Wednesday, 14 July 1971
Dáil Eireann Debate
Mr. Cooney: We oppose this section. It is typical of what I regard as the overall characteristic of this Finance Bill and fiscal legislation this year. It is obsessional. It is obsessed with the fact that there are small holes in the net and, in trying to close every possible loophole and ensure that nobody escapes, injustice is unwittingly, perhaps, being done to certain people. One cannot complain of any effort to close loopholes and thereby diminish tax avoidance. Everybody must agree with that policy but when the method used to close such loopholes inflicts injustice on small people it is time to cry halt. We must balance the two positions.
Section 39 can do an injustice, At the moment, if an estate consists partly of agricultural land and partly of other personal property, the agricultural land is valued on an artificial basis at 25 times the poor law valuation and from that figure is deducted the redemption value of the Land Commission annuity. If the resultant figure when added to the net personal property does not exceed £2,000 the estate may be valued on that artificial basis. My experience is that that artificial basis invariably lies only in the case of small farms. Here, we have a provision that if, within the following six years, that farm is sold the actual market value as realised will then be the value and presumably the assessment will have to be re-opened. If the exemptions allowed by section 7 (5) of the 1894 Act and section 61 (1) of the 1910 Act were being abused, or were capable of abuse, I could see some justification for the section, but I cannot see how they can be abused. Invariably they deal only with small estates.
The Minister made the point that the net personalty, because of a very large debt, might be a nil figure or there might even be a deficit. When that would be taken from the artificial value that should clearly come within  the £2,000 limit but, as I say, in practice this is just not possible. Take a farm of £50 valuation, which is a common enough type of valuation. There are bigger farms and there are smaller farms but, in my experience it is the maximum valuation to which these provisions could apply. I cannot see that such a farm would not have livestock on it and, if it has livestock on it, the personalty can only then be taken down if there is a bank overdraft. The reality of the situation is that a bank overdraft would not be permitted of such a size that it would equate to or exceed the personalty of the estate. This is the reality of life in rural Ireland. I cannot visualise a situation in which this could be used as a means of avoidance. All this section will do is impose hardship on people who, for some domestic and bona fide reason, have to sell their farm within six years of the assessment being made. It will not close any loophole because I do not think there is anybody escaping through that loophole at the moment. The original intention presumably in the 1894 Act and in the 1910 Act and all the other Acts which increased the original figure from £500 to £2,000 was to benefit agricultural land and not to prejudice people on small farms with heavy estate duty burdens and to encourage presumably the rectification of title and the passing on of property within the family. This was highly commendable. It is still commendable and it is altogether unjust to say that, if these people can have the benefit of this value today, and if they sell the farm within six years, the full value comes into play; six years is altogether an unrealistic period of time.
I am against any change in the law but if there has to be some provision and if the Minister feels strongly enough about it and can make a case to justify the change I cannot see how he is going to be able to justify a period of six years. So much can happen on a family farm within six years. The circumstances could be completely different from those pertaining at the time of death. This could lead to a very serious injustice in a small or medium size farm.
 The proviso of subsection (2) seeks to give relief to what I suppose the Minister will tell me would be a bona fide transaction where presumably on intestacy, there has to be a sale in order to distribute the assets among the next-of-kin and one of the family retains the property, and the section shall not apply. Again this is unrealistic; it is not conversant with the realities of life in rural Ireland and this is my chief objection to this section. It does not take into account what happens on the average farm when there is an intestacy or even a death testate. To suggest that this section has been used for tax avoidance or estate duty avoidance is quite ridiculous.
Mr. T.J. Fitzpatrick: (Cavan): The reference in the Minister's speech to evasion here is misleading. When I hear of evasion or avoidance being mentioned in relation to income tax or death duties I take it that it means the improper use of a section or the extension of a section in a way that never was meant. There is no such thing here; this is a long standing section which allows the artificial value of so many times the poor law valuation to be applied to agricultural land. All that is being done here is that this machinery, which the legislature provided in its wisdom many years ago, is being used in the way that it was intended to be used. If there was any misuse or abuse of it I could understand it.
This section simply takes away, in certain circumstances, the provision which was enacted in the Finance Act, 1910. It is a method of imposing death duties at a higher rate on agricultural land. It is introducing a new method of valuing agricultural land for death duty purposes. It is taking away the method which has been in use for the past 60 years and it provides that if the land is sold within six years from the date on which it was valued, which I take to be six years from the date of death, that the artificial value is to cease to apply and death duties will  have to be paid on the actual market value as at the date of death and not, I hope, on the sale price maybe five years later.
Family circumstances could change in the intervening six years and there might be reasons to sell the land on the open market to a stranger. It is provided here that if it remains within the family the section shall not apply, but there might be a complete change in family circumstances which might necessitate the outright sale of the land. I do not think this section should be departed from. I had hoped we were thinking of moving away from this system of collecting revenue from death duties but apparently we are going to consolidate it and establish it and collect the very last penny that can be collected. I am opposed to this section for those reasons.
Mr. Colley: This form of relief was originally introduced in relief of landlords of farms where a number of farms were occupied by tenant farmers. It was by a decision in an Irish court in 1901 that it was applied to the interests of tenants of farms. We may take it from the effect of that decision and from the manner in which it has operated since, that the whole purpose of this was not for the benefit of agricultural land as such but for the benefit of families living on farms particularly on small farms. This principle is being preserved, in what we are doing here, in two senses. First, in the sense that if a farm is sold it cannot be said that we are preserving or helping the family in the farm to hold on to it because if the farm is sold the whole object is defeated. Secondly, as Deputy Cooney has pointed out, in subsection (2) we make special exemption for situations which can of necessity arise on a family settlement in the event of an intestacy where what might be called an artificial sale takes place and we are preventing the operation of this section in such cases. Quite clearly the operation of the section is designed to continue the principle on which it has been operating for so many years.
The question was then asked how can any evasion arise on the basis of  artificial valuation? Indeed, Deputy Cooney's argument was that it could not arise and that he would consider that perhaps some action of this kind was justifiable if such evasion did arise. I want to tell the House that such evasion does arise and I should like to give briefly particulars of four cases which actually occurred in which evasion arose as a result of the use of the artificial valuation of land. In the first one the artificial value of the lands was £2,231 and there was a deficit of £1,269 in the personal estate. The value of the estate for duty purposes was £962. The lands were sold for £18,800 so that the real value of the estate was £17,531, but no duty was payable. In the second case the artificial value of the lands was £2,957; there was a deficiency of £2,859 in the personal estate due to an overdraft of £4,875, the estate was valued for duty at £98 and the real value of the lands turned out to be £22,000. In the third case an artificial value of £948 applied and no duty is paid. Two years after the death, and fairly recently, the lands were sold for £17,050, but no duty was payable.
Mr. Cooney: With respect to the Minister, the last example he gave of an artificial value of £948 would imply a poor law valuation of about £38 and it is beyond my imagination how a farm with a valuation of £38 could fetch £17,000 as agricultural land. There must have been some other factor.
Mr. Colley: No. There was no increase in value afterwards in any of these cases. They were sold as agricultural land. I am not finished yet. There is another case that I want to give details of, a relatively recent case also. Artificial value was applied to lands consisting of 267 acres approximately. The rateable valuation of the land was just over £200 and of the buildings was £36 5s. The lands were sold about two years after death for £110,000 and no duty was payable. In each of these cases that I have taken I do not think that, in fact, there was any conscious attempt at evasion.
Mr. Colley: Supposing a man has land valued at, say, £80,000 and personalty valued at £10,000. He borrows £20,000 from the bank on the security of the land and he puts £20,000 into the joint names of himself and his wife. He dies owing the bank £20,000. His personalty is thus deficient by £10,000. This deficiency lets in the artificial value of the lands and in that case duty would be payable on £20,000 only, that is, at 12 per cent, instead of on £90,000 at 37 per cent.
Mr. Colley: The key to this is that by reason of the overdraft he got himself into the artificial valuation category. If he could not do that, of course, the real value of the land would come into play. The point I am making in this regard is that first, in the four earlier cases I have mentioned, I cannot say positively but I do not believe there was a deliberate attempt to evade duty but one can see from the figures involved that there was, in fact, a very considerable nonpayment of duty which would be payable by anybody else in circumstances where the artificial valuation did not come into play but, in addition to that, I am trying to indicate that it is possible, and has been done, so to contrive one's affairs as to bring in the artificial valuation and deliberately avoid a substantial amount of duty.
This, I hope, will answer the argument by Deputy Cooney as to why we should do anything about this. I hope I have demonstrated that there is reason to take action to prevent evasion by the use of this artificial valuation. I want to stress that although we are taking this action we are also ensuring that the original purpose of artificial valuation is being maintained and if a man whose holding would be in the normal way and under the law artificially valued if he leaves it to his son and his son carries on as his father before him, as a farmer, we are preserving that situation under the section but I want to suggest to the House that in circumstances, whatever they may be in which a genuine sale takes place as distinct from the one that is saved in subsection (2), in which people get the value of the property into their hands, there is not any reason that I can see why such people should not pay duty the same as anybody else who receives a similar amount of money. I think the case for this section, quite frankly, is overwhelming.
Mr. Kavanagh: In respect of these four examples could the Minister say what county they were in? Were they  all in a county like Dublin in which land would be more likely to be artificially valued than in other parts?
Mr. Colley: Where land has potential other than as agricultural land the Revenue Commissioners are entitled by law to refuse the artificial method of valuation. I think one may take it that if such factors were operating in any of these cases the Revenue Commissioners would have refused the artificial valuation.
Mr. Bruton: It seems to me that this is one of the many sections in this Finance Bill which are greatly extending the scope of death duty. The idea was that this was a tax on property passing on death. Other sections of this Bill are making it more difficult for the giving of gifts during life which are, perhaps, made without any contemplation of death at all. So, we are extending it in that direction and we are extending its scope. It is no longer, in that sense, a tax on property passing on death. In the other direction, after the death, we are extending the scope. We are extending the scope of estate duty to sales which take place in relation to an estate which within the past six years was the subject of a bequest. So, we are extending estate duty on both sides of the grave. It is now no longer merely a tax on property passing on death but a very selective tax on the alienation of property either by gift or by sale. It is selective in the sense that it picks on those years, five years prior to death and the six years afterwards and says that sales or gifts which take place within that period are to be singled out for harsh treatment, whereas gifts which take place prior to the five-year period are exempt. The same applies to the other side.
Mr. Bruton: No, but we can see the trend of the Finance legislation that is going through. What we really have is a highly selective tax on the disposition of property—selective in the sense that it picks on those dispositions that take place within the ten-year period covering the date of death.
I should like to make a few remarks in relation to this. In relation to one of the examples to which the Minister drew attention, Deputy Cooney said he calculated that the rateable valuation of the farm would be £38. This farm was sold for about £17,000. I remember vaguely talking to the Land Commission about this question of valuation and they calculated that good agricultural land would be in the region of £1 valuation per acre. On that basis it would seem to me as if this property was sold at £500 per acre. I am not an expert on agricultural land values but I think that £500 an acre is somewhat higher than what one would normally expect to receive for land that is used solely for agricultural purposes. Certainly, £500 an acre would be a lot more than anyone buying such land could hope to recoup from it in earnings from agriculture. Therefore, we are dealing with cases that are highly exceptional and which could probably, as the Minister said, be dealt with from the point of view of saying that the land, strictly speaking, was not agricultural land and had potential in other directions. It is possible that the section, if enforced, could meet the problem to which the Minister referred.
Another question that was referred to by Deputy Fitzpatrick and on which we need some more information is in relation to the sale of land. If the sale takes place five years after the date of death, will it be the sale on the artificial market value which is supposed to be the market value of the property at the date of death of the owner or would it be the actual sale price that would be taken for duty purposes? I should like to know also how it is proposed to enforce this  section. Will it mean that the Estate Duty Office will have to keep in touch with the owners for the remaining two years so as to make sure that it has not been sold? Will there have to be some sort of police force operating to ensure that people will not sell property that has been the subject of a bequest?
I should like to point out that in the six years that are governed by this section, the circumstances of a family could change radically and by no means would it be evidence of evasionary tactics that within six years the property had to be sold. It could possibly be that for the first two or three years after death, the successors had every intention of retaining the property and working it as it had been worked by the deceased but their circumstances could change to such an extent during the remaining three years that they would be forced to sell it before the six-year period had expired. Anybody who knows anything about the ups and downs of agriculture would agree this could easily happen particularly in the present situation in agriculture where heavy investment in machinery must take place frequently and when such investment does not pay off, the person concerned might find himself in debt to such an extent that he would have to sell the farm. This would have nothing to do with the evasion of estate duty. For anybody getting on in life to say that he would avoid death duties on the estate by using this tactic would require very great sacrifice on his part. In the first place he would have to purchase an amount of agricultural land of the correct proportion, not too much and not too little. Then he would have to put that land in heavy debt. That would be taking far too great a risk for the person concerned to make it a worthwhile evasionary tactic.
Mr. Cooney: I can see the Minister's case in the sense that if a sale shall subsequently take place, the person is, in effect, getting into his pocket the actual value of the property which passed at death and to that extent is in no worse position than a person holding a dwellinghouse in a town. I can see  that but I suggest to the Minister that having put that person in an exceptional position at the date of death, it is unfair to leave him with this sword of Damocles, so to speak, hanging over him for six years. I presume, too, that the figure that will be relevant will be the price realised six years afterwards and which figure could be vastly different from the market value as at the date of death. If it is to be the value as at the date of death and not the actual sale price realised, there is then a vast area of contention because the estimation is being made in 1976 on what was the market value of that property in 1970. This is something that can give rise to considerable practical difficulties.
A further point that was raised by Deputy Bruton was how the incidence for this will come to the notice of the Estate Duty Office. A sale takes place six years afterwards and, so far as I know, a purchaser would be protected and would not be liable for any duty.
Mr. Cooney: Subsection (2) of this section provides that where there is a sale solely as part of a family arrangement for the distribution of the estate among the widow and children—I think this is unduly narrow and I would include there, the next-of-kin— and the property that is the subject of the sale remains in the possession of any one or more of them, this section shall not apply unless the property is subsequently sold within a period of six years.
Mr. T.J. Fitzpatrick: (Cavan): That is bringing it up to 12 years. If there was one of these sales within the family within five years then he has to wait another six years to get clear of this net. I think that is what that means.
Mr. Cooney: You could have the situation where a person who decided to buy it from the rest of his family subsequently found that he unwittingly  or for some economic reasons over which he had no control made a bad bargain. He had paid the full market value and presumably had paid stamp duty on the transaction between himself and his family. He would subsequently be penalised when he found he had to sell the farm by having to pay death duties. I think that is unfair.
Mr. Cooney: If he has paid stamp duty he is. He is paying twice to the Revenue. Having been put in the privileged position as a user of agricultural land, the time within which full market value would come into play should be reduced from six years to, at most, three years. It is far too long to leave it hanging for six years. If it were for three years it would increase the certainly that a certificate of discharge from death duty would be sought and that would be all to the Minister's advantage.
May I comment on the examples the Minister gave? In the first case he said there was an artificial value of £2,231 on land, that there was a deficit on the personalty and that the farm was subsequently sold for £18,000. An artificial value of £2,231 would put the poor law valuation at £110 to £115. That would be a farm of at least 100 acres taking £1 per acre valuation. In some parts of the country it would be more, in some parts less. I find it hard to see how the owner of that farm, even if he wanted to avoid duty, would be able to commit himself by way of borrowing. He would not be allowed to borrow in the way the Minister indicated. It takes into account that there was this farm of over 100 acres and there must not have been a tail on it. I do not think that in practice these things can happen.
I concede the principle that the person in the event of a sale should not be any better off but I would suggest that the period for the sale should be  reduced from six years to three years and that in subsection (2) the settlement should be extended from widow and children to all next-of-kin. The person seeking to come to a settlement can be in a much more difficult and tricky position with next-of-kin who are not his mother or his brothers or sisters.
Mr. Clinton: Could the Minister not make the one six-year period both for subsection (2) and subsection (1), that where there was a family settlement made it would be all right as long as the six-year period from the date of the death occurred was met rather than extending it a possible further six years? I do not know what objection the Minister sees to this because he is prepared to concede that there is a situation here that should be met where a family arrangement is necessary. I am sure it was never the intention in the section that this restriction should be imposed for a further six years.
Apart from that, I would not grumble very much about section 39 because it meets a case I was making yesterday where there is an artificial value put on land that will not be realised. This has happened on many occasions. The value that has been put on land was the potential value should it be sold. This section covers that sort of situation and very few people could legitimately object to it except in a case that I have in mind. This is particularly relevant to areas where rapid development is taking place such as the area I represent. At the date of death a holding could be agricultural land and even giving it its highest value it could be worth £500 an acre because of location but it would not be known to have any development potential at that point of time. Then we reach the end of one of these five-year periods when the county plan would be reviewed. This area then would be brought into the development area and services extended. This would rocket the value of the holding from, perhaps, £500 an acre up to £4,500 of £5,000 an acre. If it were valued at the time of death it would be £500. If it were valued subsequently  within the six-year period it could be as much as £5,000, as much as £7,000 if it was zoned for industrial development. There is something here that should be met in some way. There should be an attempt to value at the time of death if all people are to be treated alike.
Mr. T.J. Fitzpatrick: (Cavan): I would appeal to the Minister to accept Deputy Cooney's suggestion that the time specified in subsection (1) should be limited to three years because if the section is to be used to evade payment of death duty, then I think the sale would take place within three years. It is dragging it out too far to have a limit of six years because there could be genuine changes in family circumstances within those six years that would alter the whole circumstances and bring about a sale. If the people intended as of the date of death to sell it is most unlikely that they would wait for six years just to avoid the duty.
Mr. T.J. Fitzpatrick: (Cavan): If the Minister imposes a three-year period I think his net will be wide enough. The proviso at the end of subsection (2) which says that if there is this inter-family sale then the net will extend again if there is a sale within six years from the date of that arrangement is unreasonable. Why not have the period run from the date of death whatever it is? The Minister is satisfied in subsection (1) with a period of six years. I say that is too long but he is satisfied with it. When he comes to subsection (2) he extends that to a possible 12 less one day. He should be satisfied with the same period running from the date of death in subsection (2) as in subsection (1).
Mr. Bruton: A question I think we should consider is the impact this is likely to have on land use. The Minister has made much of the value of this artificial valuation procedure to people engaged in farming. I may be wrong but I think he did say that only 4 per cent of agricultural cases coming before the Estate Duty Office turned out to be liable to duty?
Mr. Bruton: We should have some concern about the impact this will have on land use in the case of the 96 per cent. Many estates which escape under this artificial valuation procedure may well be inherited by people who do not intend to operate the land properly as farmers. At present they can sell the land immediately and it is presumably bought by somebody who will manage it properly and get maximum use out of this national resource. In this case people who may not have the skill or capital resources to manage the farm properly will find themselves with this definite financial tax incentive to hold on to the land for six years in order to avoid paying death duties. This may not cost them very much except in rates but it will mean that the land, which could be used if put on the market and bought by a farmer, will be lying practically derelict and not properly managed. The Minister probably has a case and I think a compromise would be the best way of meeting this difficulty. A three-year period with the land lying there not properly used, while it would mean the loss of a national resource for that period would be only half as bad as if it were lying there for six years. I ask the Minister to consider this possibility.
Mr. Colley: I think we had contradictory arguments put forward. Deputy Fitzpatrick suggested that somebody who intended to sell the land would not wait six years, whereas Deputy Bruton is suggesting that somebody who had not the skill or capacity to work it properly would wait six years and that it would not worry them unduly.
Mr. Colley: No, I am not. I do not want to go over all the ground again but in this section we are endeavouring to retain the existing exemption for people engaged in farming whose families are going to continue in farming but we are applying the normal method of assessment and liability for duty that applies to everybody else to people who sell the land within six years.
I wish to refer to a few questions which were raised. First, as I mentioned in an interjection, the practice in respect of all property, land or otherwise, is to give a provisional assessment which unless for some special reason the value is specially determined is only provisional and is so regarded for a period of six years. The method by which the Revenue Commissioners keep in touch with this situation is the certificate of discharge of death duties because eventually when the property is being sold the purchaser seeks this; it must be applied for and this brings the Revenue Commissioners into the picture and they can assess what happens to the property in the way of sale. There are other methods by which the commissioners of valuation keep an eye on the market generally for the purpose of assessing movements in the value of property but primarily the method by which the Revenue Commissioners keep in touch is through the certificate of discharge of death duties. I see no reason why this should not operate just as effectively in the limited type of cases we are discussing here as it operates in the case of all other property.
On the question of the valuation of the property, assuming it is sold five years after the death and that in the meantime the value of property in that particular area has gone up substantially, what the law requires is that an  assessment be made of the value of the property at the date of death and any development which takes place after the date of death which increases the value of the property must be ignored. In practice, I understand what happens is this: take a case where the sale takes place five years after the death and that it results in the property being sold for 100 per cent more than it was assessed for estate duty purposes. An examination is then made of the general movement in that five-year period in the sale of similar land. If that reveals that in the five-year period the land is increased, by, say, 50 per cent, the sale price is reduced by 50 per cent for the purpose of arriving at the true value as at the date of death. This may sound complex. I think it was Deputy Cooney who said it could lead to a good deal of argument. This may be true but it is the basis of valuation of all types of property for estate duty purposes and, by and large, it works reasonably well. I repeat that the commissioners are obliged to ignore any development which takes place subsequent to the death.
Mr. Clinton: Yesterday, the Minister said that only 4 per cent of all agricultural cases had to pay death duties. Is the Minister sure of this? Are all farms included in this because if they are we must get the whole 4 per cent in County Dublin?
Mr. Colley: I do not know if I made this clear at the time. If I did not, I had better do so now. That figure emerged from a study which the Revenue Commissioners carried out over a two-year period in 1967 and 1968. An examination of all the cases coming in in those two years revealed that of all the agricultural holdings coming before the Revenue Commissioners only 4 per cent became liable to duty.
Mr. Colley: These would all be factors but also such things as the  artificial valuation we are dealing with here. These would be the main factors I think: there may be other factors I should not talk about——
Mr. Colley: A certain amount of successful evasion may also take place and, perhaps, good solicitors as well as good auctioneers in operation. I want to amend what I said earlier. The result of that study was that in that period, of all the cases coming before the Revenue Commissioners 4 per cent were agricultural cases in which duty was paid.
Mr. Colley: Certainly it has been a factor. What we are doing here is maintaining the position under which most farmers do not pay death duties. We are maintaining that for farmers and their families who stay in farming but for those who sell and get the proceeds we are proposing to treat them in the same manner as everyone else.
Mr. Colley: As this operates in regard to all property to reduce it would be to discriminate in favour of people who have sold the land and got the money. To put it another way, it would be to discriminate against all the other people who pay death duty.
Mr. Colley: The thinking behind the six years in subsection (2) is that when the family arrangement is made the man who gets the land is starting from scratch. It is desirable that such family arrangements take place as soon as possible and in a way this provision is an inducement to ensure that people make the arrangements and carry them out as soon as possible. On the other hand, I concede that 11 years might be unreasonable. I want to look at the matter further to see if changing that figure would allow a loophole for evasion. If it would not, I would be prepared to consider reducing that figure.
Mr. Colley: Let us take an example of house property in Dublin where the owner dies and leaves some property. A figure is submitted to the Revenue Commissioners, it is accepted and duty is assessed on it and paid. That figure is indicated clearly to the executor as being a provisional assessment of the value. It is open to the Revenue Commissioners to reexamine that, either on sale or otherwise. In the event of a sale they can come back within six years.
Mr. T.J. Fitzpatrick: (Cavan): If on a person's death it is found that his estate is valued at £40,000 and that £10,000 of this sum is in Land Bonds, the Revenue Commissioners, in their wisdom will not accept the Land Bonds in payment of the death duties. I realise this is not relevant on this Bill. SECTION 40.
This is the infamous section in the estate duty section in so far as it seeks to bring in gifts in consideration of marriage and put them in the category of ordinary gifts. This is a very serious departure for the following reasons.
Under our legal system marriage has always been equated with money or valuable considerations and, for the first time, that principle has been altered drastically. A gift in consideration of marriage, with the exception of the first £5,000 or £1,000, is being treated as a simple voluntary gift. This is a serious breach of a long standing legal principle and it should not be contained in this Bill.
The Minister gave as his reason for this change in the law the fact that marriage settlements were being used to evade estate duty and he quoted one example that had come to the notice of the Revenue Commissioners. I submit that to bring in such a drastic alteration in our legal system—it is more than merely a change in estate duty law; it is destroying the idea of marriage as being a valuable consideration—the Minister should require a stronger reason than one known case of evasion of death duty.
It is unrealistic for the Minister to be apprehensive that evasion could occur by way of using marriage settlements. It is not possible to have a marriage settlement unless there is a marriage, and a marriage cannot be arranged to suit the necessity to evade death duty. One can visualise a ludicrous situation where a father gets a heart attack and all his daughters come home. Somebody asks for a volunteer who  will marry so that the father can settle the property on the volunteer and on the death of the father the volunteer distributes the property among her brothers and sisters. This is what the Minister is asking us to believe takes place. Marriage settlements cannot be a vehicle for evading death duties.
The Minister mentioned one case in which apparently a father was in extremis; he had a child who was ready for marriage and he was able to transfer his property to the child. Presumably there was a secret trust on the child to honour the parent's wishes in regard to the redistribution of the estate among the family. This is an exceptional case. There are very few cases in which a parent in extremis would have a daughter or a son who would be getting married and on whom a settlement could be made. Secondly, if the amount of property is substantial, there are not that many families with such a strong sense of unity that the person in extremis would take on the complication of making a settlement in those conditions.
Furthermore, the fact that there must be a marriage consideration means that the gift can only vest if the marriage actually takes place. The fact that that condition must be complied with means that it has to be bona fide, that there cannot be a promise to marry so as to transfer the property. The actual marriage must take place. There can be no fiddle, so to speak, on a promise to marry which is not fulfilled afterwards because, if it is not fulfilled, there will be no marriage, the consideration fails and the property does not pass.
I suggest to the Minister that the section which these amendments seek to cure will do a lot of damage in our society. The proposals have been described as anti-social and that is what they are. The tenor of our laws so far and of our social practice has been to try to encourage earlier marriages and to encourage the disposition by elderly parents of their property to young married couples. It has long been a source of complaint in rural Ireland that the owners of land have been holding on to the land for far too long, and inhibiting their  children from marrying because they have not got the security of being the owners of the land themselves.
If there was the attraction that property transfer on marriage was equivalent to sale, the attraction that because of the valuable consideration element on marriage to transfer the property on the part of the holder or the parent, that is now being removed. As I said on the Financial Resolution, you could have the ridiculous situation in which a person in receipt of a non-contributory old age pension could leave an estate liable to death duty because his gift in consideration of marriage would be a deprivation of property and he would be qualified on a means test for a non-contributory old age pension. Technically he would have no property but yet, if that person died, under this section his estate in excess of £5,000 would become liable for duty.
Some years ago the Department of Social Welfare would not recognise a transfer if they felt it was made purely for the purpose of qualifying the transferor to receive an old age pension. Of course, they always recognsed a transfer made in consideration of marriage on the very old legal principle that it was not a voluntary transfer but was tantamount to a sale. It was a transfer for valuable considerations. This was recognised and the Department of Social Welfare were anxious to encourage these transfers.
In addition to recognising marriage settlements they abolished the rule whereby they had to be satisfied that the voluntary transfer was by way of a family arrangement and not purely to qualify the donor for pension. The Department of Social Welfare now recognise all transfers, even purely voluntary transfers. They always recognised marriage settlements. The law in all its aspects always recognised that a marriage settlement was tantamount to a transfer for value. This section is now trying to close an unlikely loophole. It will inhibit parents transferring to their children in a case where there is a bona fide marriage. I presume all marriages are bona fide intended. Where a marriage is intended, not for the purpose of evading this section, the  section will inhibit the transfer by an aged parent to children on marriage.
There is an exemption for the first £5,000. That is not a very large exemption. The second subsection gives an exemption of £1,000 in a case where the marriage gift is by a person other than a parent. This is equally a hardship because there are many, many cases in rural Ireland where a bachelor uncle transfers to a nephew or a niece in consideration of marriage. That is the type of case which it is socially desirable to encourage. If it can be put to the bachelor owner that he should get rid of his property and that there will be an avoidance of duty, this is an encouragement for him to make the transfer. It is socially most desirable that he should make the transfer but this Bill will inhibit that. It seeks to close what to my mind is a most unlikely loophole because, before you can have a marriage settlement, you must have a marriage, and marriages cannot be arranged just at the drop of a hat for the purpose of avoiding death duty.
Mr. Cosgrave: I should like to support what Deputy Cooney has said because I think this is in an entirely different category from any other device adopted to minimise or defeat the effects of estate and death duties. As has been rightly said, it is a well-established practice that marriage has been recognised for so long as anyone can remember as for valuable considerations.
It is true that in Britain some six or seven years ago they made a change in the law in this respect. It was admitted here last night that a number of the provisions of our revenue legislation, and certain provisions in the Finance Acts, have followed at suitable intervals on what happened in Britain. There is one very clear distinction between conditions here and conditions in Britain. Here divorce is not permitted. While I suppose we have all heard of cases of marriages of one sort or another the vast majority of marriages are bona fide and do not happen at the drop of a hat. While it may be anticipated to some extent it is not possible to arrange a marriage in anticipation of the death of a parent, or uncle, or aunt, or owner.
In the Constitution there are phrases  suggesting that the family is a special unit and has a special place in society. I know that on more than one occasion the Articles dealing with social principles in the Constitution have been the subject of comment by the Supreme Court as being imprecise and, in some cases, unenforceable. Accepting, for the moment, that the social principles are given at least verbal support, and that a verbal concession is made to the institution of marriage and the family, and coupling that with what has been stated here as the long-established and recognised policy of the Land Commission and the Department of Social Welfare—in particular, of the Land Commission not to fragment holdings or have unnecessary splitting up of farms—this proposal is advocated on the basis of a single case which moved the Revenue authorities to recommend to the Minister the introduction of this section. The only statistics produced in the Minister's Second Reading speech in justification for this section were in respect of a single case.
There is a complete contrast between conditions here and conditions in Britian and this is one case in which we should not follow the British precedent. Their social and family legislation is entirely different. Divorce and the dissolution of marriage is an accepted thing in Britain. There is a whole corpus of legislation and special judges are assigned to the probate and divorce division to deal with the multiplicity of cases that arise. Indeed, so serious is the position there that extra judges have had to be provided. That is not the situation here. There is no divorce. It is regarded as anti-social. This particular proposal is, therefore, contrary to accepted social policy here. The number of cases involved must be very limited and it is a bad approach in fiscal legislation like this to introduce a proposal which conflicts with Land Commission policy or, as Deputy Cooney said, with the policy operated by the Department of Social Welfare in pension cases.
There are many reasons why people who occupy farms or who run family businesses cannot part with them or assign them over to their children at  an earlier point of time and the objection we have to this is that it runs contrary to recognised and accepted national and social policy. Since this applies in the main to farmers transferring their farms to their children, it is to that extent a mistake to adopt an urban attitude of mind to what is mainly a rural problem.
Mr. Cosgrave: Such transfers are recognised as socially desirable. One of the matters causing concern in regard to membership of the EEC is the possibility of land here, farms in particular, being acquired by outsiders. This type of legislation will be an impetus to a development involving the disposal of property. At the moment property passes down through the generations. Most parents are anxious to retain property, to put into it effort and skill and enterprise and pride, and ultimately to hand it on to the next generation. This proposal will vitiate that.
I believe the amendment is one which has general acceptance. As I said earlier, there was no mention of this proposal in the Budget Statement. It was slipped in as an afterthought in a document circulated subsequently. It is contrary to established practice to introduce a major change of this type in that way. It is a weak argument to base the case for a proposal of this kind on one particular case. Undoubtedly there will always be exceptional cases. The particular case may have been a case of unusual significance but since there are so few cases, the problem cannot be a grave one. Social and national policy is supposed to be designed to settle as many families as possible on the land. This is in direct conflict with that policy. As Deputy Cooney rightly said, Social Welfare have always accepted a voluntary settlement. Sometimes these are made for valuable consideration. Gifts in anticipation of marriage are exceptional and have always been so regarded. It is a bad precedent to move away from that in the direction in which the Minister proposes to move in this section.
Mr. Tully: I do not know whether or not this section has been introduced  for the purpose of scraping the bottom of the barrel. Like a number of other sections it appears to be an effort to get the very last penny out of certain types of taxpayers. I am surprised to find the section in the Bill. It would appear to me that, the Budget having been introduced, the Minister then gave somebody the task of looking through legislation dealing with finance in an effort to find out if there was any way in which a few extra shillings could be got here and there. I honestly believe that was the position. There is no big money involved in this. The amount of money collected as a result of the passing of this section will be relatively small, but the section will cause a great deal of nuisance. I believe what a previous speaker said: this is an urban approach. It is bad enough in the case of an urban dweller who hands over cash or property to a member of the family who is getting married; it is infinitely worse when it is done in the case of a rural dweller because, in that case, agricultural land is involved. In effect, the law will have to be breached in order to try to pay off the duties if the property involved is sizeable. If the property is sizeable the Land Commission will be involved and there will be all sorts of complications. I always understood it was the policy of successive Governments to encourage two things: one to encourage marriages in the country, because we always heard about the small number of marriages and the necessity of having earlier marriages and the second, to encourage the transfer at as early a date as possible of property to the children in order that they could carry on the farm or business. It appears as if an effort is being made here to penalise them as if they deliberately gave away the property because they were going to die and they wanted to ensure it would not be taxed. I accept there may be a number of people who feel that way but I am quite sure that 80 or 90 per cent of those who transfer property do not do it because they feel they are going to leave this world very quickly and will have no further use for it——
Mr. Tully: The Minister decides, since he cannot get them if they do not hold on to the property until they die, that he must get at them in another way, by bringing in this marriage gift tax. I think the Minister is wrong. He was very enthusiastic in his “Hear, hear” when I said that the property was transferred not for the purpose of avoiding but for the purpose of ensuring——
Mr. Tully: I should be glad if the Minister would. Am I now to take it that it is the Government's policy, if somebody works hard and succeeds in getting a certain amount of property or wealth of a certain kind and instead of squandering it in a certain way passes it on to his family so that they will be able to live in frugal comfort, that those people should be taxed to the extent that after the parent or whoever has passed on the property dies they may have to sell out or sell a portion of the property for the purpose of paying tax? Have the Government reached the stage where they are so tight for money that they are prepared to take any and every step for the purpose of trying to get the last penny out of those whom they can tax in a device like that?
Mr. Bruton: This section of the Finance Bill has aroused virulent opposition from the farming community and the farming organisations. There have been repeated statements from leaders of the farming organisations and in the newspapers condemning this measure. If this measure were merely an anti-evasion measure, as the Minister is on record as saying it is, it would not be arousing such opposition. It is clear that the farming community see something much more serious  behind this section. Farmers, no more than anybody else, have no sympathy with those who are evading tax because that only means other people have to pay more.
When the Minister said this was an anti-evasion measure he was not telling the truth. Anybody can see that it is virtually impossible to contrive a situation where this could be used as an evasion measure. As was said earlier a person cannot arrange for a marriage to take place at a specific time in order to enable him to give the property over and thereby avoid death duty. Marriages do not take place in order to meet the exigencies of the tax law. They take place for other reasons.
The two biggest problems facing rural Ireland at the moment are first, the reluctance of parents, who have passed the stage where they can get the full value from their land, to transfer the ownership of that land to younger members of that family who can work it properly, and secondly, a problem which is closely linked to the first, the fact that people in rural Ireland defer marriage for longer than they should. This very often results in their dying and leaving children who are too young to look after themselves properly.
These problems have been recognised by many authorities. The Catholic Church has set up marriage bureaux all over the west of Ireland because it recognises, as the Government do not seem to recognise, that the problem of low marriage rates is one of the most serious problems besetting rural Ireland at the moment. What is the Government's response to this situation? It is to introduce a section like this.
The present law gives the person who looks ahead to his death duty liability, and some people do although the Minister seems to think that very few do, a definite incentive to dispose of the land to the parties of the marriage at the time of that marriage. This section will effectively remove that incentive. When this incentive is removed he will hold on to the land and keep on postponing the transferring of the land. Even though he might intend  to do it, he will be getting old, forgetting about things and he will just not bother. If the non-application of death duties in relation to gifts given on marriage were retained there would be a positive and definite incentive at the time of marriage to transfer the property. This section will lead to people hanging on to land longer than they should and even longer than they have held on to it to-date, which in some cases it too long anyway.
In relation to the second point I made about the encouragement to early marriage it is very often the case in rural Ireland that men are not prepared to get married as they are not in a position to support a wife and children, because they do not own the land on which they are working. If there was this arrangement whereby the parent could see that he would not only be benefiting his own son by giving him land, but also possibly avoiding the greater burden of death duties than he would otherwise have, he might encourage the marriage by transferring land in the hope of availing of the exemption which at present exists. If this exemption is removed yet another incentive to the people to transfer land and thereby encourage their offspring to get married will disappear.
I believe this legislation is socially retrogressive. The reason given for it, mainly that it is intended to avoid evasion, is quite unrealistic as the Minister has himself admitted there is only one known case of evasion under the present exemption. It is almost impossible to make an arrangement for such an evasion because, as I said earlier, marriages cannot be arranged to suit the exigencies of tax law.
Mr. Colley: I have heard more wild and unfounded statements in relation to this section than I have heard in relation to anything for a very long time. Some were made outside the House and others made during this debate. I have heard statements about policy enunciated here being anti-social, against national policy, and all sorts of other allegations, but no justification for them. Indeed, we had an illustration in what Deputy Bruton was saying. When it came near the  crunch he started saying a person might do this; he might settle money or transfer land on a child on marriage to avoid duty—might. The truth of the matter in my belief is what was stated by Deputy Tully and that is that most transfers in consideration of marriage are made because the people want to help their children, to set them up, not for the purpose of evading duty, and that the exemption of marriage gifts from liability for death duty is no encouragement whatever in practical terms to marriage, early or afterwards. If it is, what we are being asked to believe is that people arrange marriages and make settlements in order to avoid death duties. I suggest that is a ridiculous proposition.
Mr. Colley: It just does not stand up. The truth is that in what we might call the normal bona fide case people make these transfers in consideration of marriage because they want to help and set up their children. The fact that as a result there is exemption from death duties is a welcome bonus but they would do it anyway in the normal kind of case.
There is no change whatever involved in this section in the legal basis or concept of marriage gifts. For instance, the rate of stamp duty is not being changed. All that is involved is the question of limiting, for the purpose of exemption from death duty, the value of the gifts which would qualify for exemption to £5,000 on the case of a gift to a child or remoter issue and £1,000 when the gift is made by any other person than the parent.
To keep this in perspective let us remember that any gift, whether it is in consideration of marriage or not, will not be liable to death duties if the donor lives for five years after the gift is made—any gift. So that, what we are talking about here is a gift made in consideration of marriage and where the parent, say, who made the gift dies less than five years after the gift is made. That is what we are talking about and these are the limited circumstances on which we are hearing this big build-up of this being anti-social legislation, anti-marriage,  and all the other allegations that have been made. In this very narrow field, as I think Deputy Cosgrave said, and rightly, we are dealing with only a small number of cases.
It has been said that this is an urban approach. I want to ask this House is it an urban approach to take steps which will prevent very wealthy people, on the occasion of a marriage of their children, disposing by gift to their children of very large sums of money or property and thereby evading liability for duty on that property while other people who are not in the same category cannot avoid or evade their liability? I am not saying—it would be a ridiculous proposition—that people arrange marriages in order to evade duty. Of course they do not. What I am saying is that in the case of wealthy people—they are human like others; they get married and they have children and their children get married—where their children get married, because of the exemption that exists, there is an open door for them to dispose to members of their families of large amounts of property and, automatically, if they die the day after, there is no duty payable. That is the kind of evasion situation with which we are trying to deal.
Mr. Colley: That is what I am saying. He does not arrange the marriage to do this but when the marriage is arranged and he has sufficient wealth he can avail of it to an extent that nobody else can avail of it. The fact that earlier I mentioned only one case does not by any means mean, as I think Deputy Bruton suggested, that there was only one known case. I did not say any such thing. There are quite a number of known cases.
I would remind Deputies also that  gifts in consideration of marriage are not confined to the farming community and, again, my approach in this is similar to my approach in the case of the previous section we discussed of artificial valuation. I want to stop evasion and avoidance and at the same time I want to preserve the situation for the genuine bona fide case. I would suggest to Deputies that they consider the situation again where, as I have said, any gift whether made in consideration of marriage or not is free of duty if the donor lives for five years but in the case of a gift in consideration of marriage we are providing that a gift to a child by a parent worth £5,000 will be automatically exempt from duty if the parent dies the next day. If we do not provide this then any person who is wealthy can on the occasion of a marriage of his child dispose of very large sums of money and if he should die the next day no duty is payable whereas anybody else is not in a position to avail of this.
Mr. Colley: Anybody who is not in the position of being very wealthy and or having a child getting married. If you have not the combination of these two circumstances you are like anybody else and your executor pays your death duties.
Mr. Colley: They may have the money and not the child getting married or they may have some money but not be able to afford to lash out large sums of money on each of their children getting married. I want to know do Deputies, particularly Deputy Tully, support the idea that people should be entitled, if they are wealthy, to avail of this opportunity to avoid estate duty and death duties in this way?
Mr. Colley: No Deputy has explained this statement that it is socially desirable. What is the position? We are talking here about gifts up to £5,000. That is a substantial amount. The case being made against this, which has ignored all cases other than farming cases, is that this is a built-in inducement against people handing over the farm to their children. If one considers that he will find that there is no basis at all for that suggestion because as was suggested and agreed——
Mr. Colley: The Deputy did not wait for the “because”. Maybe he would listen to the argument. It was agreed on all sides, I think, that people do not arrange marriages in order to evade duty. Therefore, what are we talking about? Is it not the only basis for the argument that this provision is discouraging early marriages? Is not the only logical basis for that, the assumption that people, if they have this exemption, will arrange marriages? Otherwise, there is no basis for the argument.
Mr. Colley: Let us be clear on this. If it is to be a question of transferring the property they can transfer it irrespective of whether the son is getting married, and if they live for five years afterwards there is complete exemption.
Mr. Colley: That is right, provided they are alive. If a person should be on his deathbed at the time he had a son or daughter who was getting married, he would be positively safe in transferring them. There is a built-in inducement not to transfer.
Mr. Colley: There is no question of that. The argument here is that this provision is an inducement to people not to transfer property but there is no basis in logic for that argument.  The inducement to people to transfer their property in order to avoid duty lies in the general exemption of gifts that have been transferred during the five years before the death. In the case of a farmer whose son is getting married and who decides to transfer the farm to the son, he will decide to do that only if he considers himself to be old enough to give up or if, in his opinion, the son is old enough and experienced enough to manage the farm. There are other factors that may be involved but these two are the basic ones and if either of them is not satisfied, he will not transfer the farm.
Mr. Colley: If the inducement of avoiding duty is a potent one, he will transfer the property regardless of whether his son is getting married and he will do so as early as he considers it feasible to avoid duty. If his son is getting married and he considers the time ripe to transfer, he will transfer but if the question of avoiding duty is what is in his mind, he will have transferred before that because he will know that time is running out for him as regards a gift other than in consideration of marriage.
I would suggest that the more one examines this, the more he will find that the inducement involved in nonpayment of duty in the case of transfers on marriage is virtually nil. On the face of it, it may look like a substantial inducement but when one examines the circumstances it is virtually nil as an inducement. Again, I would remind the House that by dealing with this we are controlling opportunities for evasion which exist and which have been availed of before but  we are not interfering with the ordinary situation that arises on transfer in consideration of marriage. To suggest that what we are doing here is contrary to established social policy is a misunderstanding and is a misreading of the meaning of the section and a misreading of the actual situation in the country. The real inducement arises on the ordinary gift and not the one made in consideration of marriage because such gift is made in consideration of marriage by reason of the parent deciding, for various reasons, that this is the time to transfer and not because of exemption from duty.
Mr. Colley: Assuming that the house was provided by the parent to the son or daughter on marriage and that it was worth more than £5,000, duty would be payable only if the parent died within five years of making the gift.
Mr. Tully: Supposing the parent, having spent all his spare money in providing the house for them, died within a short time of the marriage taking place—not only would the daughter, who would have no income of  her own, have to pay the ordinary bills but she would also have to find 3 per cent on the value exceeding £5,000 for the purpose of giving a present to the State. Does the Minister consider that to be a good idea?
Mr. Cooney: In effect, the Minister's argument is that marriage is no inducement to transfer and that the real inducement is the possibility of living for a further five years. If that is the kernel of the Minister's argument, why put in any exemptions at all for a marriage transfer? Why a sum of £5,000 in the case of a transfer from parent to child and the sum of £1,000 from a relative to a nephew or a niece? He should not allow any exemptions at all.
Mr. Cosgrave: That makes it worse. The Minister said on Second Reading that estimates of the number of gifts disclosed to the Estate Duty Office during the years 1966 to 1968 indicate that an average of 1,000 gifts per year were made and that of these 81 were in consideration of marriage.
Mr. Cosgrave: I wish to reiterate what was said here by a number of  Deputies. How, in rural Ireland, do you raise money on land? you just cannot do it. Of course, if it is a really big farm there is probably no problem but even then it may not be a good thing, you must part with some of it or you must part with stock. It cannot be got. I am convinced this has emerged from a lack of knowledge of rural conditions. It also applies in urban areas but it is not as great. We are making great efforts to establish industry here, to induce outsiders to come in. If Irish people have established industries or business concerns and want them to continue, to hand on the business to their children, if they have children— if they have not it does not arise—is it not sound economic and social policy to permit them to do it and to encourage them to do it? Can anyone argue that because they are getting some benefit in very special circumstances it is denying it to somebody else or that they are being obliged to pay more in duty? I do not believe that argument stands up. There is no case here. If there are cases of wealthy fly-by-nights getting away with it, it should be possible to devise some system to deal with them. If there are such people it is surely extraordinary that they can arrange marriages and anticipate that they will die within the period. There are the obvious cases of average holdings. Deputies who represent agricultural constituencies, whichever party they belong to, will agree that you cannot raise money on a holding, that you can either sell the stock or part with the holding, but the idea of raising money on the holding is just out. Everyone agrees that it is bad policy to sell part of the holding. Indeed, the Land Commission in most cases will not agree to the subdivision.
The proposal here is apparently designed to catch a very small number of people but, in fact, will catch in the net a whole lot of people whom it is recognised and accepted should be facilitated in ensuring that their holding, their business or industry should be carried on and should be in an economic position, strong enough to meet what everyone recognises as inevitable nowadays—the demands of increased capital and increased liquid  finance in order to operate effectively. I believe this proposal has been transferred from circumstances that are entirely different from those in this country and that it is unsuited to our conditions, our circumstances and our needs.
Mr. Bruton: The Minister very significantly and enthusiastically “hear, hear-ed” Deputy Tully when he said that people do not transfer land or property on marriage because they wish thereby to avoid duty but because they wish to set up on a proper basis the new family which is being formed. Then he comes along and justifies this section by adverting to cases in which people do transfer property on marriage in order to evade duty. The Minister cannot have it both ways.
Mr. Colley: The Deputy is misrepresenting what I said. If the Deputy wants a fair argument I will give it to him but if he wants to twist my words I will not bother. He can have it one way or the other. I am trying to meet the argument fairly but if he wants to twist my words——
Mr. Bruton: The Minister will get a chance to meet the argument fairly or unfairly, but I do not think he will be able to do so. Assuming that people, as the marriages take place, settle a certain amount of property on the parties to the marriages. There may be three children and the parents settle property on them as they get married. Suppose a parent sets aside the same amount to settle on each one. We will have the situation—I may be wrong about this—that if one of the marriages takes place eight years before the death that person will get his slice of the property without paying any duty. If another marriage takes place six years before the death that person also will get his property without paying duty. If the third marriage takes place three years before the death that person will have to pay duty.
Mr. Bruton: This is the problem. The most recently married person has to pay death duties whereas the people who are less recently married and have had more time to settle themselves in life get away without death duty. This seems to be unjust. The person who is two or three years married, who may be buying a house and experiencing all the difficulties which recently married people do experience, will have to pay the death duty whereas the other people will not.
I was speaking about the effects of this section on people who should transfer land earlier in their lives to their sons. The existing provisions do provide a definite incentive to this effect. It is difficult to explain it adequately but I hope I shall succeed in conveying at least something of what I have in mind. If you are talking about this five-year ruling you are talking about something which nobody can predict because he does not know for how long he will live. There is no definite and immediate incentive to transfer the land now rather than in a year or two years hence. In those circumstances there will be the tendency to postpone from one year to the next. If you have an exemption which is related specifically to one event, namely the marriage of an offspring, there is an immediate incentive to transfer at that time rather than postpone. It is not that people want to hold on to their land in principle but they are just not prepared to make the effort to do it and they keep postponing it. If they know that at the point where their son is getting married there is a definite incentive to make the gift that will be enough to overcome the inertia which leads to postponement and ultimately leads to the property not being transferred at all during the lifetime of the testator. That is what I am trying to get at, this immediate incentive which it is proposed to remove in this section.
Dr. O'Donovan: I want to refer to a point Deputy Cosgrave made. This section is not in the Bill for the social reasons the Minister has been giving us. This Finance Bill is full of attempts to collect pennies here and there because, in fact, the Government are in dire financial trouble and everything about this Bill—the taking away of the small amount given to income taxpayers last year and this section—are all indications of this. Why did the Minister put this section in the Bill? One could not really say it was put in because he would get a substantial amount of money. Obviously he will not. He admits there were 81 cases in three years, an average of 27 a year. This is pursuing minutiae. We have 700,000 income tax payers because they are now being pursued down below ground level and at the same time we have the other extreme where the Minister is pursuing 81 cases in three years. People do extraordinary things when they are in dire difficulty. The Minister for Transport and Power said today that Aer Lingus are down £800,000 and are looking for money from the State. We know this——
Dr. O'Donovan: I shall talk about exemptions from estate duty on grounds of marriage. It was regarded as a good thing to make one's daughter an air hostess but I am not so sure that is the situation now. Why did the Minister put this section in the Bill? The reason is that by doing this kind of thing and pinching relatively wealthy people he is proving to those who have to pay income tax on sub-subsistence level incomes that he is being fair, that he is going to grind everybody.
I agree with Deputy Cosgrave that this is urban minded because the fact is that a 100-acre farm today worth £20,000 on which something like £1,250 duty would be paid, will not give any income comparable with the value of £20,000. Anybody who knows anything about agriculture knows this. It is a different type of thing. It gives security but where is the £1,250 to  come from in cash? Some months ago Deputy Hogan O'Higgins said she wished farmers would be made pay income tax because everybody would become ashamed of how small farm incomes were. We in this party have proposed that farmers should pay tax, that they should submit accounts if they were above £100 valuation. I think that is right and proper in view of the low level at which the ordinary worker pays tax. I cannot conceive of the mind that thought up this section. I do not know where it comes from.
Admittedly, when people are engaged day after day in a relatively limited area they very often get most peculiar notions and extraordinary ideas come into their minds. They inflate the importance of their own work and this is true of all humanity. Some of us like being Members of Dáil Éireann and get a good deal of enjoyment out of it. But other people get great enjoyment out of their work and that includes people in the Estate Duty Office. I want to be fair to them: in the past the Estate Duty Office were very reasonable.
Dr. O'Donovan: I thought we were on the section. It is relevant to the section. The Ceann Comhairle wants me to talk only about marriage. There is no use in pretending: most of these cases would be cases where a farm would be passed on by a parent to a child who is getting married although Deputy Tully is right in that there could be a gift of a house by a wealthy person to a daughter getting married. These are the type of cases that would happen. But the most significant case undoubtedly is the case of the land that is passed on. There is no doubt that the case made from the Fine Gael benches that either some of the stock has to be sold or the working capital has to be run down to pay this kind of money is valid. If you have the security of a 100-acre farm you have every right to spend your income but if you do, and if you are caught by this provision, you are in real trouble because it will take literally years to  pay off this sum. I am not exaggerating. Assuming the Fianna Fáil Party have some rural philosophy it is obvious that their attitude towards income tax for farmers is an admission that there is no worthwhile income from land—not that large sums of money would not be got by imposing income tax on well-off farmers whom, I think should pay tax.
In view of the miserable size of what is involved I wonder why the Minister brings in this section or allows himself to be codded into doing it by some enthusiast of the type I mentioned. He must know the sort of rumpus that would arise in the House about this kind of section. I do not understand why the Minister gets himself into this kind of alleyway and allows himself to be pushed against the wall. He has produced no argument worth mentioning in favour of this. He has admitted that the yield is relatively small. The only case he has made is where some old man on the verge of death says to a daughter a week before he dies: “Hurry up with your marriage, Mary, because I am near death and I will pass on the farm to you. I will pass away happy because the State will not get anything from me.”
Under existing law the fact is that in such a case such a man will escape only up to £5,000. There is no use in pretending this sort of thing is a normal occurrence. There is no use in dealing with head cases in legislation. The case the Minister has put before us is a sort of head case of a man on the verge of death thinking how his successors can evade duty on whatever property he will leave them. This is not normal. In other cases, I see no reason why a person, no matter how wealthy, should not pass on his wealth within the laws as they exist already.
Dr. O'Donovan: The day when 90 per cent of the agricultural cases coming to the Revenue Commissioners do not pay any duty is rapidly passing away and all the Minister has to do is sit on it as he is doing with the income tax law. At the present rate of inflation, in a short time 99 per cent of the farmers will be in the estate duty bracket—even farmers with as little as 20 acres. In another decade every farmer, no matter how small, will be paying estate duty.
Mr. Enright: I issue a challenge to the Minister in regard to this section. If the Minister believes he is right in this matter, let his party remove the whip from the Fianna Fáil members and have a free vote on this section. I predict that the members of Fianna Fáil from rural Ireland will realise that the method of transferring property from a father to his son or  daughter is popular and any changes attempted by way of this legislation will be resisted.
This method of conveyance has been used by the farmers for many years. It is a simple and easy method of transferring property. When a son or daughter is getting married the father is prepared to transfer the property. The cost involved is not large and it was a reasonable and proper way of carrying out the transaction. I know that many rural Deputies in Fianna Fáil are worried about this legislation. I come from the midlands——
Mr. Enright: When a conflict such as this arises, I believe a person has to consider the matter and look at it objectively and I am trying to do that in this instance. This legislation is a mistake and if the Minister considers the matter he will recognise it to be such. Many farmers will consider the Minister a wise man if he withdraws the section and I am appealing to the Minister to do so.
The amount of money to be obtained by this measure will be small. I have discussed this matter with many farmers and I have found that they are very worried about it. They may not become liable for duty but there is always the worry at the back of their minds that they will be caught by this measure. The anxiety that is being caused and the hindrance that is being created in regard to marriage settlements, combined with the fact that the amount involved will not be large should be sufficient reason for the Minister to withdraw the section.
 If the section is passed it will prove that the Government are desperate to raise money. The fact that they have even contemplated such a measure shows how short they are of funds. When one considers this legislation and reads about the proposals to introduce the value added tax for the sale of cattle——
Mr. Enright: It shows the attitude of the Government in their efforts to gather revenue. It shows the ruthlessness of the Government in their efforts to raise revenue. If the added value tax is introduced for agriculture that industry will be in turmoil.
Mr. Enright: This matter is specifically referring to marriage settlements and the raising of revenue. This tax on marriage settlements, combined with the proposed introduction of VAT, causes me to worry about the Government's attitude to farmers.
Mr. Enright: It demonstrates that the Government are out of touch with rural Ireland. Farmers are finding it difficult to keep going. The amount of money that this measure will provide for the Government will be small, but the amount of trouble, confusion and worry caused to the people will be great. If a farmer wishes to obtain money from the Agricultural Credit Corporation or from the banks, he finds it extremely difficult to do so. I have frequently come across applications made to the ACC and I know that nine out of ten are refused. The same situation applies to the banks. If this section is passed and a person has to pay estate duty, he may be unable to obtain money from the ACC or the banks and, therefore, he will be forced to sell stock to pay the duty. The result will be that his farm will become run-down; it will  not be stocked to capacity and when the farmer has no stock to sell he will be forced to sell the farm.
There has been much talk about entry into the EEC. Farmers are finding it difficult enough now. When we succeed in getting into the Common Market, at that stage I believe it would be a tragedy to see sections like this being imposed upon the rural community here and being imposed upon farmers. I would be sad to see any farmer in this country having to sell his farm to pay estate duty for which he had become liable and his farm being swept up and bought by somebody from Germany or France, somebody with plenty of money when our farmers are not able to compete on the same level. It may, in fact, happen if this legislation goes through.
I believe the Minister to be a reasonably fair man and I would ask him to withdraw the section. I do not know how he ever thought of bringing it in, but I am quite certain that if he listened to what I said at the beginning and allowed a free vote on this section, he would be walking into the lobby on his own to vote for it. I do not believe that anybody else would follow him. I believe the section is a mistake and he should be big enough to withdraw it. If he does so, the farming community will think highly of him. The NFA at present are very worried about this section. They have issued many statements and The Farmer's Journal has pointed out the dangers of it. Everybody is quite well aware of this section and many of the farmers who worked hard for this country took part 50 years ago in different fights for different causes. These people now are reaching the stage where many of them are handing over their property to their sons or daughters and now find that they are to be penalised to this extent.
We have at present very many commemoration ceremonies and different festivities commemorating different events, and I believe that it would cost as much for one of these receptions as the entire amount of money brought in by this section in a year. We are getting our priorities very wrong and we should reconsider and have a further look at ourselves and at the existing  position. It would be sad to see any farmer after handing over his farm to his son or daughter, when his son or daughter was getting married, dying within two or three years, and that son or daughter being forced to sell to pay the duty on a farm which he had worked in his lifetime to build up, or to see them in the position of having to obtain money at high interest rates—perhaps from a credit company or a hire-purchase company—to pay off the duty for which he had become liable. The amount of duty he would have to pay, together with the interest on the money he would have to borrow, would be such that he might be left for the rest of his life struggling to pay off the interest.
I believe it is not wise; I believe that this section is a mistake and a blunder and I ask the Minister to reconsider it. He would be a much wiser man if he did. The amount of money brought in by it is small but the anxiety, the worry and the trouble which it is causing is considerable, and in fact in relation to the number of people who will be affected, I believe it is unfair to them and for this reason I ask him to withdraw it.
Mr. Cooney: If I might clarify a point, we have had a long debate on this matter and I have not yet heard from the Minister his reason for this section. Is it that he considers he is closing a loophole or that he considers as a matter of justice that gifts in consideration of marriage should be on exactly the same footing as purely voluntary gifts?
Mr. Colley: I thought I indicated that the reason for this section is that I want to close a loophole which has existed and which has been used and I want at the same time, while doing that, to retain the existing position for what I might call the normal case. I would remind Deputies that when they are talking about farms being transferred in consideration of marriage, it brings us back to the section which we discussed earlier whereby the artificial valuation of land can be applied, and if on the basis of the artificial valuation—that being applied—you can get  a situation where no duty is payable, then it applies in the case of a transfer in consideration of marriage as it applies to any other case, and Deputies will remember that as a result mainly of that artificial valuation method approximately 90 per cent of the cases of agricultural holdings coming into the Revenue Commissioners do not pay duty. That is a very important thing to bear in mind in the context of this.
In the case of non-agricultural cases, I think the limits are not unreasonable —£5,000 and £1,000—but they will be effective in ensuring that this loophole I have talked about does not exist any more and I make no apology to any Deputy or anybody else for closing this loophole. I do not accept the idea that a man who is wealthy should, by reason of this exemption which was not intended for that purpose, be able to avoid very substantial liability for duty and I think it is reasonable, and indeed that we have a duty, to close that loophole while maintaining the position for the ordinary case. I believe that is what we are doing here. If one has regard in the case of non-agricultural cases to the levels of £5,000 and £1,000 and in agricultural cases to the artificial valuation of land, I think it is a fair approach to this problem which exists.
I would also say to Deputy O'Donovan and to Deputy Enright who made a most inconsistent speech in my opinion—he seems to be going one way for one moment and another way afterwards—and who at one stage said that this was going to yield a small amount of money, that he is perfectly right. I do not know how much it will yield but I am quite certain that it is going to be small. Having regard to the fact that there were 81 such cases over the three-year period, it is clearly going to be a small amount and therefore the suggestion that this is of vital importance to the farmers of this country or a very popular way of transferring property just does not stand up on examination of the facts. I make no apology because it is small for doing something about it. Deputy O'Donovan says that I am pursuing minutiae. I want to tell  him I believe that we—I as Minister for Finance and he as a Deputy—both have a duty in distributive justice as far as we can not to ignore loopholes of this nature because they are small, because there are a small number of people involved in it. I think we have an obligation so far as we can——
Mr. Colley: That is my very point. If I were not doing this and if Deputy O'Donovan were to think of it, he would come in here and attack me for allowing wealthy people to get away with this while we were pursuing people on, according to him, substandard wages for income tax.
Mr. Colley: If they were not aware of the evasions they would not make the point. It is quite clear to me that the main opposition to this section is coming from people who fear that it will affect them. If it will affect them, they must be people who are reasonably wealthy because, if they are not reasonably wealthy, they will not be affected by it, whether they are farmers or whether they are not.
Mr. Colley: The case made here mainly has been the case of farmers. I want to repeat that, where the farm is transferred in consideration of marriage, the artificial valuation applies. This has operated effectively to exempt about 90 per cent of agricultural cases from duty, in general, anyway. There is no reason why it should not operate in the same way in this case. Having regard to that, and to the limits here, I would suggest that we are ensuring that the genuine, bona fide, case is being kept in precisely the same position as it has been in for years. We are closing the loophole on the wealthy people who have availed of it. I feel that this is an approach to the problem which is reasonable and which should command the support of the House.
Dr. O'Donovan: It is strange that the Minister has not any estimate because I have noticed that the Revenue  Commissioners have a great capacity for making extremely accurate estimates. Every time we put the Minister in a corner he cannot give us any figure. He could not even give us the number of income tax payers.
Dr. O'Donovan: I am not missing the point. The Minister is deliberately pretending that he does not see the point. We have this continuously. Without doubt a reasonable estimate could be made of this. I have been flabbergasted at the accuracy with which the Revenue Commissioners have been able to estimate large changes in duty, and large changes in various forms of duty.
Dr. O'Donovan: I am not asking the Minister to produce a rabbit out of a hat. I want to draw his attention to the fact that he could not give us any figures—or told us that he could not. This is typical of the Minister who said to me yesterday that the air companies were making money and said today that they are making big losses.
Mr. Bruton: I did not desist. I had made my point quite adequately and to my satisfaction and, judging from the Minister's reaction, the points got home to him because he virtually exploded. I moved on to the next point having made my point adequately.
Mr. Colley: If I am approaching Opposition arguments on a reasonable basis I expect to be treated that way and not to have my words twisted but, if somebody wants to twist my words, that is his privilege and he can take the consequences.
Mr. Bruton: I am not conscious of having twisted the Minister's words. I am readily prepared to admit that it may be due to a lack of understanding on my part either of the Minister's terminology or of estate duties.
Mr. Bruton: I honestly believe that the Minister's argument contained an inconsistency and the Minister has not met my arguments on that matter. He interrupted, but he did not deal with them. This charge on my part is that, first of all, the Minister agreed with Deputy Tully that people do not transfer property to their children who are getting married in order to evade duty, and then he tries to justify this section  by saying that it is to deal with people who make such transfers of property in consideration of marriage, in order to evade duty. There seems to me to be an inconsistency there. However, perhaps, the Minister will be able to explain it to me.
The other point he did not deal with related to the question of people getting married six or seven years before death and getting away without paying death duty while those who marry within the five-year period have to pay death duty. That seems to me to be unfair because it penalises the more recently married couple and that is wrong. The Minister did not deal with the point I made in relation to the very definite incentive to transfer land as against a very indefinite incentive given to people by the five-year rule.
He did not deal with the questions asked by various speakers, namely, if this loophole is being used, by whom is it being used, in what circumstances is it being used, how often is it being used, and how much will this section be worth to the Estate Duty Office in increased revenue. A quantified reply to those questions is essential to an assessment of whether or not this general penalty is justified by the alleged evasions which the Minister says are taking place. I do not believe they are taking place on the scale claimed by the Minister.
The Minister also claimed repeatedly that there are only 81 cases in a given period on record in the Estate Duty Office. On Second Stage Deputy Fitzpatrick made a point which I do not think the Minister answered. Not knowing anything about the way in which a solicitor deals with estate duty cases, possibly I am out of depth in trying to explain this but, so far as I know, what Deputy Fitzpatrick said was that that figure of 81 was not representative because most people, knowing that there was this exemption in existence when filing the affidavit, I think it is, for estate duty purposes would not include it even though it did take place within the period. They would not bother including it because they knew it was exempt and, therefore, it was of no interest to the Estate Duty Office.
 Therefore, this figure of 81 relates only to cases where the people decided to include it in the affidavit, which it really was not necessary for them to do in practice. There may have been some strictly legal obligation upon them to do it. In practice, Deputy Fitzpatrick, who is a highly competent solicitor, did not think it would be necessary to include this. If a man of his competence did not think so, I am sure many other solicitors did not think so either. Therefore, this figure of 81 is not representative of the number of cases in which this concession in relation to gifts in consideration of marriage was availed of. Therefore, the Minister in quoting that figure is unfairly and incorrectly minimising the effect of the section.
Mr. Cooney: For the reason that Deputy Fitzpatrick gave: there is no query on the estate duty form as to whether there was a gift made on the consideration of marriage. There is a  query as to whether there is any gift inter vivos.
Mr. Enright: Most country solicitors have, of course, one or two of these every year. There are about 1,500 practising solicitors and, of that number, there are probably 500 practising in Dublin. That leaves 1,000 solicitors around the country. On that calculation there would be a minimum of at least 2,000 every year. This is a standard method of conveying property. Could the Minister get the correct figure? It should be very easy to get it.
Mr. Colley: There is no doubt at all. Let us face it: there is no doubt at all about the number that emerged from the Estate Duty Office over that period; nor is there any doubt that the form submitted contains questions as to whether there were gifts inter vivos. The calculations made by the Opposition are based on a number of assumptions.
Mr. Colley: Deputy Bruton says there is an inconsistency in what I say  because I agreed with Deputy Tully when he said that the people who were transferring in consideration of marriage were doing so to help their children. I “hear, heared” that and, when I rose, I said that this was what the vast bulk of the people were doing; they are not interested in evading duty; they are doing this because they want to look after their children. I went on to say then “but there are wealthy people who are using it”. There is no inconsistency. I said that at the time. I did not say everybody making a gift in consideration of marriage is doing it to avoid duty.
Mr. Colley: No, but it is clear they would cover the normal cases and catch the very wealthy people. Deputy Bruton also said I did not give details of the amount involved. On a number of occasions I said the amount involved was not available but clearly it would be relatively small. I do not think there is any further information I can give the House on this.
Mr. Colley: Maybe not, but maybe other people's consciences are not so happy. The allegations made here are tantamount to saying that most solicitors are incorrectly filling in the  affidavits and schedules of assets. I do not believe that is true.
Mr. Cooney: If that should be the case section 41 would soon correct it. I asked the Minister to state his reasons for this section. Was it to close a loophole and/or was it to equate marriage gifts with ordinary gifts? In his reply the Minister said it was to close loopholes. He did not say that it is a matter of policy with him to equate marriage gifts with ordinary gifts and I take it, therefore, that his motive for this section is to close a loophole, a means of estate duty avoidance that has been availed of. Am I correct in that?
Mr. Cooney: If the Minister's object is to close a loophole, estate duty avoidance or tax avoidance is something that must be within the independent manipulation of the person seeking to effect the avoidance. The setting up of a private company, the making of a settlement, the setting up of a holding company, all this sort of manoeuvring to avoid duty or tax, is within the province of the person who wants to effect the avoidance. He may need the co-operation of third parties in doing it but the scheme or the avoidance which he draws up is not conditional on any matter over which he does not have control.
In this case where the Minister is saying the avoidance depends on marriage I would submit to the Minister that there is the world of difference between the normal types of avoidance measures and a marriage settlement because essentially the person disposing of the property has no control over the marriage which is the trigger for the avoidance. The marriage is entirely  within the compass of third parties over whom the donor has no control. Consequently, I would submit to the Minister that one cannot have estate duty avoidance where the avoidance is dependent on a fortuitous happening over which the person making the gift cannot and does not have any control. It is invalid of the Minister to state that the reason for this section is to close a loophole because it is not a loophole which is available in general terms to everyone who wants to avail of it.
The fact that a marriage may be going to take place at an opportune time is not, I would submit to the Minister, a loophole which deserves statutory sanction, particularly when that statutory sanction can and does take with it adverse effects on more innocent people than on people whom the Minister would classify as guilty. The innocent people will, by and large, be comparatively unwealthy, if I may use the word, farmers and business people in towns. It has been my experience that any farm other than a very small farm falls to be valued at estate duty stage on market value because when the valuation is multiplied 20 times there must be a desperate situation in regard to personality in the estate if the resultant figure does not exceed £2,000.
Let us take a farm of £60, which is a small farm; 25 times the valuation of £60 is £1,500. A person with a 60 acre farm would want to be in a dire financial position if he had not net personalty to bridge the gap between £1,500 and £2,000. He would probably have a tractor and a car and if he had 20 cows, which would not be excessive on a 60 acre farm, they would be worth at least £2,000. I do not know how the statistics are arrived at in the Estate Duty Office but I am telling the Minister as a matter of fact that there are very few farms—they are only farms of a tiny valuation—which fall to be valued on the artificial valuation basis. These people will now be caught by this section because the Minister wants to close what he calls a loophole which has been availed of by some wealthy people. It is not a loophole because it depends on circumstances entirely outside the control of  the person who is going to avail of it. I submit to the Minister that his reasons for introducing this section are illogical.
Mr. Colley: No, I think I have dealt with it in considerable detail before. I agree in the main with what Deputy Cooney says about the theoretical basis of a loophole and evasion. This is a special case which can, as he says himself, be availed of by a very limited number of people. It is for this particular reason that I was making the point that they should be treated the same as everybody else.
Mr. Colley: My contention is that we are not doing the harm. This is borne out by the relatively small number of agricultural cases on which duty is paid. In the interests of the honour of the solicitors' profession I should draw attention to the fact that the cases of transfers in consideration of marriage which come to the notice of the Estate Duty Office are only those in which the donor dies within five years. There could well be far more such transfers executed each year but the ones on which any question arises would only be those where the donor dies within five years.
Mr. Enright: I am glad the Minister said that. It is a matter of custom  that this occurs in the country. This particular mode of conveying property is a very normal procedure. Deputy Tully seems to believe it is not an incentive to marriage; that is debatable. I feel that as it is used so often——
Mr. Enright: The point is that it is a very normal procedure. This section is going to upset the practice which I believe is a very good and wise practice because it leads to the desirable situation where farmers transfer property to their sons and daughters. This is something I had hoped would increase.
We are discussing entry to the EEC and if this section is brought in it will have a detrimental effect on our farmers and for that reason the Minister should reconsider the matter. It is a mistake to upset this procedure at this stage. The figures quoted by Deputy Cooney in regard to the artificial value are important. Many thousands of transfers before marriage take place every year. The figure of 27 per year who are going to be liable for estate duty involves a very small amount of revenue. It is a serious matter to upset this procedure and for that reason the Minister should withdraw the section.
Brady, Philip A.
Brosnan, Seán Connolly, Gerard C.
de Valera, Vivion.
Fitzpatrick, Tom (Dublin Central).
Gogan, Richard P.
Healy, Augustine A.
Hillery, Patrick J.
Burke, Patrick J.
Collins, Gerard. Kenneally, William.
Kitt, Michael F.
Lalor, Patrick J.
Lemass, Noel T.
Clinton, Mark A.
Cooney, Patrick M.
Dockrell, Henry P.
Dockrell, Maurice E.
Donegan, Patrick S.
Enright, Thomas W.
|Fitzpatrick, Tom (Cavan).
Flanagan, Oliver J.
Harte, Patrick D.
Hogan O'Higgins, Brigid.
Jones, Denis F.
Murphy, Michael P.
O'Connell, John F.
O'Higgins, Thomas F.
O'Sullivan, John L.
Tellers:— Tá: Deputies Andrews and S. Browne; Níl: Deputies Begley and Kavanagh.
Question declared carried.
Question proposed: “That section 41 stand part of the Bill.”
Mr. O'Higgins: I wonder if the Minister would indicate what is the position, under this proposed section, of an executor of an executor who takes on the administration of an estate and goes to a solicitor to have the estate administered. Is he to be liable, as the accountable person, for what may have been done or seemed to be done by the previous executor and, in particular, is he to be held accountable under subsection (2) (b) to displace the onus of proof? Would it be accepted that he, having nothing to do with the previous administration of the estate, although he is now the accountable person, could be held amenable for penalties, he having only taken up the administration of the estate?
Mr. Colley: The Deputy will note that at the end of subsection (2) (b) the onus is placed on, in the case he envisages, the executor unless he proves that it was submitted without his consent or knowledge. In the circumstances described by the Deputy it seems to me that the phrase, “without his consent or knowledge” would exculpate the executor.
Mr. O'Higgins: If he proved it.
Mr. Colley: Yes.
Mr. O'Higgins: I am concerned to know how he may prove it. The previous executor may have been with solicitor. A and may have had the estate in the hands of one particular solicitor. How does a succeeding person prove that whatever was submitted was submitted without his consent or knowledge? Why should he have to partake of the onus of so establishing?
Mr. Colley: The general principle is that being the accountable person, if return is made fraudulently or negligently he is, on the face of it, responsible unless this was done with his consent or knowledge.
Mr. O'Higgins: Unless it was done without it.
Mr. Colley: Yes. I am sorry. Unless it was done without his consent or knowledge.
Mr. O'Higgins: And he has to prove that?
Mr. Colley: In the absence of his having to prove it I think that it would probably in practice mean that he would never be liable although, in fact, it could have been done with his consent or knowledge.
Mr. O'Higgins: Is it not a tremendous burden to put on anyone who succeeds in the administration of an estate that prima facie he is held liable unless he proves to the contrary for all the ommissions and actions of those who went before him?
Mr. Colley: I am sorry. I think I was thinking at cross purposes with the Deputy. Am I right in thinking that the point he is making is that this would arise perhaps in the case of  somebody who had no consent or knowledge——
Mr. O'Higgins: Who succeeds in the administration of an estate.
Mr. Colley: And who has, therefore, not given his consent or had no knowledge of what had happened? It seems to me that where such an incident occurred before he became executor there would be no difficulty for him in establishing that it was done without his consent or knowledge.
Mr. O'Higgins: The section says it shall be deemed to have been submitted by that person unless he proves to the contrary.
Mr. Tully: He is guilty until he is proved innocent.
Mr. Colley: That is not a new principle in statute law.
Mr. Tully: I know a few people it happened to all right.
Mr. Colley: There are lots of instances under statute where a person is guilty until proved innocent.
Mr. Cooney: The Road Transport Act is about all.
Mr. O'Higgins: This, in fact, is a burden undertaken by people, generally people within the ambit of the family to administer the estate. Is this not a pretty onerous burden to put on somebody who comes along to pick up the chips after the previous executor dies? I am not sure whether the executor of an executor is still executor to the first estate under the Succession Act. He either is or may be made. If he picks up the executorship by reason of the fact that he is administering the executor's estate he may have no knowledge of what is going on, no means of knowing what solicitor the previous executor had consulted or whether he consulted any solicitor at all.
Mr. Colley: I wonder if the Deputy could elaborate a little more on the circumstances in which he visualises this particular executor coming in?
Mr. O'Higgins: The Minister may correct me on the law because quite frankly I am not certain about it.
 Person A is the executor under a will to an estate. He proceeds to administer the estate. He consults, one assumes, a solicitor and the various steps are taken in relation to the administration of the estate. He has made his will and he subsequently dies. Person B happens to be his executor. Being the executor of an executor he has the responsibility in relation to the administration of the first estate. He has no information. He does not know what solicitor has been consulted or anything of that kind. He is the accountable person I presume and everything that is done prior to his time shall be deemed to have been done with his knowledge unless he can prove to the contrary. That is my trouble. It seems to put an onus of proof which is very severe.
Mr. Colley: I think I should say it is not a new onus. There is a similar provision in section 58 (6) of the Finance Act, 1963.
Mr. O'Higgins: A bad section.
Mr. Colley: It reads:
For the purposes of this section, any return, account, estimate, statement, book, document or declaration submitted on behalf of a person shall be deemed to have been submitted by that person unless he proves that it was submitted without his consent or knowledge.
Mr. O'Higgins: That is different. It is a bad principle but——
Mr. Colley: May I just go ahead? I am advised that the situation which the Deputy visualises cannot arise. The chain of executorship which he has referred to in fact disappeared under the 1965 Succession Act.
Mr. O'Higgins: I was not sure.
Mr. Colley: I think this kind of problem would not arise.
Mr. Cooney: May I suggest to the Minister that the penalties proposed in the section are frighteningly large. I think the Minister would be obliged to give us some very good reasons why these, to my mind, excessive penalties have been introduced. Section 1 provides for a penalty of £500 for failure  to comply with subsections (3), (4), (5) and (14) of section 8 of the Finance Act, 1894. Subsection (3) requires an executor to return accounts of personal property. Subsection (4) requires a person other than an executor who receives property to make a return of it. Subsection (5) requires a person accountable for estate duty and any person whom the commissioners believe to have taken possession—I presume an executor or an administrator de son tort—to make a return and subsection (14) again puts an obligation to fill the forms required by the Commissioners. Section 8 of the 1894 Act provides for a penalty of £100. No doubt having regard to inflation since then £500 is not that big but £500 to my mind is a huge penalty for failure to comply with these sections.
There is a further very significant and serious distinction between what is proposed now and what is in the 1894 Act. Subsection (6) of section 8 of the 1894 Act ends with a proviso: “Provided that the Commissioners, or in any proceeding for the recovery of such penalty the Court, shall have power to reduce any such penalty.” This discretion to remit would appear to be removed by section 41 and if a penalty is imposed it must be a penalty of £500. That is altogether excessive particularly when it could apply to a person who would be in the position of an executor de son tort, maybe in that position through no fault of his own. It is altogether prohibitive and quite repressive. If the Minister wants to increase the monetary penalty he should at least retain the proviso giving the Commissioners or the court power to reduce any such penalties. That should be retained because there could be varying degrees of guilt for failure to make the returns.
Mr. Colley: The first penalty which is provided in subsection (1) is a penalty not exceeding £500. In subsection (2) we are dealing with fraud or negligence in the sense that we discussed on an earlier section, negligence in the sense that is defined in one of the previous Acts which is considerably more than what is commonly accepted as negligence. In the later ones  dealing with banks we have stepped it up too but we are taking account of the fall in the value of money plus the fact that we are dealing in subsection (5) with banks for whom a smaller penalty would mean very little. However, having said that, I must confess that the point made by the Deputy has some validity. It may be justifiable in the case of fraud to have a penalty that will not be reduced below the £500 but, perhaps, in other cases a discretion should exist and I shall have another look at that.
Mr. Cooney: May I further suggest this to the Minister? With regard to subsection (2) (a): “Where a person fraudulently or negligently ...” the Minister says that negligence is defined in a peculiar fashion for this purpose. I do not see in that section any back reference to the definition of negligence. Earlier in the Act there is a definition of negligence for income tax purposes but while I may be wrong I do not see any special definition of negligence in relation to making returns for estate duty purposes. I think the section is unduly harsh here also if it equates fraud with negligence in failing to make returns and provides a penalty of £500 and the additional duty. Subsection (3) would also cause me considerable worry and apprehension. It says: “Any person who assists in or induces ...”. “Induces” is fair enough but a person who assists in making out a return “which he knows to be incorrect shall be liable to a penalty of £500”. “Which he knows ...”—could this mean that he would be held to know if there was negligence in not knowing? If a person was negligent in informing himself of the facts could he then be held to have known that there was a false or inaccurate return being made?
Mr. Colley: I do not know if I can pronounce authoritatively on this but I think that would be stretching it too far.
Mr. Cooney: A further point arises in connection with subsection (2) (b) where a document is submitted on behalf of a person accountable it shall  be deemed to have been submitted by the person accountable unless it was submitted without his consent or knowledge. Again it may be stretching the point too far but I remind the Minister that county registrars have powers to apply for and obtain letters of administration and grants of representation and in this connection they must make returns to the Revenue Commissioners. No doubt it was the intention at the time of passing that Act, in giving that power in the Succession Act, that it should be extended and would gradually become widely availed of. I remember this because it caused considerable apprehension in legal circles. You could have a funny situation in which an officer of the court would possibly find himself in difficulty under this section. I submit that the penalties which are already within the estate duty code are quite adequate. Has the Minister's experience been that they are inadequate to deal with abuses or have abuses been taking place on a substantial scale? If they have not been adequate to procure quick payment of duty that is already dealt with in the interest section. There are already severe penalties for not making a return and for making a false return. It is unduly harsh and, indeed, repressive to impose a penalty of £500 for negligence in the making of a return.
The facts that may have to go into a return can be of such complexity that the gathering of them would present great difficulty and it could be quite simple for a person after the event, when a certain amount of ground work has been done but has not been fully done, to say: “You were negligent in not doing that ground work fully.” When it is being done it might have been very difficult; subsequently, with hindsight, it might appear to the person seeking to impose a penalty for negligence that there should not have been any negligence. I ask the Minister to remove “negligently” from subsection (2).
Mr. Colley: I think the actual figures involved are not unreasonable having regard to the fall in the value of money. The Deputy asked if the  existing penalties were adequate. Unfortunately, there is some doubt about them from a legal point of view and they are not adequate in that sense. That is why we had to recast the sections but I have indicated, and I say again, that I have some doubt that we should have fixed penalties apart from fraud. I shall have another look at that.
Mr. Cooney: Would the Minister consider removing “negligently”?
Mr. Colley: That is what I mean. I said “fraud” and I am distinguishing between fraud and negligence.
Question put and agreed to.
Section 42 agreed to.
Question proposed: “That section 43 stand part of the Bill.”
Mr. E. Collins: What is the purpose of exempting stamp duty on bills of exchange of certain types?
Mr. Colley: The purpose of the section is to provide for the exemption from stamp duty of cheques which are drawn on forms supplied by the Revenue Commissioners where tax is deductible from sub-contractors, the lumpers, to whom we referred earlier. We already have a similar provision in relation to remittances of PAYE and wholesale and turnover tax.
Mr. Tully: The Minister referred on this section to lumpers. Does the Minister know what is happening now? A ruling has been made by his Department that men who are contracting and who are the main body of contractors, who supply labour only or craft only, are not considered to be lumpers and are in some peculiar way excluded from the arrangement. Would the Minister comment on that?
Mr. Colley: The real problem arose with that kind of contractor and so the others did not really enter into it. It is not true that all of them are being cut out but the bulk of them are being cut out.
Mr. Tully: I have here a letter from the Minister's Department which states that the rule is that since they are contractors just for labour only they are being excluded. The gentleman who has been dealing with this section —I do not want to name him—has told me that is the ruling, that unless they are supplying some kind of material or something like that as well as their labour, they are not considered to be lumpers. The Minister has said, and I agree, that they were the people for whom the provision was originally introduced. I should be glad if the Minister would look at that aspect of the matter because it is causing endless trouble, and many of the men have emigrated because they cannot stand up to it.
Mr. Colley: Many of them have gone back into employment and are paying PAYE and paying for stamps and so on.
Mr. Tully: I know, for instance, where there are two brothers working on a building scheme as carpenters and they take the timber work of the scheme. They employ two or three or four. They are the people we were talking about when this measure was introduced. It is unfair to tell them that they should stamp cards. They do not work normal hours or work in the same way as other insured workers on the site. It was unfair to introduce a Bill to cover those people and then to manipulate it in such a way as to exclude them.
Mr. Colley: I cannot go back on the principle of the Bill.
Mr. Tully: The principle of the Bill as passed in this House or the principle as enunciated by someone in the Department?
Mr. Colley: The principle of the Bill as passed in this House.
Mr. Tully: That was that these people would be included. The lumpers, who were specifically to be included, were not included.
Mr. Colley: If they met the requirements of the Act.
Mr. Tully: The requirements were introduced afterwards. They were not mentioned until afterwards. I can produce the Official Report if the Minister wishes. I am not trying to be awkward on this matter.
Mr. Colley: I gave the House the essential details of what would be in the regulations about a fixed place of business and so on.
Mr. Tully: They have a fixed address and if they are writing to a contractor offering to take a contract they give this address. They take a job, and whether two of them do it or whether they employ ten others to do the same work, it is ludicrous to say that they do not come within the Bill. That was the purpose of the Bill. Perhaps the Minister would have another look at the matter when he has time to do so. I only want him to investigate and to satisfy himself that this is being properly administered. I think a mistake has been made.
Mr. Colley: All right.
Question put and agreed to.
Question proposed: “That section 44 stand part of the Bill.”
Mr. E. Collins: As I understand it, a public utility company could include a company which was formed by a number of people for the express purpose of buying land with the intention of building houses thereon. I should like the Minister to confirm if this is so. If that is the case I have information that a former Minister of the present Government has formed such a company and has profited highly from its development. If this is to be free of income tax I am against it. I should like the Minister to clarify this point.
Mr. Colley: I have no knowledge whatever of what the Deputy is referring to and, of course, it has no relevance to this section. The bodies which would benefit under this section would be building societies, railway companies, the Agricultural Credit Corporation and dock or canal undertakings  which are statutorily restricted as regards prices or dividends.
Mr. E. Collins: Could the Minister clarify this point: can a utility company be formed for the express purpose of buying land with the intention of building and selling houses?
Mr. Colley: I do not know what the Deputy has in mind. I suspect he may be confusing utility societies with utility companies. However, this is referring to a utility company of the kind I have mentioned, such as railway companies.
Question put and agreed to.
Section 45 agreed to.
An Leas-Cheann Comhairle: Amendments Nos. 35 and 36 are related and may be taken together.
Mr. O'Higgins: I move amendment No. 35:
In page 25, line 23, to delete “.75 per cent” and to substitute “.58 per cent”.
These amendments are intended to reduce the rate of interest.
Mr. Colley: I think we discussed this before.
Amendment, by leave, withdrawn.
Amendment No. 36 not moved.
Section agreed to.
Section 47 agreed to.
Question proposed: “That section 48 stand part of the Bill.”
Mr. Tully: It appears that in this section there is a new proposal if a person is assessed for tax. If he is not satisfied with the assessment he appeals the assessment to be heard by a judge of the circuit court. According to the section the corporation profits tax shall be paid in accordance with the determination of the appeals commissioners. This is an extraordinary situation because it appears the principle that a matter is sub judice while it  is before the courts no longer applies. The Minister decides that the appeal commissioners' decision must stand even though there is an appeal provided for. This is my reading of the section but I may not be interpreting it correctly. However, if my reading is correct, perhaps the Minister would say why this decision has been taken.
Mr. Colley: If I understand the Deputy correctly he is mistaken but it may be that I do not understand the point he is making. Is the Deputy saying that the section is providing that when the appeal commissioners have made a determination that operates as a determination the person has to pay the tax on that basis unless the decision is upset by the circuit court? Is that what the Deputy means?
Mr. Tully: The section states:
Notwithstanding that, in the case of an assessment to corporation profits tax made upon a person on or after the date of the passing of the Finance Act, 1971, the person has, pursuant to section 429 of the Income Tax Act, 1967 (as applied to corporation profits tax by section 56 (6) of the Finance Act, 1920), required his appeal to the Appeal Commissioners against the assessment to be reheard by a judge of the Circuit Court, corporation profits tax shall be paid in accordance with the determination of the Appeal Commissioners:
Provided that if the amount of the assessment is altered by the determination of the judge.
It appears to me that despite the fact that the person is dissatisfied with the assessment and has appealed to a judge of the circuit court—which he is entitled to do—and in normal circumstances the decision given would be final, but the Minister is saying here that whether he is right or wrong he must pay the tax. The Minister says that he will refund the money if he is wrong and that if the man has not paid enough he will have to pay the extra amount. This appears an extraordinary section to insert in a Bill. Despite the fact that the matter is sub judice the Minister is saying that the person must pay anyway.
This brings me back to a point I mentioned earlier this evening—the Government must be very short of money when they are forced to make such efforts to get every small amount of money collected. They may have to refund some of the money but their main objective is to get hold of it in any way. Will the Minister state if my interpretation is incorrect?
Mr. Colley: I think the Deputy has the method by which the section would operate quite clear but I do not think he is right in his interpretation. First, it is not a question of doing this solely because of the amount of money it would make available to the Exchequer. This matter is in relation to corporation profits tax but there have been similar provisions relating to income tax.
Let us compare the position of a taxpayer with a person under PAYE. The person will appeal to the appeal commissioners under the present law and then to the circuit court. Perhaps he will wait until the day of the hearing and then withdraw the appeal. I am not saying this happens in all cases but it does happen in many cases. When it happens people obtain a lengthy period during which they have not paid their tax. Let us compare that position with somebody under PAYE.
Mr. Tully: It is a weak argument.
Mr. Colley: It is not interfering with the right of a person to appeal.
Mr. Tully: Nobody will appeal unless he proposes to proceed. He must believe in his case.
Mr. Colley: That does not always happen.
Mr. Tully: He may withdraw his appeal but the Department get their pound of flesh eventually.
Mr. Colley: If it is unfair and if people have to pay too much they will get it back with interest at 9 per cent.
Dr. O'Donovan: I have an observation to make on this section, which  I do not think the Minister will like. In this city there is a room with the word “court” written on the door— c-o-u-r-t—and this is the room in which the Appeal Commissioners sit and this is most inappropriate and contrary to the Constitution. I see the Minister sighing heavily—I knew he would not like it.
Mr. Colley: I am sighing because it does not seem to me to be relevant to the section.
Dr. O'Donovan: It certainly is relevant to the section—that is just the point. If you go before an ordinary court and lose your case and then appeal, you can do nothing about it, pending the hearing of the appeal. In this case you have to cough up so I think my first remark is relevant to the section because in fact it is not a court—let us be clear about it—and I appeal to the lawyers on my left that in fact it does not comply with the Constitution—not for one minute. Not alone that, but you are going to compel the person to pay. Do not misunderstand me—I am not in favour of large corporations being able to keep the Minister out of his money but I do not think the large corporations go in for this kind of thing. If there be an element of people trying to fob off the Revenue——
Mr. Colley: There is.
Dr. O'Donovan: ——it is much more likely to be the corporation that is finding difficulty in paying the tax —much more likely to be that kind of person, to whom the money is important. I think they have every right in law to be able to go to the Circuit Court—and it is not very far off the line, and cases have been taken through the High Court and the Supreme Court. The Minister knows this as well as I do, but I do think this is contrary to natural justice and contrary to the accepted procedures of our legal system up to the present. It suggests that my colleague, Deputy Tully, is right—there are so many miserable little provisions in this Finance Bill which are all the time  suggesting there is a grave shortage of money in the Exchequer, such a grave shortage that the Minister has to think up these temporary subterfuges, because they are nothing else. Once they level out, he will only get the same money—in a few years time, it will be the same—but for the moment there is a considerable addition to the revenue, but once it levels out, it will go evenly; but in the meantime this stunt which the present Government have gone in for—all these stunts of taxes payable under PAYE and all that kind of business—is now being spread out —that particular kind of net is being spread wider and wider. It is not going to help anybody in the long run but it is a temporary subterfuge to get in more money for one year, and there will be more money got in because they will be getting the normal money and getting this extra money. In other words, it is clear evidence, as I see it, of the Revenue Commissioners pursuing the system into every hole and corner and it is a complete absurdity. It is like the taking away—I cannot say it too often—of the small concession made last year in income tax, in spite of the huge increase in the yield of income tax which would have occured ths year without any such thing being done, and it runs right through this Finance Bill.
Mr. Colley: I do not wish to prolong this discussion but I must repeat that this does not interfere with the right of appeal at all. Secondly, I am surprised by the line being taken by Deputy O'Donovan when he says this is contrary to natural justice, when in the case of PAYE taxpayers, if they want to appeal against the assessment, they have to wait until the end of the year.
Dr. O'Donovan: No, they do not.
Mr. Colley: They paid their money.
Mr. Tully: The Minister is entirely wrong—they can appeal at any time.
Mr. Colley: Have they not paid their tax already? These people under this, the Deputy suggests, should be able to hold on and not pay their tax  until there is a final decision by the Circuit Court.
Mr. Tully: You can put a company into liquidation by insisting on having a sum paid which they legally should not have to pay and which would be returned to them at a later stage when their appeal is heard.
Mr. Colley: The other kinds of cases are far more frequent. I know of no case in which any company has even looked like being put out of business by having too much tax taken from it, but I know lots of cases of companies which, by virtue of delaying and so on, by making appeals which they do not pursue eventually, have made a good bit of money out of holding on.
Mr. Tully: They have to pay 9 per cent over the whole period. The Minister is making the case that they will be returning with 9 per cent interest but they would have to pay that on it even if the case went against them eventually. Frankly, I cannot see the right of the State to do this. As Deputy O'Donovan said, I most certainly am not in favour of big companies being able to get away with corporation profits tax—they should pay—but there is a principle involved here. The Minister's comparison within PAYE is entirely wrong because if somebody being taxed under PAYE finds his tax assessment wrong, the first day he gets the form—he may hand it in to the employer—he will appeal it straight off the reel and while he may not get a decision very quickly, he will get on to somebody who will go to the commissioners and have it cleared up in reasonable time. In this case what is happening, in my opinion, is that somebody decided to appeal to the court. I do not claim to have a great knowledge of this sort of thing, but it is the only case I know of where in the case of somebody under appeal, the decision is taken in favour of the Government. It is the very same as somebody who is charged with committing a crime and who is let out on bail. According to the Minister's reading of this, he should be put in jail and a sentence passed on him and even if he appeals,  he should still have to serve the sentence until the appeal is heard.
Mr. Colley: No.
Dr. O'Donovan: It does not look like good law to me, using the phrase in a general sense.
Questions put and agreed to.
Mr. O'Higgins: I move amendment No. 37:
In page 27, to delete subsection (1).
The amendment which follow seeks to delete the words “or neglect” from subsection (2), and it does appear to me that whatever case was made by the Minister in relation to equating fraud and neglect for income tax purposes, I would feel that it is not right— I think it is wrong—to equate these two terms in relation to interest on corporation profits tax. Fraud, I imagine, particularly from a corporation point of view, is a conscious act brought about by a number of officials concerned in the company. With regard to neglect, a corporation can only act through its officers and neglect would appear to me to be an omission by some perhaps insignificant official. I would urge that different considerations apply and I would suggest that the word “neglect” should be removed from the section.
Mr. Colley: These proposed amendments are similar to ones which were moved by Deputy O'Higgins in relation to section 18. They were withdrawn by the Deputy on my undertaking to have another look at the definition of “neglect” before Report Stage. If any change were being made in that it would have to apply to this section also.
Mr. Tully: That was amendment No. 11, was it?
Mr. Colley: It related to section 18.
Mr. Tully: The Chair will be able to guide the Minister on that.
Acting Chairman (Mr. Carter): Amendments Nos. 8 and 9 to section 18.
Mr. O'Higgins: I am happy.
Amendment, by leave, withdrawn.
Amendment No. 38 not moved.
Mr. Colley: I move amendment No. 39:
In page 27, subsection (5) (c), line 47, to delete “the Appeal Commissioners determine” and to substitute “it is determined”.
Amendment agreed to.
Section 49, as amended, agreed to.
Sections 50 to 52, inclusive, agreed to.
Question proposed: “That section 53 stand part of the Bill.”
Mr. O'Higgins: What does that mean? Is it the usual one?
Mr. Colley: This is the customary one placing under the care and management of the Revenue Commissioners all taxes and duties imposed by this Bill.
Mr. O'Higgins: What does it mean in effect?
Mr. Colley: The care and management phrase?
Dr. O'Donovan: It means just nothing.
Mr. Colley: It does mean something.
Mr. Tully: The Minister had better get Chambers again. It means that the Revenue Commissioners will mind the money.
Mr. Colley: It has had a meaning over the years, if not in a particular statute.
Mr. O'Higgins: Leave it so. The Minister can ask me that next year.
Mr. Colley: I do not know if the Deputy will ever be over here but sometimes I wish he were.
Question put and agreed to.
Section 54 agreed to.
 First, Second and Third Schedules agreed to.
Title agreed to.
Bill reported with amendments.
Acting Chairman: Can we fix a date for Report Stage?
Mr. Colley: If the House is agreeable I should like to suggest that we might take it tomorrow after Questions, taking the amendments at short notice.
Mr. Tully: The Minister is giving himself very little time to look into all the matters raised, or maybe he feels they are not worthy of consideration.
Mr. Colley: That is not so. I would think that I would be able to do justice to the various items mentioned——
Mr. Tully: That is what we are afraid of.
Mr. Colley: ——if we were to take it tomorrow after Questions. This is subject to agreement by the Whips. This is just my own suggestion.
Mr. Tully: The House can supersede the Whips, as the Minister knows.
Mr. Colley: I do not know if anything can supersede the Whips.
Mr. O'Higgins: We will aim at 4 o'clock tomorrow.
Report Stage ordered for Thursday, 15th July, 1971.
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