Wednesday, 4 June 1975
Dáil Eireann Debate
Mr. Colley: I was dealing with paragraph 8 (3) of Schedule 3 when we adjourned the debate. I pointed out to the Minister that it seemed to contain a most extraordinary provision if I read it correctly. The subparagraph reads:
(3) Where any of the terms of the lease (whether relating to forfeiture or to any other matter) or any other circumstances render it unlikely that the lease will continue beyond a date falling before the expiration of the term of the lease, the lease shall not be treated as having been granted for a term longer than one ending on that date . . .
The question of whether it is unlikely that a lease will continue beyond a particular date is, on the face of it, a most peculiar provision. Here it specifically spells out that it is unlikely because of circumstances relating to forfeiture or any other matter and I am asking the Minister how it is decided in relation to a lease that the terms relating to forfeiture are such that it is unlikely the lease will continue beyond a certain date?
Mr. Colley: Will the Minister state what kind of circumstances would produce that situation? The nature of forfeiture is not the ordinary termination of the lease. It is the compulsory  termination of the lease by the lessor because of certain circumstances.
Mr. R. Ryan: If some very onerous imposition is placed on the tenant then it would be improbable that the tenant would continue. If, for instance, the tenant were to apply for permission to rebuild and the permission were given subject to some onerous condition, in such circumstances it might be open to construction that a forfeiture was likely to take place because the onerous condition would be unacceptable.
Mr. Colley: That raises a few questions but I want to keep to the main one for the moment. Surely, in the circumstances described by the Minister, what would be likely to happen would be that the tenant, finding the terms too onerous, would simply carry on without rebuilding. Why would forfeiture be a likely result in such circumstances?
Major de Valera: Suppose you had a lease for a certain term or for the life of the lessee, whichever was the earlier, do you judge it then on the health of the lessee as to whether it was likely to determine?
Major de Valera: The provision says “or any other circumstances render it unlikely that the lease will continue beyond a date falling before the expiration of the term”. The term can be tied to the life of the lessee and, if it is, then you would have to have a Revenue doctor after the lessee.
Mr. Colley: The use of the word “unlikely” is unlikely, if I may put it that way. Quite apart from that, I  am still not clear as to how it could happen that a forfeiture of a lease prior to its termination in the ordinary way was a likely event determining for the purposes of this subparagraph the date on which we calculate the lease will expire, with the results that flow from that. There is a specific mention of forfeiture, and this is what intrigues me, in the subparagraph as one of the matters which could render it unlikely that the lease would continue beyond a certain date. Despite the Minister's suggestion of an example, I do not think that really answers the question, and I would guess that the Minister is himself a little bit puzzled as to why the word “forfeiture” could be deemed to be likely to occur on a particular date.
Mr. R. Ryan: One might reasonably argue that the words in brackets are, perhaps, unnecessary because they say “whether relating to forfeiture or to any other matter” but forfeiture involves a termination so I suppose to that extent the draftsman considered it would not be inappropriate to put in the word “forfeiture”. I agree it is difficult to give an illustration of specific circumstances.
Major de Valera: If I have a lease on a certain property and there is a likelihood that the local authority will acquire the land on a certain date there is no uncertainty. What do you  do there? Is that not “any other circumstances”? Take, for instance, the famous Bray Road which after 20 years is only maturing now.
Major de Valera: I am glad the Minister and I are in such close rapport that we can communicate telepathetically now. If my memory serves me aright, notices were served and dates were even anticipated. It was postponed because of various circumstances and it is only now taking place and has not yet been completed, or anything like it. Would that type of thing be a circumstance that would affect the duration of a lease? Obviously acquisition would extinguish a lease and everything else.
Mr. R. Ryan: Circumstances could arise in which the lease would be clearly not a lease of long duration. Circumstances could change. You must have a provision to deal with circumstances if and when they arise.
Major de Valera: I hate getting into generalities but I am forced into them here. Is there no possibility of this legislature and the judiciary getting, under the Constitution, a consensus of approach to this type of legislation so that the reasonable thing can be done where the intention is clear and get back to Acts of Parliament which are clear in intent letting, if necessary, the judiciary intervene. Stop the game of Cowboys and Indians which is sure to develop. In fact, it is there already. I fail to see the definiteness of this. I fail to see exactly what the Minister is after in wanting to make sure a long lease will not be granted. What is the objection to a long lease? Why is it so necessary to take the view that a  lease must be of the shortest possible duration?
Mr. R. Ryan: Whether it is a relief or an additional imposition, all this particular paragraph is doing is stating that the lease will be treated as what it really is as a result of certain circumstances. If it is a short lease it will be treated as a short lease. It is doing the reasonable thing Deputy de Valera says we ought to leave to the courts; it is asserting that if a lease is, in fact, a short one then it should be treated as a short one.
Major de Valera: What is the materiality of the legislation? This sounds to me like what one might call tidy administration and tidy accounting. I wonder, from a practical point of view, what is the importance of it? If I can see it will mean a serious loss of revenue or that it will lead to serious evasion then I might modify my point of view. I cannot see that either of these things will happen.
Mr. R. Ryan: It is relevant, for instance, to determine, whether or not a lease is a wasting asset. If it is under 50 years then it is a wasting asset and will be treated as provided in paragraph 1 of the Third Schedule.
Mr. Colley: Did the Minister not tell us that if it is treated as a wasting asset, because it is under 50 years, then  the table applies? The table is in fact more advantageous than in the case of a wasting asset, other than a lease of land.
Mr. Colley: From the point of view of the Minister, whether it is to the advantage of the taxpayer or the Revenue Commissioner, surely he is not happy about the use of the word “unlikely”? It says that where any term of the lease or any other circumstances render it unlikely that the lease will continue beyond the day then certain things would follow. Who is to judge whether it is likely or unlikely? Surely this is an impractical provision?
Major de Valera: Dare I again make the point I made earlier? This particular provision could apply to a lot of relatively small interests who would not be prepared to take the risk of seriously disputing the matter. If it was one of those provisions likely to go for the big fellow or anything like  that I would be with the Minister. If we pass this I am afraid we are putting ourselves a little bit in the position of the big fellow doing the heavy. I can see the Minister coming back and saying that this device of leases might be used in the bigger interests and why not put an upper limit to cover that or do it differently? I agree with Deputy Colley that the word “unlikely” could possibly operate very unfairly in relation to the smaller interests who would not find it economic to assert their rights, and with the larger interests it is an invitation to litigation and incurring costs for the State.
Mr. Colley: I believe Deputy de Valera is right. This is going too far and is producing an unworkable provision in order to achieve something which is not of very great importance. I suggest that the Minister think again about the whole idea involved in this subparagraph.
Mr. Colley: It is so uncertain what is visualised here as determining whether a lease will be deemed to be a long lease or a short one and the consequences flowing from that. It is based on whether certain circumstances or certain terms of the lease make it likely or unlikely that the lease will go beyond a certain day. Surely that uncertainty really makes the provision unenforceable? Surely the Minister cannot be happy with that?
Mr. Colley: Even to put oneself in the shoes of the appeals commissioner or the judge, how do you determine a thing like this, it is so uncertain? The best you can do is to go on the balance of probability. That kind of uncertainty in determining tax liability is hardly acceptable.
Mr. R. Ryan: The thinking behind it is sound. I do not think we can make it any more certain than it is. We have in mind circumstances in which people would be providing alternatives for the duration of a lease, ones spelt out in terms of years other than related to certain circumstances and events and so on.
Mr. Colley: Let us take the worst possible view of the situation. If there are alternatives provided, whichever one is operated for the purposes of the law, he is stuck with that. He cannot be chopping and changing from one possible course to the other, presumably. From the point of view of the Revenue Commissioners presumably what is sought to be prevented is a lease which is really a long one, being dressed up to look like a short one. On a long lease he could deduct the total expense of acquisition whereas on a short lease he could not. I presume that is what is behind this. This subparagraph, as phrased, is making it easier rather than more difficult to do that.
Major de Valera: We are beginning to lose sight of what the Bill is all about. If it is a question of capital gains why not attach the gain and the reliefs to the actual disposal of the property? If it is a long lease and for some devious reason it is made to be a short lease and you attach the excess that is lost, so to speak, if there is any such, to the falling in of the lease, surely in the long-term there is nothing very much lost, and you do attach a deterrent.
What the Minister is really doing in this Bill is legislating for what the interpretation of a lease is to be without specific reference to the problem in hand, and the problem in hand is capital gains. Would the Minister not relate these provisions to the purposes of this Bill, to the accrual of gains, and if it is a question of allowances that is all right? If through the operation of some term of the lease an excessive allowance or credit is taken or there is some loss in capital gains, let that attach to the lease falling in. Therefore if the lease is a long lease it is a long lease, but if it is a long lease dressed up as a short lease, then attach whatever should have been attached to it as a short lease when the lease falls in and have that go from disposal to disposal. In other words, any vendor and purchaser of a lease will have to be put on notice that it will be a requisition matter. They would be on notice of the condition or the circumstance; of course, “circumstance” is so indefinite that, taken with the word “unlikely”, I do not know what one could make out of it. I do not know how one would even frame a requisition.
Major de Valera: That is all right. When someone accepts a title with that answer to a requisition, he accepts it with the full implications it carries, and that it was not in the vendor's knowledge will not stop the Revenue Commissioners from stepping in and getting their due rights at whatever stage they should. I would suggest  some such approach rather than the one the Minister is taking.
Mr. R. Ryan: I hope the Deputy will not take it as a personal affront when I say I think he wants to have it both ways. He has been arguing with great vigour and effect throughout that discretion should be left to the Revenue Commissioners.
Mr. Colley: If what the Minister has just said now were the provision, I would be much happier about it than what is there. Giving the Revenue Commissioners discretion to determine whether it is a long or a short lease, I would settle for that any day rather than this.
Mr. R. Ryan: That is, in fact, the process of making the decision and it will involve the Revenue Commissioners. I was wondering, when Deputies were asking for a different approach, whether or not one could provide that the Revenue Commissioners might, if in their view the lease was “unlikely” to be a long one, come to that conclusion, but I do not think it is going to get you any further to specify the Revenue Commissioners as the decision-making authority when in fact they will be, subject to the right of appeal.
Mr. Colley: What Deputy de Valera has been advocating is on a much broader scale than this. I think the Minister by now must accept that this subparagraph as drafted is uncertain, may even be void for uncertainty, that it is unsatisfactory because of the uncertainty attaching, and that at least the drafting of it should be changed, apart from the matter already mentioned about forfeiture, and possibly the thinking behind it should be  changed. I do not want to delay on this, but one could develop the question of what happens if one determines a particular lease to be a short lease, what happens in practice to the lessor and the lessee and their claims for allowances against capital gains. However, I am asking the Minister to have another look at this.
Major de Valera: I do not think my approach is contradictory. The provision says it shall not continue beyond “a date” falling before the expiration of the lease ending on that date. It does not provide a specific date. Not only is “circumstance” arbitrary, not only is “unlikely” arbitrary, but the date is arbitrary. Take the case of a hydro electric scheme that was scheduled for completion by a year. Under that paragraph you could say the 31st December of that year was a likely date for the purpose of this paragraph. To take the Minister up on his argument, it would be much better to leave it completely to the discretion of the Revenue Commissioners, as Deputy Colley says, to decide whether a lease was bona fide a long one or a short one, and I would be happy to let the Revenue Commissioners decide that question, which is the whole crux of the matter. But this provision, instead of giving them discretion, ties them to a technicality and also threatens them with litigation.
Major de Valera: One would be surprised. It is when they exercise bona fide discretion that they can be sure of the support of the court. When there is reliance on a specific provision, then the court will scrutinise it in the spirit of The Merchant of Venice.
The duration of a lease shall be decided, in relation to the grant or any disposal of the lease, by reference  to the facts which were known or ascertainable at the time when the lease was acquired or created.
Mr. R. Ryan: I think it is so obvious that I cannot add anything to what is in the section itself. It is one of the simpler paragraphs in the schedule and even in the whole Bill. However, what are relevant are the facts which were known or could have been known, which were ascertainable at the time the lease was acquired or created. In other words, that is the term, what was in the mind of the grantor of the lease, not something that could happen afterwards.
Mr. Colley: It may seem simple but let us push it further and see what the Minister says. Suppose the lease is for the life of the lessee and the lessee is of advanced age and in poor health— is that a fact which was known or ascertainable at the time and is to be taken into account in determining the duration of the lease?
Major de Valera: Obviously, the Revenue Commissioners would not consider a matter of that nature as relevant. It would be an ordinary incident of human life and “to hell with the person”. But if you take out paragraph (3) which we were arguing a minute ago and put into this paragraph “the duration shall be decided at the discretion of the Revenue Commissioners  as to the bona fides of the contracting parties” or some such provision, the subsection would be less objectionable than as it stands, particularly when taken in relation to paragraph (3). The omission of paragraph (3) would strengthen this one.
We are travelling along the road— which the Minister has travelled in the next Bill we are to discuss—when there will be a penalty on the doctor for not telling the Revenue Commissioners that the lessor has an incurable disease. Already, there are penalties coming up in the Wealth Tax Bill for non-disclosure of information and if we continue in this direction it will not be long until we find it here. I cannot see why under the heading “Duration of leases” there cannot be a reasonable general provision about depending on the bona fides of the transaction and relying on the courts to uphold the decision of the Revenue Commissioners when they have all the reasons for that decision, as they would have when it would come to court. I have yet to see a case where, on the actual merits, the Revenue Commissioners could be badly faulted. There are many cases where they have been technically wrong in law and where they have lost cases because of legal interpretation, but I can recollect very few cases in tax history where there was unfairness or anything like it. It is through the attempt to administer the letter of the law that the costs, expenses and defeats of the revenue authorities here and in England have occurred.
Major de Valera: If the Minister is suggesting that this document is more illuminating for the public, I am sorry. I must be a very ignorant member. Whatever else it is it is not ad revelationem gentium.
The inclusion of section 176 in that table attached to paragraph 3 of Schedule 5 of the Bill is not considered to be necessary in view of the many other provisions relating to the supply of information. Paragraphs 4 to 7 of Schedule 5 deal with the supply of information relating to new public issues of shares, nominee shareholders, settlements, holdings in non-resident companies and interests in settlements of which the trustees are non-resident. Special provision is made in paragraph 6 to obtain information from auctioneers and other agents dealing with tangible moveable property of which the value exceeds under £2,000. In addition, stockbrokers are required to give particulars of any transaction carried out by them.
Mr. Colley: I do not accuse the Minister of concealing information from the House but I suspect that his attention may not have been drawn to what is probably the real reason for this amendment, that is, that under section 176 an agreement was reached between the Revenue Commissioners and the Incorporated Law Society whereby it would not operate in respect of previous years because it was inoperable. This applies only to income tax. If it had been applied here the problem would arise in regard to capital gains which had accrued since, say, April, 1974. I would agree to the amendment but I think that what I have referred to is a relevant factor in the proposed deletion of the words concerned.
The amendment in subparagraph (1) is to make clear that what is involved in paragraph 11 of Schedule 5 is the charge to capital gains tax by virtue of the provision of subsections (2) and (6) of section 4. This is being done by emphasising that it is any disposal falling within the provisions of these subsections that is at issue instead of stating merely that the paragraph is concerned with assets mentioned.
Mr. Colley: I have no objection to this amendment in so far as it clarifies what is involved. What I have the greatest objection to is the paragraph which is being amended. However, it might be more in order to raise that objection on the Schedule in relation to the paragraph. While I have no objection to the amendment I do not wish it to be taken that I am in any way in agreement with the paragraph which is being amended.
“(3) Where any such payment as aforesaid is made by or on behalf of any person, that person shall forthwith deliver to the Revenue Commissioners an account of the payment, and of the amount deducted therefrom, and the inspector shall, notwithstanding any other provision of this Act, assess and charge that person to capital gains tax for the year of assessment in which the payment was made on an amount equal to one-half of the payment at the rate specified in section 3 (3).”.
Paragraph 11 of Schedule 5 is designed to provide a means whereby tax charged on non-residents who are liable to capital gains tax on certain assets in the State and who sell such assets may be recovered out of the purchase money paid by the purchaser.
The series of amendments, Nos. 55 to 59, proposed in relation to paragraph 11 is intended to give a more effective machinery of collection in these cases and to enable the vendor to apply for a certificate of clearance where he has accounted for the liability arising on the sale of the asset. The substantial changes are those relating to subparagraphs (3), (4), (5) and (6).
Specifically on amendment No. 55, as the charging provision stands in subparagraph (3), an assessment could be made on the purchaser of the assets in the amount of half the purchase consideration. The subparagraph does not make it clear that it is intended that the assessment may be made without waiting until the expiry of the year of assessment and that it is distinct and separate from any charge on the purchaser on gains from the disposal of his own assets. The subparagraph proposed in substitution for the existing subparagraph (3) would leave the latter substantially unchanged up to the point where it is required that tax should be deducted from the payment, that is, to the words “deducted out of the payment” in the existing subparagraph  and “deducted therefrom” in the revised subparagraph.
The final part of the new subparagraph specifies that the year of assessment for which the charge is to be made is the year in which payment is made for the asset and that one half the payment is to be charged at the flat rate of 26 per cent provided in section 3, subsection (3). This puts beyond doubt the intention that the charge is a special one distinct from the purchaser's liability on any disposals of his own so that he cannot set off against this special assessment any losses or reliefs for which he may be entitled personally.
Mr. Colley: Again, some of these amendments are going very much to the root of what is intended to be achieved in paragraph 11. As I have indicated, I have grave objections to paragraph 11 but, while within the rules of order one might pursue some of those points on these amendments, it would be more satisfactory to do so on the discussion on the paragraph where one can consider the overall picture of what is involved. Subject to that I am not raising any objection to this amendment or to the others associated with it, but I wish it to be clear that that is on the basis that the real objection I wish to express remains, that it applies to the whole paragraph and that acceptance of the amendment does not in any way imply agreement with what is sought to be achieved in paragraph 11.
“(4) The inspector may, where, in relation to any such payment as aforesaid, any person has made default in delivering an account required by this paragraph, or where  he is not satisfied with the account, estimate the amount of the payment to the best of his judgement and, notwithstanding section 5 (1), assess and charge that person to capital gains tax for the year of assessment in which the payment was made on an amount equal to one-half of the amount so estimated at the rate specified in section 3 (3).”.
The revision in subparagraph (4) is in line with the revision proposed in subparagraph (3). The opening clause, that is, up to the words “so delivered” is unchanged but it is proposed to change the final part, to make clear, as in the previous subparagraph, that the assessment is a special one and not part of the purchaser's personal liability.
As subparagraph (5) is at present it might be interpreted as giving the right to the purchaser to claim relief. The purchaser will have fulfilled his obligation by paying the tax to the Revenue and will not have suffered any loss. The vendor is the person who should have the right to set off relief or repayment and this has to be made clear in the draft subparagraph. It is proposed to do this by specifying that the claim for relief or repayment is to be made by the person chargeable in respect of any gain on the disposal—the vendor.
The amendment is designed to enable the vendor and not the purchaser to take the initiative and get a certificate from the inspector that the transaction is free from any capital gains tax burden. As the draft is at present the initiative was left to the purchaser with the result that a vendor might be deprived for a long time of the use of part of the money due to him and at the same time not be able to do anything to get the balance of the money. Under the new provision the vendor alone may ask for a certificate and he will thus be put in the position that he may obtain clearance as soon as he wishes to clear any liability on the particular transaction. That it is proposed to do by deleting the words “in an assessment” and substituting “under section 4 in respect of the disposal.”
Mr. Colley: When we are talking about vendor and purchaser, we are talking about the vendor and purchaser in a transaction which becomes liable to immediate payment of capital gains tax under this whole paragraph?
Mr. Colley: The purchaser in those circumstances would, as I would have thought, be the person who had the special interest in getting the clearance certificate because if he wants to sell or dispose of his assets he is the one who is going to be in trouble if he cannot produce such a certificate.
Mr. Colley: That is true, but let us assume that the purchaser deducts the money and he pays the tax in accordance with the provisions of this paragraph. If the Minister's amendment is accepted, the purchaser, having paid the relevant tax, will not, as I understand it, be in a position to get a certificate like the certificate of discharge under death duties, whereas he is the man who will be looking for it if he is in turn selling the asset to show that there is no liability attaching.
Mr. R. Ryan: The purchaser. He has a duty to withhold the money to ensure that tax is paid. We are dealing here with disposal of assets by non-residents and we want to ensure that the tax is paid. Otherwise purchase money could be handed over to a non-resident, a vendor, and the revenue would be at the loss of the tax which would be payable, so it is to ensure that the tax is paid while the resources to do so are still in the country that we have to have the provision, but the vendor is disadvantaged until such time as the tax is paid and a certificate produced which enables the purchaser to hand over all the money to him.
Mr. Colley: How does that arise, considering that the purchaser has only deducted half the tax and paid it over? How can the certificate show that the whole amount was paid? I will confess that I read the paragraph as drafted and the amendments are now changing it around, but even so I do not think there is a change in the provision for deduction and payment over of half the tax.
Mr. R. Ryan: Yes. The paragraph provides against a potential difficulty in the collection of capital gains tax in a case where an interest in land or minerals in the State or rights attaching to an asset situated in the Continental Shelf is disposed of by a non-resident. The charge to tax on such disposal is imposed by subsections (2) and (6) of section 4, but there is a danger that sale moneys may be paid away before a tax assessment is made, thus leaving no means of recovery to the tax. The proposal is to treat 50 per cent of the consideration in the same manner as an annual payment is treated under the Income Tax Acts, thus requiring the purchaser to deduct capital gains tax from that sum and account for it to the Revenue Commissioners. When the appropriate tax is paid, the vendor will apply for and get a certificate which will confirm that he has paid his tax. It does not matter whether or not half of it has been received via the purchaser or where the money has come from. The certificate will simply be evidence, and will be given to the vendor as the person affected, that the tax has been paid.
Mr. Colley: We are assuming that the purchaser has deducted half the tax and paid it to the Revenue Commissioners and that the vendor has come along and paid the other half and then he gets a certificate. This, as I understand it, is what the Minister is saying. What I want to know is what is the point of the certificate at this stage when he has paid the full tax or it has been paid one way or another? There is no provision for a certificate in the case of anybody else who has paid his capital gains tax, so why have it in this case?
Mr. R. Ryan: Because we are dealing with a non-resident who is outside the country and the proceeds of sale and the consideration would be passing out of the country, so we have to have special provisions to ensure payment.
Mr. Colley: I am not talking about special provisions to ensure payment. I am talking about the certificate. What is the point of the certificate unless it is to enable him to claim against liability in his own country, double taxation relief or something, but that is not the original intention. It was drafted quite differently and it was the purchaser who was getting it. I assume the reason for that was to enable the purchaser to show if he was disposing of the asset that there was no question of outstanding tax in respect of it.
Mr. R. Ryan: Would the Deputy look at subparagraph (7) which relieves the person paying the consideration from the obligation imposed by subparagraph (2) to make this deduction in a case where the inspector's certificate is produced to him provided there has been no fraud or failure?
Mr. Colley: I had a note to ask the Minister the meaning and effect of subparagraph (7) because as far as I could make out, taking the Bill as drafted, it seemed to me that what it was saying was that when the tax has been paid the purchaser may then get the certificate. What use is the certificate to the purchaser if he cannot get a certificate before the tax is paid? How does it affect him in saying that he does not have to deduct his profit under subparagraph (2) if he has the certificate because he can only get the certificate after the tax is paid?
Mr. R. Ryan: There are cases in which the vendor will not be liable to tax at all. It would be a loss-making situation. Nevertheless, a purchaser would have to discharge the obligation under subparagraph (2) unless and until the certificate is produced to him which shows that any tax payable by the vendor has been paid. I cannot say what would be the precise wording of the certificate. Presumably, it would be on the lines that the vendor has discharged his liability and that would be an indication to the purchaser that he was relieved of the obligation of making a deduction in accordance with subparagraph (2).
Mr. R. Ryan: We are dealing with a case where we have clearly to provide that where the consideration is going out of the country at least some of the tax is paid. That is why this provision is there, to ensure that part of the consideration goes to the Revenue here before the means of payment of tax leaves the country altogether.
Mr. T.J. Fitzpatrick: (Dublin Central): This will slow down the process of transfer of property. At what stage would the assessment be made by the Revenue Commissioners? If a non-resident sells property he must go to the Revenue Commissioners. I cannot see the assessment being made within seven or eight weeks, which is the period it normally takes to sell property. This certificate deals with property sold within the State. The State wants to be sure that it will get the capital gains tax in case the money moves out of the country. Will this certificate be issued where debts are outstanding in respect of capital gains made outside the country? Will the Revenue Commissioners give a clearance although there are debts outstanding that legally will not be repatriated?
Mr. R. Ryan: We are dealing only with assets which are within the country, not with assets outside the country. Could I give an example? Suppose there is a consideration of £200,000; the original cost to the vendor was £160,000; the gain is £40,000 and the appropriate capital gains tax on that gain would be £10,400. Subparagraph (2) imposes on the purchaser the obligation in the  absence of a certificate to deduct from the consideration the tax on half of the total consideration. Tax on one-half would be £26,000, the amount the purchaser would have to deduct.
Mr. R. Ryan: When the vendor pays £10,400 tax then the £26,000 will be released to him by the purchaser. The purchaser will withhold the money until he gets the certificate or else pay the £26,000 to the Revenue Commissioners and the non-resident outside the country can apply for a refund of the difference between £26,000 and £10,400.
Mr. Colley: Is that the machinery visualised in order to get it? Clearly, if the £26,000 has been paid then the tax and more than the tax on the transaction has been paid. So, what he is looking for is a repayment of the overpayment made on his behalf by the purchaser. Quite apart from any question of a certificate, in the example the Minister gave I forget what he said the correct amount of the tax was, but let us say it was £5,000, he would be looking for a refund from the Revenue Commissioners of £21,000 and should get it there and then. How does the certificate come into all this?
Mr. R. Ryan: The certificate if produced to the purchaser relieves the purchaser of the obligation to make the deduction. Therefore, the vendor would get his money right away. In the absence of such a certificate the purchaser has to make the deduction.
Mr. Colley: He produces it to the purchaser and tells him that instead of deducting £26,000 he does not have to deduct anything because there is a certificate showing the taxes were paid in full before the transaction was completed.
Mr. R. Ryan: I am not going to ask the Dáil and the Seanad to pass a law creating a liability to tax on people outside the country who can avoid all liability by having all the consideration given to them at the time of disposal of the asset. That would be a farce.
Mr. Colley: Unfortunately the Minister is doing that in many cases. As I indicated earlier, I want to deal with the problem when we come to that part of the Schedule. We may  be totally out of order if we pursue this on the amendment.
Mr. R. Ryan: In most cases the purchaser will not know the liability of the vendor and the Revenue Commissioners will not know until they have full information. In order to ensure that some money will be retained in the country to meet any liability to tax that may arise there must be some way, perhaps even a crude way, of making a deduction from the consideration——
Mr. R. Ryan: It could be called a useful way. If someone can think of a better way that will ensure that people outside the country will not avoid their liability by having the full consideration sent outside the country I would be very pleased to hear it. In the absence of some better way to ensure the tax is paid, I think this is a reasonable and a fair one.
Mr. R. Ryan: On many occasions he has asserted here that he believes taxes should be paid by everyone who is liable and that people should not be able to avoid payment because they are resident abroad. In the course of this and other debates, Deputy Belton has gone on record as asserting that principle.
Mr. R. Ryan: Certain mischievous interpretations have been put on his remarks by Members on the opposite side and I thought it necessary to put on record my admiration for the intelligent questioning by Deputy Belton.
Major de Valera: In case I was misunderstood when I mentioned voting one of the difficulties we have in dealing with legislation of this kind is that in the end it will be determined not on its merits but by the mobilisation of the Whips. I do not single out Deputy Belton for individual comment on this matter; I am afraid it applies universally.
The Minister is proposing to delete that and I should like to be quite clear on the consequences. Does it mean a certificate will be binding despite fraud or failure to disclose, or does it mean a bona fide purchaser for value does not get clearance even if there is a certificate, that he is not protected?
Mr. Colley: As I indicated earlier, my understanding was that the purpose of the certificate was to enable the purchaser in the first transaction who had made the deduction and had paid the tax to proceed with the asset and deal with it as he liked and to assure  a further purchaser that because he had a certificate no liability attached to the asset or the purchase money. The proviso refers to:
Mr. R. Ryan: If the asset was charged with the tax we would not need this special provision. The Revenue Commissioners cannot realise the asset in order to obtain payment of the tax but, because the asset itself is not charged, we have to have this provision.
Mr. R. Ryan: If a person is a party to fraud it is, of course, a different matter, but the obligation to provide the information lies on the vendor as the person liable for the payment of tax and, if the vendor makes an improper disclosure, then there will be a penalty lying on the vendor. The purchaer is as free as the air. He is not involved in this.
Mr. Colley: Perhaps I am a little confused. Ignoring for the moment the amendments the Minister has introduced, what was visualised in the Bill as originally drafted was that the purchaser would apply for the certificate and that certificate would be evidence that the tax had been paid and no  further tax was payable in respect of the particular transaction. There was a proviso that, if the certificate was obtained by fraud or otherwise failure to disclose material facts, then it would not discharge any person from liability to tax but the bona fide purchaser for value would be protected, that is, a bona fide purchaser from the purchaser in the sense we have been using it earlier in regard to the transaction from which the tax arose. There must have been some purpose in providing a certificate and in providing that a bona fide purchaser from the original purchaser would not be affected. It is now proposed to delete that. I should like to know why the provision was there in the first place and why it is now being deleted.
Mr. Colley: The provision originally provided that the original purchaser was the person who had to make the deduction, pay the money to the Revenue Commissioners and apply for a certificate. If he applied for a certificate in all good faith and got it, why was it necessary then to go on to say this certificate would protect him if he were a bona fide purchaser acting at arm's length? Surely to say that the purchaser referred to there is the original purchaser seems to be defeating the purpose for which the certificate was originally intended. After all, in order to get the certificate the purchaser had to have actually paid over what amounts to 13 per cent of the total consideration which, as the Minister indicated in the example he gave,  could be well above the actual tax due. In order to comply with the law as the section was originally drafted the purchaser had to have deducted that money and paid it over before he could get a certificate so that, at that stage, how could any question arise of the purchaser not being a bona fide purchaser for value and, since he had paid over more than the tax due on the transaction, why does he need a certificate? The only purpose I can see for the certificate issued to the purchaser is so that he can deal with another purchaser and show he has a clear title free of any claim for capital gains tax.
Mr. R. Ryan: The purchaser in the Bill as originally drafted was under a certain liability. He had the responsibility of applying for the certificate. Now he is free of all responsibility so there is no need at all to refer to the purchaser.
Mr. Colley: But, as the Minister says, under the Bill as originally drafted the obligation was on the purchaser to deduct the money, pay it over and apply for the certificate. Why was he applying for the certificate under the Bill as originally drafted? What was the purpose of the certificate?
Mr. R. Ryan: So that he could pay over the purchase money. On the example I gave, he would have deducted the £26,000 and he still owed the £26,000 to the vendor but, on getting the certificate, he could then pay it over.
Mr. Colley: How would he get the title to the asset or the asset if he said: “Wait a minute now. I want the asset. I am going to pay the Revenue Commissioners and now I have got my certificate and here is the certificate and here is the purchase money”. He could not do business like that. Was one of the purposes of the certificate not to protect the bona fide purchaser for value and are we not deleting that protection here?
Mr. R. Ryan: It is not required because the bona fide purchaser will not be under any liability. Any failure to  disclose the fact would be a failure of the vendor and he is subject to the ordinary penalties for failure to disclose the facts, not the purchaser, and no liability is attaching to the asset.
Mr. Colley: Since the Minister is now switching it around and putting the onus on the vendor, how does this operate if the transaction has been completed? In the case the Minister mentioned the consideration was £200,000; £200,000 is supposed to be paid over by the purchaser to the vendor but, instead of paying the £200,000, the Minister visualises his paying over £174,000 and now, as the Bill is redrafted, he will not have a certificate. He will just say: “Here is so much and the balance I am going to pay to the Revenue Commissioners”.
Mr. R. Ryan: If the vendor wants the £26,000 the vendor will settle up his capital gains liability with the inspector of taxes and discharge the tax payable and produce the certificate to the purchaser who will then have to pay the full consideration to the vendor.
In particular and without prejudice to the generality of subparagraph (1), the provisions of the said Acts specified in the Table to this paragraph shall, subject to any necessary modifications, apply to capital gains tax.
Is this provision necessary or wise? To specify precisely the various sections and parts of Acts involved as is done in the Table and to start off and say “without prejudice to the generality of subparagraph (1)” and then to go on and specify that these will apply to capital gains I suggest to the Minister is unnecessary and unwise.
Mr. R. Ryan: I agree it is not necessary but it is intended as a guide. I believe it will be helpful to the public and to practitioners in general to have a Table which is a very convenient reference. It does not exclude the possibility, as the Deputy says, of some other sections having relevance but I think it is better to have them named.
Mr. R. Ryan: I visualise the possibility but we must remember we will  in time be in a position to relieve staff now assigned to deal with estate duty so that there need not necessarily be an increase in the total number of personnel. They will be redeployed in their duties.
Major de Valera: I understand the burden is so heavy in certain departments and on certain personnel that even if there is a relief of work through the Finance Act that the burden will be almost intolerable. I wonder if this has been taken into account by the House in passing this subparagraph, which is a substantive enactment? Has the Minister any idea of the cost of administering this Act through this provision? What will be the additional cost of putting the care and management of capital gains tax under the charge of the Revenue Commissioners? It is bound to involve cost. Has the Minister any estimate of the additional cost which this subparagraph will impose on the Exchequer?
These will all need to become experts in this legislation. Will the Minister ensure that their status and remuneration is adequate to the burden put on them? I am not asking that in relation to furthering the claim of any particular group but from the point of view of keeping the expertise within the civil service. It is quite obvious that the course the Minister has embarked on with this legislation will constitute a direct incentive to outside interests to make very attractive offers to experts within the civil service.
This has already been a problem where income tax is concerned and it will be a double problem under the Minister's next three Acts. In implementing subparagraph (2) of paragraph 1 is the Minister prepared to take  the necessary practical precautionary measures to ensure that the undesirable consequences I have suggested do not follow?
Major de Valera: Might I inquire whether I am addressing Dr. Jekyll or Mr. Hyde? I am not primarily concerned with the individual but with the smooth working and the continuity of the State machinery for the collection of revenue. The fairness and the justice of the administration and also the efficiency in collecting the revenue depends very much on this. I do not think there is any further comment to be made on subparagraph (3) of paragraph 1 although the comments made on the other two subparagraphs are relevant.
The provision of the Income Tax Acts relating to the care, management, assessment, collection and recovery of income tax shall, subject to any necessary modifications, apply in relation to capital gains tax as they apply in relation to income tax chargeable under Schedule D.
That is simply a general provision which says that the existing mechanism, duly adjusted and expanded, is to be invoked; it is merely a mechanical supplementation of subparagraph (1) of paragraph 1. I think I am right in that?
Major de Valera: I agree with Deputy Colley in regard to subparagraph (2). Although it may be of some help in a handbook or anything else, I doubt the wisdom of particularising certain sections, because when one particularises there is always the suggestion, from the point of view of legal interpretation, that what is not particularised is omitted. There is, shall I say, a prima facie assumption that if you  particularise like this, this is what is intended and nothing more, and therefore the remainder is excluded.
“In particular, and without prejudice to the generality of subparagraph (1), the provisions of the said Acts . . . ” and so forth—that does not help you. At best, you are trying to have it both ways; at worst, there is an ambiguity. Like Deputy Colley, I do not think it is necessary. I take the Minister's point that there is a certain advantage in having such a list but I think it would be better catered for in say, a simple handbook or explanatory memorandum issued by the Revenue Commissioners through the Stationery Office for anyone who wanted one, rather than to embody it in an enactment of this House. I know that when the Minister proposed his capital gains White Paper, and later when the texts of these Bills were circulated, many of the larger accounting firms in Dublin furnished very intelligible and relatively simple digests of the content of the legislation and of these Bills. The Minister himself furnished explanatory memoranda. All these are helpful but I would strongly endorse Deputy Colley's point that, perhaps, to have the generality might be the safe legal course and if that generality is not sufficient, to supplement it and would, to an infinitesimal extent, I am afraid, having regard to the volume of the Bill and the Schedule, give some appearance of simplicity.
“Returns and information”, is in itself a section. The application of law is a relatively simple thing for which to legislate, but for returns and information a certain discretion is needed. A general and fair criticism of the State in recent years, not only under the Minister's Government but in the past, is that there has been a tendency for the State service—in that I include the Government, and the responsibility rests with the Government and with the Minister who puts through the legislation and ultimately, with this House—to yield over-much to administrative convenience and almost to pander to fear; in other words, to get a fixation on evasion  and other such problems and finally —it started with PAYE—to turn the citizen himself and private organisations into the tax-collecting agency.
I know the difficulties of tax collection and nobody will quarrel with requiring all reasonable returns, but in our approach to this part of the Schedule we should be on our guard against going too far. This is going very far now. On the one hand, the individual is being completely exposed and, on the other, people are required to be agents, where they are not personally liable, for the State, even to the extent of being intelligence agents. This is a very bad mentality to develop and it will surely bring adverse results. I make that comment under the heading “Returns and information”.
However, paragraph 3, relating to the making and delivery of income tax returns, is a fair provision. Before we pursue this in detail I shall content myself with making these general points on the Schedule so far, so that we do not mistake the wood for the trees.
There is a Table on page 71, under subparagraph (2) of paragraph 2, which is headed: “Income Tax Provisions Applied to Capital Gains Tax.” That is the table that Deputy Colley has rightly suggested is unnecessary, and I would go further and say it is unwise and should be left out. Why do we have to have a table labelled “Further Income Tax provisions Applied to Capital Gains Tax”? Why separate the two? What is the purpose of separating the two?
Major de Valera: I know, but here again you have the needlessness and also the undesirability of doing this and also the separation of what is really a single task, the applying of the income tax revisions where relevant to capital gains. The very fact that you divide it up by sections gives force to the suggestion that I have made, that there is the possibility that this procedure may lead to the interpretation that the rest is excluded  notwithstanding subparagraph (2) of paragraph 2. There is something to be said in detail on the returns and information section so that perhaps we might pause there and go into it.
Mr. R. Ryan: The Deputy will see that the second Table is referred to in subparagraph (2) of paragraph 3— Returns and Information. I think it is clear enough. This is a long-established practice in Finance legislation to have Tables of this kind. I think they are helpful.
Mr. Colley: I would like to ask the Minister first of all about subparagraph (2) of paragraph 3 at the bottom of page 71 and over on page 72. It is provided there that certain things are deemed to be included in Schedule 15 to the Income Tax Act, 1967. Could he tell us what is the effect of that subparagraph?
Mr. R. Ryan: Paragraph 3 adapts the penalty provisions of the Income Tax Acts to cases where there is failure to furnish returns for capital gains tax or where through fraud or neglect incorrect returns are furnished. In the income tax code the amount of the penalty is graded depending on the type of offence and the person who is liable for the penalty. For example, if an individual fails to furnish his personal return he is liable to a penalty of £100 and a further penalty of £10 for each day in which the failure continues after judgment has been given against him.
On the other hand if he fraudulently makes an incorrect return the penalty is much more severe. It is £100 plus twice the difference between the tax actually charged on him and the amount which would have been charged if he had made a correct return. Where a company fails to make a return the penalty is £500 plus £50 a day for continuing failure after judgment has been obtained. Fraud in the case of the company attracts a penalty of £1,000 plus twice the difference between the correct tax and the tax charged.
 The different penalties are set out in sections 500 and 503 of the Income Tax Act, 1967, while the various income tax provisions requiring the furnishing of returns and information are listed in the three columns of Schedule 15 to that Act. The penalty where a particular section is contravened depends on the particular column in which the section is listed. The sections listed in columns 1 and 2 attract the penalties provided by section 500, that is the penalties for failure to make a return. Where the offence is the furnishing of a false return under the sections listed in columns 1 and 2 the penalties are provided in subsections (1) and (2) of section 501. The sections listed in column 3 of the Schedule deal mainly with persons liable to deduct tax and pay it over to the Revenue Commissioners, and failure to comply with these provisions attracts the penalty provided in subsection (2) of section 501.
Paragraphs 4 to 8 and paragraph 11 of Schedule 5 provide special rules for furnishing returns and information on capital gains tax and by inserting references to these paragraphs in Schedule 15 of the 1967 Act, failure to comply with these rules will attract the same penalty as if the failure had been a failure under the Income Tax Act. Failure to supply returns required under paragraphs 4 to 7 will attract the same penalty as would failure to comply with any of the sections listed in column 1 of Schedule 15. Failure to comply with paragraph 8, that is to furnish information in connection with appeals, will be dealt with in the same way as failure to comply with the sections listed in column 2, and failure to account for tax under paragraph 11 will be penalised as would a like failure under the sections listed in column 3 of the Schedule.
Mr. Colley: I can probably find it. I will check it, but in the meantime could I refer the Minister to subparagraph (3) and immediately following that on page 72? Could the Minister tell me what provisions of the Income Tax Act require particulars in the same way as are required in this subparagraph (3)?
Mr. R. Ryan: The Deputy was asking me about the penalties. I do not know if he has found them in his own volume or not—page 428 of the Income Tax Act, 1967. There is quite a number of different penalties relating to different persons and different circumstances.
Mr. Colley: I will get that later. Could the Minister indicate the provision or provisions of the Income Tax Acts requiring the kind of information to be furnished on receipt of a notice in relation to income tax as is provided in subparagraph (3) in relation to capital gains tax?
Mr. R. Ryan: There are plenty of cases where information is furnished to the Revenue Commissioners which would disclose financial particulars about the affairs of persons other than the people directly involved. For instance, section 174 provides for the production of accounts and books. The very accounts and books of one taxpayer might disclose information about the affairs of another.
Section 174 says that where a person was being duly required to deliver a statement of the profits or gains arising to him from any trade or profession fails to deliver the statement, or the Revenue Commissioners are not satisfied, they may serve on that person a notice in writing requiring him, and so on. I want to suggest to the Minister that there is no comparison between that and subparagraph III which requires a person on whom a notice is served not only to give information regarding his affairs but if the notice relates to income or charitable gains of some other person of any assets acquired by that other person. I am trying to find out where is the corresponding provision in the Income Tax Acts. Section 174 is not a corresponding provision.
Mr. Colley: But this is not a provision relating to employers giving relevant information concerning the capital gains of employees—that is not what this says. This is why I am asking whether the Minister can point  out a corresponding provision under the Income Tax Acts to this?
Mr. Colley: I would suggest that it goes a good deal further than that. I must confess that I cannot regard this subparagraph, or indeed subparagraph VI which ties in with it, with anything other than the gravest suspicion. The whole import of this portion headed “Returns and Information” is that the Income Tax Act provisions are being applied to capital gains tax. This subparagraph refers to a notice under any of the provisions of the Income Tax Acts as applied by this paragraph. Any ordinary person reading that could—and I think is calculated to believe—that what is being done here is what is already in existence under the Income Tax Acts. That is not so at all. There is a wide and major extension being proposed in subparagraph (3), an extension which would impose an obligation on any person to furnish information, if they receive a notice requiring it from the Revenue Commissioners, relating to the income or chargeable gains of some other person and of any assets acquired by that other person. This is a totally new requirement going far beyond anything in the Income Tax Acts. I suggest that it is being done in this subparagraph in a way that is totally misleading because it is prefaced by the notice, “under any of the said provisions of the Income Tax Act, as applied by this paragraph”. I regard that as totally misleading.
If one refers to subparagraph (6), we find that there is provision for penalties. It begins with the words “Where any person has been required  by notice or precept”. It is not the person who is liable for the tax; not even an agent of that person, but any person who is served with a notice by the Revenue Commissioners requiring him to give information about some other person's capital gains or assets acquired by him and where he fails to comply with that he is liable to penalties. At the end of subparagraph (6) dealing with these various penalties, it says that they shall apply to that person for the purposes of capital gains tax as they apply in the case of a like failure to act for the purposes of income tax.
I suggest that that is a further step in the misleading facade which is being built up in this Schedule to pretend that what is being done here is only what is already in operation in relation to income tax, when, in fact, that is not so. It would have been a great deal more forthcoming, to use the least offensive word I can find, to have picked out the new powers that were required and to set them out clearly, and not in the Schedule, but in the Bill. I take an extremely poor view of the way this matter is being handled in these subparagraphs. I am not blaming the Minister for this, because he did not draft it, although he is, of course, responsible to the House. I am not personally blaming him. I am not saying that he directed that this should be drafted in this way but I am saying it is totally misleading to draft subparagraph (3) in the way that it has been drafted and, indeed, a great deal of ingenuity went into it to have it suggest that the powers contained in subparagraph (3) are already in existence under the income tax code when they are not.
This impression is further strengthened by the phrase at the end of subparagraph (16) dealing with penalties, where it refers to the case of a like failure or act for the purposes of income tax when what we are dealing with in subparagraph (3) is something quite new and quite without precedent under the Income Tax Acts. Indeed the ingenuity which went into it raises a question in my mind, from a legal point of view, as to whether in fact any penalty can be imposed on a person  who fails to comply with such a notice because there is not provision for a like failure under the Income Tax Acts.
Read that in the light of what goes before it and you are being asked to give details and particulars of the person from whom the article was acquired and of the consideration, in relation to another person's business, another person's acquisitions, not a person for whom you have been acting as an agent even but somebody about whom you might happen to have some information, a neighbour, say. You are being obliged under pain of penalty here to furnish to the Revenue Commissioners, if you are given a notice, details of that neighbour's acquisitions of property, from whom he bought them if you know it, what he sold it for and what he bought it for, if you know that, and any other information the Revenue Commissioners consider relevant.
This is totally unacceptable. It is reprehensible to seek to have it put through in this guise because that is what is happening when it is being put through in the Schedule under the guise of corresponding to the provisions of the Income Tax Acts. It is unacceptable and reprehensible. As far as I am concerned, unless the Minister can indicate that he is prepared to delete these provisions, I for one am not prepared to support or accept the provisions in subparagraphs (3), (4), (5) and (6) of this Schedule.
Mr. R. Ryan: If one looks at the Income Tax Acts of 1967, one will find the provisions there. They are just as extensive as the provisions in this Bill. I am not aware of anybody having challenged them as being repugnant.
Where any person has been required by notice or precept given under or for the purposes of any provision specified in column 1 or 2 of Schedule 15, to deliver any return, statement, declaration, list, or other document, to furnish any particulars, to produce any document, or to make anything available for inspection, and he fails to comply with the notice or precept or fails to do any act, furnish any particulars or deliver any account in accordance with the provisions set out in column 3 of that Schedule he shall be liable to a penalty.
Mr. Colley: It says where he has been required by notice or precept. Has been required under what section? If the Minister is saying that this provision exists in the Income Tax Acts, I would suggest that he has an obligation to point out specifically where it exists.
Mr. Colley: Yes, but the Minister will see that that relates to a person who has been required by notice or precept. Therefore, what you have to look at is under what section is he required to give the particular notice or precept that the Minister says corresponds to this Schedule?
Mr. O'Malley: Is the Minister suggesting that if the Revenue Commissioners find out something about you under the heading of one particular  tax they are not going to use it to screw you on every possible front? Did the Minister himself not, in the course of the debate of the Finance Bill this year, say that the Revenue Commissioners were using the stamping of miserable little tenancy agreements at a pound or two for the purpose of finding out who was letting property and taxing them accordingly?
Mr. R. Ryan: Section 51 provides that the Schedules to the Act shall have effect for the purposes of the Act. Therefore, notices served under these Acts must be for the purposes of this Act or the Capital Gains Tax.
Mr. Colley: I am sorry, but could I ask the Minister again to point to a provision in the Income Tax Act which obliges a person, who is not himself liable for the income tax in question or an agent of such person, to furnish the kind of information provided for in this subparagraph?
Mr. R. Ryan: I have already told the Deputy, and the Deputy knows, the person paying fees and commissions to another person must furnish particulars to the Revenue Commissioners of the commission so paid.
Mr. Colley: I want to point out to the Minister, as I think I have done already, that he has deleted section 176 from the table, so that he cannot rely on that as being the one in question. Anyway, such persons are in receipt of moneys from the taxpayers concerned. This provision here need have no connection with the taxpayer concerned. He may just be a neighbour or an acquaintance.
Mr. O'Malley: We have the situation now where a number of very pertinent questions have been asked in relation to this Schedule 5, and in particular to paragraph (3) (6) of it by Deputy Colley. They have not been replied to by the Minister, except in a vague and rather mumbling way. He referred us to two sections, one  of which applies only to a man's own income and own returns and the other section rather ominously has already been taken out of this paragraph by one of the Minister's amendments for some reason best known to himself. The only reason we have been given was that it was not necessary, but it was not specified why it was not necessary.
There is in subparagraphs (3) and (4) of this paragraph a very disturbing situation. These two provisions are tucked away near the end of a terribly long and complicated Bill as subparagraphs in a remote Schedule. They are in a kind of cave that people reading the Bill might not look too hard at. They are shoved in here, I suggest, so that they will be glossed over, so that their implications will not be realised. These are the kind of major new provisions which should appear as sections in the body of the Bill proper so that they get the attention they deserve, but instead of that, the Revenue Commissioners and the draftsman—and the Minister must take responsibility for the activities of both— tuck away these ominous provisions on page 72 of a long Bill in the middle of the Fifth Schedule, in the hope that by the time the Members of Dáil Éireann come to deal with the Fifth Schedule so much time and talk will have passed that they will be weary and will not bother with them.
In particular, it is hoped that because by now the country is totally bored with capital gains tax, the Press is totally bored with capital gains tax —they do not report anything of what is said in the House about it—and because everyone is bored and tired and sick of it and waiting for it to end and because it is in the Fifth Schedule that this sort of thing might be slipped through. We cannot stop it being slipped through because the Minister has 70 people who will follow him blindly through the Division lobbies even though half of them know in their hearts that all these taxation measures are disastrous and that before they are passed at all have a serious effect on the country.
I wish that some of the people who used to be eloquent when they sat on  these benches would apply their minds to the implications of subparagraphs (3) and (4). The situation is that not alone can the Revenue Commissioners under these provisions serve any notice they like on anyone to obtain any information in relation to his affairs and his financial transactions, they can serve any notice they like on anyone to find out about someone else's affairs and financial transactions.
The Minister introduced last year and guillotined through when we could not discuss it, the concept of doing this in relation to solicitors and their clients. He is now proposing to extend it to every one. If through some chance or otherwise an individual happens to know something about the financial affairs of his neighbour, whatever the source of his information, a notice can be served on that person and he is obliged by law and will commit an offence if he does not disclose to the Revenue Commissioners what he knows about his neighbour's affairs. Is this House going to allow this type of thing to go through to get no satisfactory explanation from the Minister but just because we are all tired and bored let this happen?
This is a whole new concept in snooping by the Revenue Commissioners. If it was not, it would not be necessary to put it in because it would have been applied by the general application of the Income Tax Acts. Because it is set out specifically it is new. If the Revenue Commissioners now discover that you have a motor car they are entitled to find out from you how much was paid for it. They are also entitled to find out from you from whom it was bought and the amount paid for it and when it was paid.  They can then ask the vendor where he got it and how much he paid for it and when he bought it, and so on. If somebody sells property to me, in particular moveable property other than land, they will not be very pleased if I inform them that under the provisions of this paragraph I will be obliged to inform the Revenue Commissioners that they sold it to me and what I paid for it and if I fail to do so I commit an offence. This forced snooping by neighbours on one another may be all right in the eyes of the Minister for Finance, Deputy Ryan but I venture to think that if a large number of people were aware that these provisions were in the Bill they would not think it all right. Unfortunately they do not know. It is very difficult in such a technical Bill to get across to people that there are such provisions. If they could or would read the Bill they would see them. It might be necessary in many cases to explain the provisions to them. The provisions are totally new.
The Revenue Commissioners will have achieved a major step forward in their powers and abilities to obtain information in relation to people if this Bill is passed in its present form. Paragraph 4 sets out in detail in respect of three particular classes of persons how that information can be obtained and the extent to which notice serving and snooping by the Revenue Commissioners will be carried on if this Schedule is passed. An issuing house, a stockbroker or an auctioneer will have to return to the Revenue Commissioners on notice being served on them, details of property sold by them, to whom it was sold and for how much.
I ask the Minister what he thinks the consequences of this will be, for example, for stockbrokers. If I am aware that my stockbroker will give full information about my affairs and activities to the Revenue Commissioners I will not employ him. I will go to England and employ a British stockbroker who will not give this information to the Revenue Commissioners because he cannot be compelled to give it. Do stockbrokers realise the obligations that will be  imposed on them and the damage that will be done to their reputation and their business by the provisions of paragraph 4? Do auctioneers realise the implications for them? Do issuing houses issuing shares on behalf of other companies realise the consequences of this? Do people who are now subscribing to issuing houses for shares in Allied Irish Banks and in Waterford Glass under their recent rights issue realise that before they have those shares in their hands the Revenue Commissioners will know all about them? All the Revenue Commissioners have to do is send a two-line letter to the registrars of issuing houses concerned—Allied Irish Banks in respect of their own issues and the Bank of Ireland in respect of Waterford Glass—and get a list of where the ten million shares in each case were issued. Are people aware of this and what the consequences will be? Does the Minister realise what the consequences will be? We will have the most perfect information gathering machine in the world. There is no doubt about that. That will be Deputy Richie Ryan's legacy to the country. The Revenue Commissioners will be as efficient in obtaining information on every citizen as the KGB or the CIA. Will that do the country any good? Possibly the Minister for Finance thinks that it will. I do not think so.
Hundreds of thousands of people, if they realised what the Schedule contained, would not think so either. This will not worry the Minister unduly. He will regard it as his great achievement that no one can have any form of secret any more in the country. No longer will it be possible to have any form of privacy without the Revenue Commissioners being entitled to find out. If they see your neighbour looking over your fence they are entitled to serve a notice on your neighbour compelling him to disclose what he saw, how many chickens there were in your back garden. If somebody inadvertently finds out something about someone else a notice can be served on that person compelling him under penalty of law to disclose what he inadvertently found  out. We had in this House a few months ago an effort by Deputy Colley and various Deputies on this side of the House to put a stop to what the Minister had done to the relationship between solicitor and client but it failed. The Minister stoutly defended the right of the Revenue Commissioners which he was giving them to compel solicitors to disclose anything and everything in relation to their clients' business. The Minister finally put the seal——
Mr. O'Malley: He put a seal on the end of the confidential relationship between a solicitor and his client. At that time we pointed out here that if the Minister was prepared to terminate the privileged and confidential relationship of a solicitor and client in aid of the Revenue Commissioners trying to collect more tax, then if he were logical he was far more entitled to do it if he or the Government were trying to find out something about a serious crime, for example, which is far more serious than simply the collection of tax. Of course we were pooh-poohed and told it was all imagination and so on and it could never happen. We pointed out that there were other confidential relationships which could be smashed when the relationship between a solicitor and client had been successfully smashed by statute of this House and we were pooh-poohed again.
Here we have a situation in paragraph 3 or 4 in which the relationship of solicitor and client is no longer necessary. It can apply also to any relationship. It can be the relationship of confessor and penitent, of doctor and patient. People who are ill and worried have been known many times to discuss aspects of their financial affairs with their doctors, apart from solicitors or accountants or anyone else. I am sure doctors regularly in the course of their practices acquire information given to them in confidence about the financial affairs of their patients. They will be compelled under these sections to disclose that information to the Revenue  Commissioners when notice is served on them. Does the Minister seriously seek to stand over that kind of situation? Does he approve of it? Did he realise what was in it, and now that he does realise, does he propose to do anything about amending it? Are we going to have the ridiculous situation once more that 70 people over there will walk through the division lobbies behind him, half of them revolted in their stomachs at what they are forced to do and a lot of them not slow to tell one in the privacy of the corridors of this House how revolted they are? Are we going to go through this charade again? Are we going to pass into law measures that abominate us, which the present Minister for Finance would have spent hours on his feet trying to stop if he were on this side of the House and Deputy Colley or any other Fianna Fáil member were on that side?
It is strange how the journey of five yards from one side of this House to the other side can cause a man to forget so quickly much of what he espoused for so long. The earlier provisions of this Schedule are bad enough but there are provisions in paragraph 11 that Deputy Colley will deal with later that are even more appalling. I do not want to deal with them now; I am dealing simply with paragraphs 3 and 4 and with the situation that arises under them, where anybody can be compelled now to give any information about anyone else.
Mr. O'Malley: The Minister made a lame attempt a minute ago to suggest that somewhere at the beginning of this Schedule it stated that a notice can be served for the purposes of this measure—I think it was in section 51 or one of the earlier sections—and he tried to suggest that the information that would be obtained on the service of all these notices could or would be used by the Revenue Commissioners only for the purpose of assessing people to capital gains tax. I will  pay the Minister the compliment of believing that he is naïve enough to believe that. I do not think anyone else is.
It is a well known fact that if the Revenue Commissioners obtain information under any of their various branches or headings they will distribute that information to all the other sections or divisions of the Revenue for the purposes of trying to screw the taxpayer under every possible heading. There is the example which I deal with daily—the question of death duties—where as soon as the local inspector of taxes becomes aware that somebody has died he starts writing to the executor or the solicitor concerned looking for the schedule of assets. This is examined and if anything turns up on the schedule which the inspector did not know about a big investigation is held and, as I well know and have seen it happen to a number of people, the deceased man's financial affairs going back to six or 12 years if necessary are scrutinised. His estate is reassessed for income tax right back over that period. The Minister cannot be serious in suggesting that the information that would be got under all these notices, that can be served on literally anybody, would not be used for any reason other than for the purposes of capital gains. Of course it will be used. It will be used for income tax, for wealth tax, for inheritance tax, for gift tax and for VAT. It will be used for anything else that the Revenue Commissioners can rake up and let nobody be under any illusions in relation to that.
I hope that if any small fraction of what Deputy Colley and I have had to say about these paragraphs is reported that people will come to realise what they do not know already. They do not know that there are huge, sweeping new powers proposed to be given here in paragraphs 3 and 4 of Schedule 5 to the Revenue Commissioners, compulsorily to make inquiries under legal penalty from anybody in this country to find out anything about the financial affairs of anyone else. I cannot stop that. We cannot stop that. All we can do is to point  out, which we are doing to the best of our ability, that this is happening and hope to goodness that the Minister will see reason or that some of his backbenchers if not publicly, will at least privately go to him and point out the foolishness of this and the resentment it will cause throughout the country and see if these paragraphs can be dropped or amended in some way.
I ask him in particular to think of the situation of people like stockbrokers, who are now going to be compelled by the Revenue Commissioners to return every transaction to them, with the names and addresses of everyone who buys or sells shares through them and the amount involved. I ask him to think of the position of auctioneers selling moveable property, who will have to give exactly the same information and who will suffer all the penalties of law if they refuse. I ask him once again to think of the position of issuing houses. Who will have to give all this information in relation to shares that are being issued? On this very day— ten million rights issues of Waterford Glass and the Allied Irish Banks are being issued. Is everyone who takes up his rights in Allied Irish Banks or in Waterford glass going to have his name and address on the table before the Revenue Commissioners before he even gets the shares themselves.
These are serious and important matters; they are matters which we should not now be discussing in the recesses of the Fifth Schedule to this Bill. These are matters that should be discussed in the open as sections in the main body of the Bill so that people would realise what is involved and we could have a proper debate on each of these paragraphs. As it is, we are restricted from voting against the paragraphs individually; we must take the whole Schedule which, like all the other Schedules, is a very lengthy one, running into 9½ pages. Because the speeches must range over the whole Schedule and because only one vote can be taken on the provisions in the Schedule as a whole, a quite false view can be obtained by many  of the real effect of the Schedule because a great deal of it may be innocuous enough.
|Last Updated: 14/09/2010 20:23:35||Page of 38|