now that if it is properly handled, I believe the incentive will be welcome.
I do not want to delay the House further except to refer to the duty on cigarettes. Has the Minister had second thoughts on this question? There is a difference between the amount of duty paid, as distinct from collected, on the tipped and the ordinary blend cigarettes. It appears to me that somebody will make a substantial profit,  particularly as the tipped cigarette appears to be more popular than the other brands. The Minister said that cigarettes will be improved. All smokers will agree that cigarettes have been improved. Are they going to produce coloured cigarettes or will the packets be improved? There is an amount of money collected and where is it going? The companies netted a valuable profit and the State was not able to get at it because the Finance Bill was so framed that the Government allowed them to get it. Is it now tied up to ensure that if the public have to pay more for their smoke, the extra money will go to the State, not to private companies who want to make a profit on the State?
Mr. Booth: I should like to welcome the Finance Bill in its new form. The Minister was very wise in his decision that the implementation of the actual Budget policy would be summarised in one short Finance Bill and that any question of general amendment of the tax law, or bringing us more up to date could be better handled by a subsequent miscellaneous Bill. That has clarified the whole situation enormously and will enable us to get through this Bill quickly and properly and spend more time, without being under any pressure, in discussing the various amendments later in the year.
Part I of this Bill deals with income tax. We have got to remember that in spite of a certain amount of discouragement in recent weeks, there is still a very real prospect of membership of the European Economic Community within the comparatively near future. I cannot see us going in readily to the Community with our tax structure as it stands at the moment. Not only is our income tax structure complicated—as Deputy T.F. O'Higgins has said—but it is largely, to my mind, incomprehensible. The first stage in rectifying that position has already been taken with the passing of the Income Tax Act. At least now we have in one Act the complete income  tax code. It does not make it any easier to understand but at least makes it easier to commend. I would hope that during the next few months the Minister and his advisers will give very serious consideration to a radical recasting of our whole tax structure, bearing in mind general European Economic Community policy in this connection. What has been done in this Bill is merely to ease the load here and there and, while it is very welcome that these additional concessions should be given, we are still merely trifling with the problem.
In sections 1 and 10 we have provisions relating to surtax. The Minister in his speeches previously and today, made it perfectly clear that he appreciates the desirability of setting up a proper tax structure, using the word “proper” in the sense that it bears comparisons with that in Great Britain. We do not wish to take the risk of highly qualified technicians, managers or executives being drawn across the water simply because they can get not only higher gross incomes but higher net incomes as well. We should not apologise for this, because the employment of top-rank men in this country is a first-rate investment for the whole community. Unless we have the very best in management and the highest grade of technicians, we will not be able to make the progress which is so essential if our economy is to get really moving again.
It is more than discouraging to find that if you are really tops in your job and are being rewarded appropriately in the terms of the market at present, you will leave yourself open to 7/- in the £ income tax and an additional 9/- surtax on a considerable portion of your income. At that stage, it just does not become worthwhile. The number of people who will be affected by this is very small. Therefore, the amount of income which the State will receive from such a high rate of taxation is, to my mind, negligible. It is far better to go on the ordinary business practice— the way to increase your turnover is to reduce your prices. If we reduce our taxes, we will get more money simply because we will encourage people either to stay here or even to come  here and, thereby, draw more people into the tax net. But it will mean that the burden is more evenly and fairly spread among various members of the community.
I know the Minister has already committed himself to some sort of review but I hope it will be a really comprehensive one. We have to try to swing our taxation system away from income taxation altogether. I am becoming increasingly convinced that this is a disincentive and, even in cases where this criticism is not justified, wage-earners are very often discouraged from working harder, or even working overtime, because they say: “We are working for the Government more than for ourselves.” In many cases that is an illusion, but, in some cases, it is not, and certainly it is most discouraging. I am convinced that a far better method of taxation is that adopted in EEC countries, which are ahead of us in this way of taxing expenditure rather than income.
If you tax expenditure, the taxpayer is the man who spends most; if you tax income, it is the man who earns most who bears most of the load and he is thereby made unable to save as much as he should. If you tax expenditure, you encourage saving; you encourage increased earnings, and that is the way to get an expanding economy. But, in the situation as we have it at the moment, the Minister has probably gone as far as he could; we cannot expect him to come in like a new broom and sweep clean altogether. It probably would be unhealthy if he tried to do too much too quickly but he appears to me to be moving in the right direction. I only hope that between now and the next Budget, he and his advisers can think this matter out very fully and come up next year with much more comprehensive and drastic reforms.
As our income tax structure stands at the moment, one of the classes most seriously hit is the class of people who are living on fixed incomes, either by way of pensions awarded by their employers, or other fixed pensions. It applies also to people who have been left a small amount of investment income. At the moment these people are  bearing too high a proportion of tax and, unless the Minister makes more drastic reforms within the next couple of years. I would hope that next year he might take a very friendly look at these people living on small fixed incomes to see whether some means could be devised of giving increased tax allowances in their case. These are people whose incomes are continually falling behind the rising cost of living.
It is a pity that the concessions which the Minister has made in sections 1 and 10 raise a higher rate of surtax but I am prepared to forgive the Minister that because I am not in the higher surtax bracket myself. Anyway, I think the general trend is in the right direction.
Mr. Booth: In section 12 we have a provision which is very worthwhile— the allowance of tax against medical expenses. I do not quite follow Deputy T. F. O'Higgins's fears about how this might affect voluntary health insurance. I am every bit as enthusiastic about voluntary health insurance as is the Deputy. It is doing a marvellous job but, at the moment at any rate, voluntary health insurance covers only hospital expenses. It is doing a very good job in that context, but the relief granted in section 12 is much more extensive, relating as it does to professional services, maintenance, treatment in hospital, drugs, medicines and appliances. I cannot see any way in which this provision could prejudice voluntary health insurance in any way.
Part III, dealing with stamp duties, is a worthwhile provision but I still feel the Minister has not gone far enough as far as stamp duties on transfers of property are concerned. Here again we are far behind the taxation system in Britain where purchasers of  houses do not have to pay stamp duty at all until they get into the category of people buying pretty expensive houses. Stamp duty and legal fees account for a considerable amount of the cost of a new house for a newly-married couple. I would be the last to say that legal fees are in any way excessive. They are kept constantly under review and I regard the rate of fee on ordinary land transfers as practically all right as it stands.
However, the stamp duty is, to my mind, far too heavy. If the Minister could find some other way in which he could raise the money I, for one, would be delighted. I do not think the amount can be enormous but the amount in respect of each individual transaction can be a killer altogether when a deposit must be paid, furniture bought and so on.
I would hope the Minister would keep in his mind for next year the possibility of a very substantial relief on stamp duty on the purchase of house property, particularly new houses for young married couples. It may not be possible to confine such a relief to any particular class of people but the matter is one which could very well be looked into during the months ahead.
Mr. Sweetman: The Minister has indicated already that he proposes to bring in a different Finance Bill in the autumn. I feel, therefore, that it is really in relation to the provisions of that promised Finance Bill that there is likely to be more discussion in general and in particular than in relation to this Bill.
I pressed him recently, and Deputy O'Higgins mentioned it today, that it is highly desirable that at the earliest possible opportunity there should be an indication of the proposals the Government have in that regard. There can be very great difference of opinion indeed in the interpretation of the phraseology of the Minister for Finance in the Budget in relation to  the promised second Finance Bill and it is important for the business community that the taxable limitations of the measure that is to be introduced by the Minister be known as soon as possible. All of us appreciate that the Bill may be a bit complex. However, there has been a long period of gestation for it and I do not think it unreasonable to say that the gestation should now be ended and the Bill should see the light of day as soon as possible.
I do not know whether the Minister in that Bill will deal with anything other than the matters dealt with in Part VII of the Finance Act, 1965. Perhaps he might indicate whether he proposes to make it a general Miscellaneous Provisions Bill or merely one designed to deal with a single problem. If the Minister is to make it a more general measure, is he going to include anything in it which would harmonise, or start to harmonise, our system of taxation with that in existence in Europe? Quite apart from whether we do or do not join in the Community, it is quite desirable that there should be a full examination of the methods of taxation available in other countries. I would strongly urge the Minister to make available to the House in the form of a White Paper an analysis of the main forms of taxation with which we are shortly to be associated, if and when we do join the Community. It is one of the things that should be done in some detail before the decision is taken and debate takes place in this House.
In relation to the position in taxation vis-á-vis other countries, I want to mention another matter which came to my knowledge last week and about which I wrote to the Chairman of the Revenue Commissioners. Frankly, I have not yet had time to have a reply. It is a matter of general application I understand that some time last November or thereabouts, the Minister or the Revenue Commissioners—I am not sure which—entered into a new double taxation agreement with Canada, which double taxation agreement will, in due course, be laid before the House and will then be enacted, I suppose, by Schedule, or perhaps there is a general  enactment that enables the Minister to bring it into force by ministerial or Government order. It has not been possible to get any information about the provisions of that double taxation agreement here in Ireland. However, last week I came across a memorandum—it was brought in by a Canadian—on the contents of the agreement that had been published in Canada.
I want to urge very strongly on the Minister that it makes us look extremely foolish here if the position is that he has signed a Convention with another country which can publish the details of it while we do not publish the details here. It may be that in the particular case there was some mistake —mistakes can happen even in the best ordered families—but as a general principle, I would urge the Minister most strongly to make certain that when Conventions with other countries are signed and completed, whatever may be the date of implementation, there will be a clear understanding at the time as to the publication of the details thereof, a summary of it or the entire contents of such a taxation agreement, and that we will not be put in the position of being pennyboys here, not knowing what has occurred and making ourselves look entirely foolish in the eyes of the people in the other country concerned. I do not think that is asking too much and it is something on which the Minister and I for once will be in agreement.
I must confess that I find some of the provisions of this Finance Bill somewhat difficult to follow. Indeed, the provisions, in certain circumstances, do not at all carry out what the newspapers took from the Budget speech of the Minister. I am quite clear that I interpreted the Minister's Budget speech in the way in which it has been put into legislative form in this Bill in these respects. The fact is that it was interpreted otherwise and I am afraid a great many people were under the impression that they were going to get substantially greater reliefs than they did get. Many people thought that the effect of the increase in the income margin for the housekeeper allowance would be an increase  in the allowance itself, but the allowance is remaining at £60. In this Finance Bill there is no improvement whatever in the actual allowance, although there is an increase in the margin of income allowed before the allowance is knocked off. Similarly there was some misunderstanding in relation to the child allowance. This is bringing up, if you like, to the over 11 margin, the allowance for a child under 11.
I must confess I was bitterly disappointed that the Minister did not include in his budgetary proposals anything to increase the age and small income allowance for old people. From a question I asked in the House on 6th April, it is clear that the cost of increasing the age allowance would not be of any real consequence. A figure of £20,000 for an increase of ten per cent in terms of the amounts the Minister is budgeting for is a mere bagatelle—it is not even big enough to be called a bagatelle. Yet, for old people who are endeavouring at the end of their years to put up with the ever-spiralling cost of living and to maintain some standard for themselves, it would have been really worthwhile. A ten per cent increase in the age allowance would cost only £20,000, and presumably therefore an increase of one-fifth would be £4,000 a month only. An increase in the small income relief would be even smaller. Were it a ten per cent increase it would cost only £10,000. I think the Minister was lacking not merely in imagination but also in charity when he did not ease the lot of those old people in that way when it could have been done for so very little.
Speaking of charity, I was disappointed also that the Minister did not include in the Finance Bill a provision to permit formal covenants for the benefit of charities to be deductions for income tax purposes. I think I am right in saying this was originally permitted and many charities benefited from it. Then the Finance Act of 1940 cut down the relief completely, and subsequently the Finance Act of 1957 modified the restriction and covenants for research charities were allowed. Then in 1959 that was extended to  convenants where the proceeds are used for teaching the natural sciences.
I can see a very strong argument against allowing such covenants for surtax as well as income tax. I think that in 1952 the British brought in a provision by virtue of which covenants for charities were not allowed as deductions for surtax purposes but were allowed as deductions for income tax purposes. The effect of that has been some amelioration of the position of certain charities there. The Minister would be wise not merely to follow the pattern set for him in 1952 in England, but also the pattern in the Seventh Report of the Commission on Income Taxation in Chapter 8 where, having examined the matter in great detail, they made it clear in the end that they came down in favour of a recommendation in the following terms:
The effect on formal covenants of that sort would have been a substantial assistance to these charities and in this respect one is not thinking in terms of the taxpayer at all because the taxpayer is giving away money. One is thinking of the charities concerned. It is most unfortunate that in 1967 the recommendation in the Seventh Report of the Commission on Income Taxation was not considered and brought into effect, speaking from recollection, five or six years after the report was brought in. It is to be regretted that the Minister has not seen fit to include such a provision.
I might add in support of the Commission's report that not only is this the position in Great Britain but it is also the position to some degree in the United States of America and in Canada. There it is not done by way of deed of covenant but by way of a contribution up to a stated percentage of income. This would have affected not merely the universities but also the secondary schools. There would be a strong argument for the schools concerned,  and, indeed, for the universities also, why rely on the sentimentality of those who passed from them in their earlier days. Even between now and Committee Stage, I would strongly urge the Minister to include such a provision in this Bill, realising of course, as I do realise, that the inclusion of such a provision would have a negligible effect in the current financial year.
I found very considerable difficulty in an interpretation of section 8 as drafted, and of section 344 of the Income Tax Act. It is obviously not a matter to be raised on Second Stage except from the point of view of giving notice to the Minister that I will raise it on Committee Stage.
The way the section is drafted in the Act—I freely admit to the Minister that perhaps I should have spotted this when we were consolidating the section in question—makes it look as if, when a person has more than £50 interest, the first £50 will not be exempt. In practice, the first £50 is exempt and I assume the first £70 will be exempt, but it does not look as if the section was drafted in that way. It seems to me it should be drafted with greater certainty.
In my statement on the Budget, I referred to the mining incentives to which the Minister now proposes to give legislative effect in section 9. I made is clear then that I appreciated the reason for them and intimated that I thought the Minister was right in viewing the broader general issue rather than the details that had been put forward.
I am afraid, however, in relation to section 12—in which medical expenses can be deducted—that I find one very bad vacuum. As I understand the section, a taxpayer will be allowed relief for medical expenses even if the person on whom the cost has been incurred is one in respect of whom the taxpayer is given a tax allowance by reason of his dependency. We all come across sad cases indeed where children of more than 16 years of age, perhaps mentally retarded and not able to be in school, are a source of great expense to their parents. Under the Income Tax Act, once a child becomes 16  years of age and unless he is in an educational establishment, the parents cease to obtain any allowance in respect of that child As far as I can read section 12, there will be no allowance either for medical expenses incurred on that child. If I have read the section correctly, it is a gap which should not have been left in the legislation.
Mr. Sweetman: As I understand section 12, a person is limited to medical expenses on a dependant and that dependant is a person for whom the taxpayer is already getting a tax allowance of some sort or another. It can be a wife, in which case the taxpayer gets the married allowance; it can be the people set out in section 139, 140, 141 and 142 of the Income Tax Act. Section 139 provides an allowance for a housekeeper; section 140 provides an allowance for taking charge of an unmarried brother or sister; section 141 provides child allowances and section 142 provides the dependent relative allowance. If I read section 12 correctly, the person on whom the medical expenses have been incurred has to come within one of those categories before the allowance is given. If the taxpayer has a child who is more than 16 years of age and who is perhaps so mentally retarded that he cannot go to a school, then the taxpayer in question suffers twice: firstly he does not get the child allowance because that allowance is only to be given where the boy or girl who is more than 16 years of age is in a school; and secondly, because no matter what expenses he has incurred on the child, he does not get relief under section 12 of this Bill.
I think that is a great mistake. It should not be at all difficult to provide a form of definition which would mean that a dependant was somebody who is dependent on the taxpayer concerned not only in the common or garden sense but in the legal sense under the Income Tax Act. It seems grossly unfair that the section should not be extended to cover such people.
It must also be appreciated that in relation to a married man with a family  of three or four children the relief is given to him only in respect of expenditure in excess of £50 on any one child. If he has to spend £70 between all the children, he gets no relief because each single child is regarded separately in relation to medical expenses incurred under the section concerned. At the same time, I accept that the section is drawn a little more widely than was suggested before the Commission. The fact that the section is there at all is a tribute to the persistence with which Deputy Patrick Byrne has, during the years, endeavoured to push this door open. It shows that persistence, even in Dáil Éireann, brings its rewards.
Indeed as I mention that, I might also mention another section of which Deputy Byrne can fairly claim parentage. It is section 21 which permits errors found afterwards to be considered for relief from corporation profits tax. That was brought to light as a result of an amendment put down by Deputy Byrne, and when he was not available last year, it was moved by me without my being able at all to advocate the case as strongly and as clearly as he would have been able to do had he been here.
The other provisions in the Finance Bill can be discussed more clearly on Committee and Report Stages. I should like to say now, however, that it is a good thing we have gone over to the Swedish system of free depreciation under which one is entitled in certain respects to depreciate as seems desirable for commercial purposes and to ensure that such commercial depreciation also will rank for tax allowances. I hope the opening of that door in a small way, following the Swedish precedent, will be followed by the adoption of other similar precedents in our tax inducements for the purpose of endeavouring to get modernisation and adaptation.
I was disappointed, though I suppose I had no business to be, in the light of a reply given by the Minister to a question on 5th April last that he would not include a section to provide that bona fide purchasers for value of free-hold registered land would not be concerned with death duties arising in  respect of previous ownership. The Minister was all wrong in the answer he gave when he referred to the avoidance of unnecessary expense, being the expense of obtaining a certificate in discharge of death duties.
I was not referring to that at all. I was referring largely to Civil Service administrative expenses, apart from the expenses of solicitors. As far as the solicitors are concerned, they obtained the certificate as part of their ordinary scale fees. It does not arise there, but it does certainly mean substantial administrative expenses. I do not think it is worthwhile as a revenue saver, having regard to the fact that the Land Registry transactions are there for examination, and are examined, and having regard to the fact that the tendency of the Government in the past years has been to endeavour to move all titles bit by bit into the Land Registry. Certainly, the existence of this provision will not be an encouragement to people freely to register title without the necessity of compulsion.
The Minister and I will probably have an opportunity on the Money Resolution to come back on another point I raised with him in relation to the Budget. I do not propose, therefore, to say very much about it except that it seems odd to see from Iris Oifigiúil of the 16th of this month, notwith-standing the note that revenue this year is £7 million up on last year, which one would hope, that stranger still expenditure is £1 million down on last year for the very reason I said originally that the Minister “cooked the books” on the 31st March last.
Mr. Haughey: I do not wish to interrupt but on a point of fact, in case I do not get an opportunity of replying this evening, the case mentioned by the Deputy of the mentally retarded will, in fact, be covered because the definition of a dependent relative means somebody who is prevented by old age or infirmity from looking after himself or earning his own living.
Mr. S. Dunne: We are all very glad to hear that from the Minister. It would worry every Deputy if that were not so. I do not propose to be overlong in my contribution or to repeat what I said on the Financial Resolutions in respect of the various matters affected by the Budget, such as industry and so on. There will be other opportunities of dealing further with this very interesting source of conversation, discussion and indeed civil unrest. I want to refer specifically to a matter which I would be glad if the Minister would deal with in his reply. I hope he will not be long delayed and that he will get in this evening. I refer to the effect of our taxation code upon the provisions of the recently enacted Landlord and Tenant Act. In other words, my purpose is to speak about something which is not provided for in the Finance Bill and to ask the Minister to take any necessary steps to make provision to meet the problem which is there.
It seems to me that our existing code of taxation can have the effect of nullifying the objects of the Act to which I have referred. The relevant part of our taxation code is called Schedule A tax. As every member will be aware, many thousands of house purchasers who borrowed money either from the local authorities or the building societies in the period since the war have been levied with a ground rent which has long been accepted as having no real basis in so far as the moral and social rights of the community are concerned. I take it that it was in good faith the Minister for Justice introduced the Landlord and Tenant Bill discussed in this House following the deliberations of a commission. I accept it was an effort by him to bring this medieval concept of ground rents in so far as they affected house purchasers —as they did and indeed do in thousands of cases—to an end.
 That Bill should have represented for most people the wrapping up of the unfinished business left over by people like Davitt and those other great men of history who secured the removal of landlordism from the rural areas of Ireland. It was an effort to try to wipe out the last vestiges of a system which had been imposed on our people and which had no basis in justice—the ground rents system. Its provisions offer to house purchasers the opportunity of obtaining the fee simple of the ground upon which their houses are built. But I do not know whether it was foreseen at the time of the passage of that Bill—certainly I must say it was not foreseen by me— that this system of ground rents could be replaced in effect by Schedule A tax as operated and imposed by the Revenue Commissioners.
I wrote to the Minister for Justice on this matter at the behest of a considerable number of my constituents in the suburban areas of Dublin. He was good enough to consult with the Minister for Finance, who provided him with a memorandum supplied by the Revenue Commissioners setting out their position in this regard. Like all emanations from the Revenue Commissioners, it is to a simple man such as myself a complex and almost inexplicable document. From my reading of it, it does appear that whether or not a house purchaser of the type whom I describe and for whom the Landlord and Tenant Act was, I take it, primarily intended, sets about the purchase of the fee simple of his house and the piece of land attached to the house, he will continue to have to pay in money the same amount as if he never opted to avail of the provisions of the Landlord and Tenant Act. It would appear so. I do not know whether I would be in order in reading this memorandum. It is, perhaps, too lengthy and the Chair would take exception to my doing so. The reading of it might be useful inasmuch as it would write it into the record as, perhaps, a guide to the thoughts of the Revenue Commissioners and would also help me to impress what I mean on the Minister.
There are two examples given in the  memorandum as to the method whereby Schedule A tax would operate. Figures are given. It appears that, i ndeire na dála, the purchasing tenant who had been paying, say, £10 ground rent per annum and who is now in process of purchasing the fee simple will find himself paying out of his pocket the same amount of money, whether it be in the shape of interest on a loan which he might have to borrow in order to purchase the fee simple, whether it be in the shape of the national value which the Revenue Commissioners say attaches to the fact that he is no longer paying ground rent and, if he has purchased the ground rent out of other moneys which are not borrowed moneys, that he is enjoying an income equivalent to the amount which he had been formerly paying to the landlord. If I sound somewhat confused in this, blame the Revenue Commissioners and not me.
It seems to me that the principle on which the Revenue Commissioners operate and on which this memorandum is based is a clinging, as it were, to the idea that while ground rents may be gone in theory they are not gone in fact so far as payment is concerned and in so far as the idea of ground rents can be employed by the Revenue Commissioners to extract from this section——
Mr. Haughey: Yes, I will. You opposed the setting up of the commission. You had a motion in the House about ground rents. I said: “Let us not rush; let us get an expert commission to give us their recommendations”. That duly happened and the job was properly done.
Mr. S. Dunne: The facts are that after the election, when the Minister arrived in office, he found on the Order Paper a motion put down by me to secure the abolition of ground rents. Is that not so? In order to circumvent that motion, he reached out for the oldest parliamentary gag that exists— a commission. The Minister should not have mentioned that commission.
Mr. Haughey: I am quite happy about the whole question. The Deputy was trying to rush into something he knew nothing about. I established an expert commission which did a valuable job and which has now brought about the result we all wanted.
Mr. S. Dunne: The Minister is suggesting that I knew nothing about ground rents. I knew this much about them, that I have been listening to the grievances and complaints of my constituents who, let me say, are affected in greater numbers by ground rents than are the constituents of the Minister or of any other Member of this House, due to the fact that in the County Dublin area there has been more building. I do not claim to have been an expert in ground rents. I am not a man for all seasons, like the Minister. I simply know something about them. I do not know everything, like the Minister.
Mr. S. Dunne: I am not beyond your rails. I was seeking to approach this matter in a reasonable fashion and I am set upon as I seem to be invariably set upon by Members on the Government benches. I was seeking to  approach it in a non-political and completely unbiased fashion in order to try to get facts. I am set upon in this way. I could dilate for a considerable time upon other provisions of this Bill. I could inquire, with relevance, in regard to some other matters which might be affected by this Bill.
Mr. S. Dunne: My principal purpose in standing up here was to discover how this Schedule A tax was going to affect people whom I represent. The Minister is in a very testy mood this afternoon and he sought to denigrate my efforts to get some clarity  in this matter. The fact that house purchasers now paying ground rent of £10 per year and who when they purchase the fee simple of their places, will still be paying that £10 a year is a very important matter, and I want to hear how the Minister says that this will not be so.
There are up to 15,000 such people in my constituency and it is on account of the fact that I have attended meetings of their associations at which this matter was raised that I bring it forward here. I mentioned at the outset that I did not want to make a prolonged speech on this, much as I have been provoked to do so by the impudence, if I may so describe it, of the Minister, and I am in two minds whether I should or not even now. Were it not for a previous commitment, it would be a pleasure for me to stay here for some little time, possibly some hours, and recite the facts as they affect this Government and the inequities for which this Government are responsible in so far as their activities are concerned throughout the country. The temptation is great and the spirit is, indeed, willing, but time just does not allow.
Mr. P. Byrne: I am grievously disappointed with the Bill before us for several reasons. I am disappointed because, in common with many Members of this House, I respect the considerable talents of the Minister for Finance because he is a professional colleague of mine, as a chartered accountant, the first chartered accountant to become Minister for Finance since this State was established. Because tax law is so complex, previous Ministers have signally failed to effect any substantial or significant mechanical changes in the British code of taxation operated in this country which I have said many times before is so unsuited to our requirements.
I am disappointed also because some months ago, with the assistance of a Special Committee, the House enacted an Income Tax Consolidation Bill consolidating the British Income Tax Act of 1918 with the various Finance Acts passed here since the establishment of the State, thereby making it mechanically  much easier to effect the desirable and necessary changes. In the past, it has been very difficult for the lay person, and even for the lawyer, to disentangle the cumbersome complexities of our tax law. Now with the new Income Tax Act it is somewhat easier to follow, but the Minister has failed to bring in any significant changes.
A few months ago there was submitted to him a memorandum by his own professional institute, the Institute of Chartered Accountants, pointing out nine worthwhile changes, most of which could be implemented at no great cost financially. The first of these proposals is one to which I wish to draw the attention of the House, for the Institute of Chartered Accountants, in making this submission to the Minister, were joined by the Incorporated Law Society, and these two most eminent professional bodies submitted to him a memorandum urging a certain change in the powers possessed by the Revenue Commissioners in assessing persons and firms to taxation, the powers of re-opening cases, of assessing tax back to the very foundation of the State, creating a situation where nobody really knew where he stood.
The continued existence of the powers possessed by the Revenue Commissioners relating to several different matters affecting the rights of the individual is a public scandal. We are indebted to the President for the action he took in relation to the power of lodging persons in prison without a court order. That has been found unconstitutional and repealed. There are other harsh, arbitrary and unjust powers unnecessarily possessed by the Revenue Commissioners, and they must be repealed also.
I want to quote briefly, if I may, from the submission to the Minister by the Institute of Chartered Accountants and the Incorporated Law Society in relation to the power to re-open assessments, to assess to taxation right back to the very foundation of the State, a situation which did not always exist. In British law there is a six-year time limit in respect of this matter of re-opening assessments.  There was a six-year time limit in this country up to 1936, when it was changed so that assessments could be made for any year from 1922-23 onwards; that was 14 years back, and is now 45 years back. The reason for the change in 1926 could, in my opinion, have been connected with loss of records during the Civil War and in the period preceding it, and I have no doubt that it was perfectly proper in 1936 to provide for extended powers for the Revenue Commissioners in this regard. But the position has changed very drastically since 1936 and it is surely grossly inequitable to have these powers continued over such a considerable period, and that notwithstanding the fact that the six-year limit still exists in Britain, from which our legislation, in the first instance, was culled.
Why has the Minister taken no action in respect of this matter, a matter in relation to which he received such a concise and well-produced memorandum from the professional bodies to which I referred? It is not good enough that successive Ministers should continue to remain inert and lethargic. It is particularly deplorable and reprehensible that the Minister involved now should continue these provisions; he ought to appreciate better than any of his predecessors the full significance of and the grave injustice in these provisions.
There is a power of seizure of goods possessed by the Revenue Commissioners, a power which exists without reference to the courts; it is a power which enables the Revenue Commissioners to seize goods, not necessarily the property of the taxpayer involved. Many members of the public were very shocked when they read the very trenchant and vigorous article on this subject in the Sunday Independent some weeks ago by an eminent Dublin accountant, well known to the Minister and to myself, Mr. Gerard Wheeler. We are very much in his debt and in that of the Sunday Independent for the disclosure of this public scandal and it behoves us here now in this House to demand of the Minister that these unnecessary powers, which hark back to the first decade of the last century,  should be repealed. The context in which these powers were first created was that in which a person's hand could legally be chopped off for stealing a loaf of bread and in which our forefathers were executed or transported for what are now regarded as trivialities.
Mr. P. Byrne: Is it the argument that these over-severe powers should continue to be implemented in terrorem by the Revenue Commissioners? It was said by the Minister—he will correct me in this if I am wrong—that the power of lodging persons in prison, now repealed at the behest of the President, was never, in fact, used by the Revenue Commissioners. It was used. In many cases it was used as a threat to intimidate unfortunate tax-payers. It may be that in the past this House could afford to ignore these matters because not very many people were affected by them, but income tax is now run-of-the-mill. It is common-place. Every second citizen is therefore affected by the continued existence of these provisions. We intend to give the Minister an opportunity of further considering these matters on Committee Stage. It is my personal hope that, as he did in section 12 in relation to health expenses and in section 21 in relation to CPT, he will accept some further enlightenment from us. As I said on the Budget debate, we do not believe that Fianna Fáil possesses the urge to create the kind of just society which we espouse but, for what it is worth, they are most welcome indeed to learning from our policy and implementing it——
Mr. P. Byrne: ——where suitable, as is being done here in section 12.  Credit where credit is due: in section 12 the Minister is doing something which was urged in this House over the past six years, something three of his predecessors persistently refused to do. He is also doing something which was opposed by the Revenue Commissioners before the Commission on Income Taxation.
In Britain many people are concerned about the unsuitability of ancient tax laws. Recently I saw the view expressed that no Chancellor of the Exchequer remains in office long enough to get round to tax reform and initiative in tax reform is unlikely to come from his technical advisers because they are preoccupied with the burdensome task of raising the necessary moneys to run the country and they have, therefore, little time to think of anything else. They do their task most efficiently and with great dedication.
Deputy Booth implied that more was to come in the shape of tax reform in a Bill in the autumn, more than just the reform of the notorious Part VII of the 1965 Act. It is desirable that the Minister should indicate to us now if Deputy Booth is correct in this. Has the Minister any tax reform proposals up his sleeve? I am somewhat sceptical.
The Minister in his very brief statement today did not explain the significance of the repeal provisions in section 25. I do not think these provisions are of any great significance. I am quite satisfied that they do not deal with the objectionable powers to which I have referred vested in the Revenue Commissioners.
Mr. P. Byrne: Section 481 of the Income Tax Act is not affected by these repeal provisions. I should like further clarification of these matters, if not at this stage then on Committee Stage, from the Minister. This power possessed by the Revenue Commissioners, to which I referred at the outset, to re-open cases back for 45 years is in very marked contrast indeed with the converse restrictive powers  possessed by the taxpayer in connection with the re-opening of cases in his interest. If the taxpayer forgets to claim a personal allowance for a child, dependent relative or housekeeper, he cannot claim one back for further than six years. If he has a claim for a loss, he must claim within two years. If he has made an error in his return he can only claim back six years. Indeed, in section 21, now applying the error or mistake provisions for corporation profits tax purposes, I am pretty confident I am right in saying that the six-year limit is again applied—yes, it is quite clear in section 21 (1): the taxpayer is restricted to six years. This is in contrast to the Revenue's right to re-open all cases, not only those cases where fraud is suspected but all cases.
Mr. P. Byrne: It is right. It certainly is right. These matters I speak about are undoubtedly far more suited to a Committee Stage discussion. As I have already said, I intend to give the Minister a full opportunity of considering them with particular reference to the submission made to him recently by the Institute of Chartered Accountants and the Incorporated Law Society. We on this side of the House are not prepared to permit these bodies to be treated that lightly by the Minister for Finance. It is our intention to submit amendments relating to their submission.
Finally, I would once again say what I have said ad nauseam. I have said it so often that I am almost getting tired of doing so myself. We might as well never have obtained Home Rule in this country for all the difference it has made to our tax code. I am convinced that in the opening decade when this State was set up, in the 1920s, the Government at the time were so preoccupied with more serious matters— the Civil War situation—that much of the British legislation which was adapted under the Adaptation of Enactments Act ought to have been kept in force for a time and should then have been the subject of radical reform. Again, in the 1930s, the Government  of the time were preoccupied with a depression situation, with the Economic War, and, in the 1940s, we had a World War. Since then, say 1950, we have had the report of the Commission on Income Taxation many of whose recommendations have not been acted upon at all. It ill behoves a Minister for Finance of my generation to take the same line on these matters I am speaking of as was taken by his distinguished predecessor, the then Deputy Dr. James Ryan, who was Minister for Finance for so many years. We expect more of a Minister of this generation.
The Income Tax Act recently enacted will be translated into Irish. That will cost just about £20,000. Much of that Act goes back to William Pitt. Much of it is totally unsuited to our conditions and our requirements. We shall give the Minister an opportunity here next week or the following week of dealing, piecemeal and in a small way initially, with some of the matters I have spoken about as was done by him today in section 12 in respect of health expenses. We shall give him a full opportunity of adopting our proposals.
Mr. Haughey: As Deputy O'Higgins indicated at the outset of his remarks, this is really a measure more appropriate to discussion on the Committee Stage than on the Second. However. I feel I should say in regard to the Bill generally that I think it is an excellent measure, one which brings about very considerable improvements and gives effect to Government policy in a number of ways both in regard to the achievement of social justice and economic expansion. Indeed, the excellence of the measure, like the Budget itself, can be gauged more by the lengths to which the Opposition were put to try to criticise it than in any other way. I would not wish and I do not think the Chair would wish me to deal in detail with technical points at this stage. I shall therefore just reply to a few of the main points which were raised.
First of all, I want to deal in general with this question of the powers of the Revenue Commissioners. I shall be quite happy to return to a fuller debate  on the issue on the Committee Stage. We have to be sensible and practical about this matter. In every country in the world, the Revenue Commissioners or the revenue-raising authority—by whatever name they are called—have to have very specific and very real powers to enable them to do their job because the collection of revenue is at the very basis of the operation of the State. If we cannot collect the revenue to run the State then everything else falls down.
It is all very well for Deputies to fulminate about this and that particular power and it is all very well for people outside to berate the Revenue Commissioners and to attack certain powers which they have but the job must be done. Human nature being what it is, nobody will pay taxes, customs duties or anything else unless they have to and unless we have some arm of the Government or the administration with the necessary powers to do this job then we might as well forget about administering the State and go back to some sort of pastoral type of economy.
Even as it is, in this Bill, we are repealing some provisions which give the Revenue authorities certain powers. Deputy Byrne does not seem to be aware of that. But, if we are repealing them, we shall have to put something else in their place. We just have to have machinery to enable revenue to be raised and the raising of revenue to enable the State to function is in a different category from any other aspect of our administration and must be approached in that way. It must be approached in the knowledge that it is a fundamentally important matter from the point of view of the functioning of the State and of the Government. However, as I said, I will be quite happy to return to this subject later and deal with it more fully and in greater detail on the specific provisions when we come to them.
Deputy Byrne suggested that perhaps we did not pay enough attention to the memorandum submitted by the Institute of Chartered Accountants. First of all, I want to say that I do not think a recommendation has any particular value because of the source from which  it emanates. I judge a recommendation on its merits. No matter where it comes from and no matter how exalted a body is, I do not think we should pay any more attention to a recommendation than it deserves on its merits. In regard to this memorandum we considered it in the greatest possible detail.
The Institute had a technical session with the Revenue Commissioners and my understanding is that they received satisfaction on a number of points and in particular with regard to the point raised by Deputy Byrne specifically, the question of the length of time which the Revenue Commissioners can go back. The Institute was written to indicating that the practice is—and this practice has the formal sanction of the Minister for Finance—that assessments are not re-opened for a period further back than six years except in cases where fraud or wilful neglect are involved. We have put in writing to the Institute the clear rule that unless there is fraud or neglect involved then——
Mr. Haughey: It has been put in writing to the Institute as a matter of practice, for which the Revenue Commissioners have the formal sanction of the Minister for Finance, and as I understand it that is sufficient for the purpose of the Institute of Chartered Accountants.
Mr. Haughey: I certainly will, but as I said, I looked at it very carefully before the Budget and it seemed to me that certainly where cases of fraud or wilful neglect are involved, then the Revenue Commissioners should be entitled to re-open assessments.
Mr. Haughey: We must deal with realities. We have given the Institute the assurance that it is not the practice to do this. I have already dealt with a point raised by Deputy Sweetman but it is no harm to mention it again. The new medical expense provisions will apply to anybody, child or adult, who is prevented from earning his own livelihood by reason of his infirmity. I want to point out again to Deputies who have been expressing disappointment that this or that was not done with regard to the medical expenses provisions, that we are going further than the Commission recommended. We are going further in so far as we are deleting any requirement that the illness must be likely to be permanent. We are deleting that because, first of all, it would be very difficult to administer, and secondly, because what matters to the taxpayer is the cost of the illness and not the type of illness. If an illness involves a taxpayer in heavy expenses this is the thing that will operate to get him relief and not the particular type of illness.
I should also like to point out that we are including chemists' bills, the cost of drugs and so on, and the fact that we are including such a wide range of medical expenses will mean that the limit of £50 which applies will not, in fact, be a very onerous limitation at all. I think it was Deputy Tully who raised the question of the married woman who is deserted by her husband and who will now be able to get the housekeeper's allowance. I admit that the section does refer to full-time employment but I can assure the Deputy that that will be interpreted in a liberal and sensible way. The idea will be that where a woman is in employment in which she is earning sufficient to provide for herself and her children she will be regarded as being in full-time employment.
Mr. Haughey: It has implications. Our idea is that where a woman has to spend sufficient of her time to earn enough to keep herself and her family she will be included. I do not think there is any reality in the fears mentioned by Deputy O'Higgins that these new medical expense provisions may affect the activities of the Voluntary Health Insurance Board in some way. In that connection I should like to point out, of course, that a taxpayer will only be allowed to charge up for income tax purposes un-recouped medical expenses and there will still be an overwhelming advantage in being a member of the Voluntary Health Insurance. Bearing in mind the fact that in these income tax proposals we have the £50 limit on the one side and the £300 on the other side, I do not believe there will be any adverse effects from the point of view of the activities of the Voluntary Health Insurance Board because of these new proposals. I would be very sorry if there were and I am sure there will not be. Like other Deputies I, too, subscribe to the appreciation to which the Board are entitled for the wonderful job they are doing.
Mr. Haughey: Deputy Tully returned again to his favourite theme about the tipped cigarettes. I can only assure him again that the manufacturers will not, in fact, use this to increase their own profits in any way. I understand that the amount involved in a packet of 20 tipped cigarettes is  very small, .01 of an ounce. This amount will be put back into the cigarettes and will not be used to enhance their profits.
Mr. Haughey: I think it is about one per cent. Deputy Sweetman has a point about the double taxation agreement with Canada. Unfortunately, it is just one of those things in which we were caught out by the march of events. We were ready to circulate the text of the draft Order with an explanatory memorandum to Deputies when we discovered certain statutory references in the draft had to be altered because of the passing of the Income Tax Act 1967 and this matter is having urgent attention with a view to getting the details into the hands of Deputies.
I do not think there is any other matter of major significance at this stage with which the House would expect me to deal except, perhaps, to come back to the matter raised by Deputy Byrne. The Deputy will forgive me— he comes from my own constituency and he is a colleague—if I tell him that the spectacle of himself as a seagreen Republican demanding complete independence of everything British amuses me a little.
Mr. Haughey: The Deputy knows the background and circumstances as well as I do. I am as anxious as anybody else for the reform of our taxation structure. I have welcomed, and will welcome, any proposal put forward by any Deputy or organisation but I have the experience of going, not too recently, to experts and saying to them: “This is a very difficult and complex problem. You have been  talking a lot about it but I cannot see my way to a solution of it. Would you please give me a draft of a solution?” Mark you, they disappeared and were not terribly anxious to come back to me with a ready-made solution to any of the problems I put to them.
I do not know how far we can go in achieving simplicity in our income tax code. It is all very well to talk about the complex system we inherited from the British but I wonder if the German, French or Belgian system is any simpler. Certainly, when we go to make double taxation agreements with any of these countries we do not find any great amount of simplicity in the work that has to be done. I have a suspicion that, by and large. there is roughly the same amount of complexity in all income tax codes because the process goes on interminably of revenue commissioners trying to close loopholes and clever accountants and lawyers finding other loopholes and revenue commissioners seeking to close these again. That being so, we can expect a great deal of complexity which is unavoidable but I shall devote my attention to the problem and see how the code can be simplified and keep a very open mind on any suggestions or proposals that may be put forward.
Basically, I suspect what really annoys people about income tax is not the complexity of the code but that it has to be paid. I do not think we can ever do a great deal to make people happy with income tax, or indeed any other form of tax, simply by playing around with the way in which it is administered. I may be wrong and if I can discover any concrete solution or if anybody can put such a solution before me in the form of concrete proposals or suggestions, I shall be very happy to adopt it.
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