Finance Bill, 1978: Second Stage.

Tuesday, 9 May 1978

Dáil Eireann Debate
Vol. 306 No. 4

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Minister for Finance (Mr. Colley): Information on George Colley  Zoom on George Colley  I move: “That the Bill be now read a Second Time.”

This Bill gives effect to the taxation changes announced in the budget as well as making some other provisions which I will explain as I go along.

[552] The budget which I introduced on 1 February was framed in the context of the Government's medium-term plans to reduce inflation and tackle the serious problem of unemployment by pursuing a policy of rapid and sustainable economic growth. It was designed to give a stimulus to activity in 1978 and to set the economy on course for achieving our medium-term targets. The cornerstones of this budgetary strategy were increased income tax allowances and a higher level of public expenditure.

The generous increases in the personal income tax allowances were a vital element in securing an orderly and moderate development of incomes. As Deputies are aware, agreement has been reached since the budget on a national pay agreement to cover a period of 15 months. The Government welcomes the ratification of this agreement by the employers' side and the ICTU. Combined with the income tax concessions provided for in this Bill, the agreement guarantees significant increases in real incomes.

In addition to the increases in personal income tax allowances, the budget also included a package of business incentives designed to encourage the spirit of enterprise and expansion in the private sector. These include corporation tax reliefs for small companies, simplification of the arrangements governing a special reduced rate of corporation tax for manufacturing companies which achieve expansion, indefinite extension of the period of operation of free depreciation in respect of capital expenditure on new plant and machinery, free depreciation for industrial buildings and continuation of stock relief for a further year. Certain restrictions on interest relief are being modified. This package of measures should provide a positive climate for the expansion which we require in the coming years.

I will now comment on the various measures contained in the Bill. Chapter I of Part I contains a number of income tax provisions. The proposed increases in personal allowances set out in the budget are provided for in section 5. These increases are of unprecedented amounts and in themselves [553] will result in a significant increase in post-tax income for all taxpayers. The increases for married persons are proportionately greater than the increases for other persons. This derives from the decision to set the married person's allowance at double the single person's allowance.

Section 2 changes the basis of division of their personal allowances and reliefs between spouses in cases of separate assessment. The section provides that where separate assessment has been claimed or is claimed in future, the allowances and reliefs of the married couple will in general be divided equally between them instead of in proportion to their incomes as has been the case up to now. Where reliefs relate to particular outlays, for example mortgage interest, the relief will of course be divided by reference to the amounts borne by each spouse.

The right of each married person to choose to be assessed to tax separately from his or her spouse—without, of course, affecting the total liability of the couple—has long been a feature of our income tax code but this right has not been widely availed of.

I am anxious to ensure that every married woman who has income of her own will become aware of her rights under existing tax laws, including in particular her entitlement to be separately assessed to tax and to make a separate return of income. I have, therefore, arranged that the Revenue Commissioners will issue to married women with incomes of their own a leaflet explaining entitlements under tax law and a simple form by which a married woman may, if she wishes, exercise her right to claim separate assessment.

Section 7, like several other measures in the Bill, is designed specifically to encourage business enterprise and investment. It effects some modification to existing restrictions on income tax relief for interest payments, so as to remove disincentives to investment in business. As announced in the budget, unrestricted relief is to be available for interest on borrowings for investment in private trading companies. Section 7 provides accordingly and, as an additional measure, [554] allows special relief for interest up to a maximum of £2,000 a year to a full-time employee or full-time director of a public trading company in respect of borrowings to acquire shares in the company. The reliefs thus provided by the section are in addition to the amount of relief available to anyone for interest generally.

Sections 8 and 9 provide a remission of income tax to certain workers and employees along the lines of that granted in the case of public service employees who became liable for PAYE in 1976. Section 8 provides for a tax remission of one-half of the tax for 1976-77 to cross-border workers who became liable for income tax on the PAYE basis in the United Kingdom in April 1977, following the introduction of the new double taxation convention between the two countries. This remission was announced on 12 August 1977.

Section 9 grants a remission of a half-year's tax to certain employees who were transferred from a public service to a PAYE employment prior to 1976-77. Section 10 effects a technical amendment to take account of the repeal of estate duty and the introduction of capital acquisitions tax.

I should now like to refer briefly to a number of other income tax provisions to implement measures announced in my budget statement. Section 1 provides for income tax relief on a uniform basis for premiums on all new life assurance policies. Section 3 removes the cash limitation on the amount of premiums paid by self-employed persons on retirement annuity policies which qualify for income tax relief. The percentage limitation of 15 per cent of net relevant earnings will remain applicable to these premiums—it corresponds with a similar provision for superannuation payments by employees.

Section 4 repeals the provisions introduced in 1976 for the assessment of employees' motoring benefits-inkind in minimum amounts. Those 1976 provisions imposed a minimum charge of £300 or 15 per cent of the cost of the car, irrespective of the amount of the employee's private use [555] of the car. The effect of the repeal will be to restore fully the former long-standing basis of the assessment of these benefits by reference to the relevant facts of each particular case. These arrangements in future will therefore take full account of each employee's circumstances, including the amount of his private use of his employer's car and the relationship such private use bears to the working usage. The effect of section 6 is to exempt from income tax the income derived by thalidomide children from the investment of the tax-free compensation moneys received by them.

Chapter II deals with farmer taxation. In my budget speech I said that I would be implementing the manifesto commitments on farmer taxation in the Finance Bill. These concern the retention of the notional basis as an alternative to the accounts basis, a single payment date at the end of the financial year, a deduction for contractors' fees on the notional basis and the granting of a credit against a farmer's tax bill for the preceding year's rates. These concessions are designed to encourage agricultural developments as well as ensuring that farmers are taxed fairly.

In drawing up the budget measures the Government also recognised the need for a more equitable tax contribution from the farming sector. To this end, an additional 7,000 farmers have been made liable for income tax by lowering the threshold from £75 RV to £60 RV. However, the majority of these newly liable farmers will not have to pay their full tax as marginal relief is being made available for those between £60 RV and £69 RV. Another measure designed to achieve a more equitable contribution from farmers is the raising of the multiplier from 65 to 90. The need for these measures is clear from the low yield from farmer taxation in 1977-78. which is expected to be about £14 million. The new measures are estimated to yield about £24 million from farmers in the tax year 1978-79. Given current levels of farm income such a contribution from farmers cannot be regarded as onerous.

[556] Sections 11 to 16 of the Bill give effect to the changes I have mentioned as well as to some other provisions. These are described in detail in the Explanatory Memorandum and I need only make a brief reference to a few particular points.

Section 13 provides, among other matters, for a new section 21 to be substituted in the Finance Act, 1974. This involves the granting of a deduction on the notional basis for contractors' fees in addition to the existing deduction for wages paid to employees who are registered for PAYE and social welfare purposes. This basis for the allowance of wages has attracted the criticism that it represents discrimination against a farmer who employs a son or daughter on the farm, since employment by a father is generally not insurable employment and therefore not eligible for the deduction. There are two points I would like to make about this. Firstly, this change was made necessary by the widespread practice among farmers of claiming to have paid wages up to the amount of the single person's allowance to members of their families. It is virtually impossible for an inspector to check the validity of such claims. The second point is that any farmer who pays wages to a son or daughter who cannot be registered for social welfare purposes may obtain an appropriate deduction by opting for the accounts basis. He would then be in precisely the same situation as any other trader or businessman who employs his children.

The new section 21 also provides that, where all the partners in a partnership are already separately liable for income tax, the antifragmentation provisions of section 17 of the Finance Act, 1974 will not apply. This means that in such cases only a farmer's proportionate share of the land occupied by the partners will be taken into account for the purposes of a notional assessment. The new section 21A provides for the granting of the preceding year's rates as a credit against the tax bills of full-time farmers.

Section 16 provides for the situation which would arise under the Finance [557] Act, 1977 whereby certain farmers are liable for interest on overdue tax in 1977-78, which interest would be calculated by reference to a notional assessment later found on appeal to be an over-assessment. The section provides for the calculation of such interest by reference to the actual tax due. As announced on 21 October last, it also provides for the extension of the period before which interest is charged on tax overdue from farmers in 1977-78 from two months to four months, thus giving farmers up to 31 December 1977 to pay the instalment due on 1 September 1977.

I now turn next to the sections of the Bill which provide for the corporation tax incentives announced in the budget. The restoration of tax exemption for agricultural and fishery co-operatives is proposed by section 17 and the provisions are intended to operate from 1 April 1978. These provisions have been formulated with a view to securing optimum growth in agriculture and fisheries through the best efforts of the co-operatives, while at the same time taking due account of the legitimate interests of other traders. The implementing arrangements are set out in the explanatory memorandum.

Section 19 provides that in 1978 and 1979 manufacturing companies will have to meet only one expansion target—that is an employment target of, basically, a 3 per cent increase each year—in order to qualify for the special 25 per cent rate of corporation tax. The section also provides an option for such companies to have the 1977 test of increase in output gauged, if desired, by reference to the value of their 1976 sales increased by 19 per cent—rather than by the formula which was specified in last year's Finance Act. The section also opens participation in the incentive to manufacturing companies which commenced trading in 1977 or 1978 in order that they too may bring forward new employment-creation in manufacturing.

Small companies, because of their employment potential, merit a special incentive to spur them along the growth path and, so, section 20 provides [558] a significant and retrospective increase in the threshold at which the 35 per cent rate of corporation tax ceases to apply and in the threshold at which the normal 45 per cent rate of corporation tax begins to apply. I trust that this valuable measure will help small companies to grow and thus lead to early new employment in such companies. Small companies which are manufacturers can, of course, qualify for the special 25 per cent rate of corporation tax for manufacturing companies to which I have just referred.

The purpose of section 27 is to maintain closely the relationship between the rate of corporation tax and the tax credit which attaches to distributions out of company profits, so as to match the position which obtained prior to the cut of 5 percentage points in the rates of corporation tax from 1 January 1977.

By maintaining the old tax credit, thirty-five/sixty-fifths of actual distributions made by the companies, the Exchequer would be retaining a smaller percentage of the normal corporation tax rate than was the case before. I have no grounds on which to justify that.

It should be noted that the Exchequer is obliged in many cases to give to recipients of distributions the benefit of the tax credit attaching to those distributions even where the underlying profits bear little or no corporation tax because of stock relief or accelerated capital allowances, for example. The standard tax credit also attaches to distributions out of manufacturing profits which qualify for the special 25 per cent rate of corporation tax.

The reduction in the rate of tax credit follows on the reduction of corporation tax rates, and the overall effect should not reduce shareholders' incomes.

A further series of proposals also designed to promote investment and encourage business enterprise is contained in Chapter IV of Part I of the Bill. These proposals—namely sections 21, 22, 24 and 25—deal with capital allowances, which are given for both income tax and corporation tax. As [559] announced in the budget, free depreciation for new plant and machinery is now being extended indefinitely. This step should facilitate advance planning by businesses. As a corollary, the shipping investment allowance, which has been suspended for several years past because of the existence of free depreciation, is being withdrawn; this allowance was introduced when free depreciation was not available and its retention would be superfluous.

The introduction of free depreciation for expenditure by industrialists on their buildings was announced in the budget. Section 24 makes provision accordingly and also extends free depreciation to hoteliers for expenditure incurred by them on their hotel buildings. Section 25 removes a technical bar to the giving of capital allowances to taxpayers in respect of their contributions to capital expenditure incurred wholly or partly on behalf of traders by local authorities. Section 26 gives effect to the continuation of stock relief for a further year as announced in the Budget.

Part II of the Bill contains one section, section 28, which confirms four orders relating to excise duty matters which were made by the Government under the Imposition of Duties Act, 1957. Details of these orders are set out in the explanatory memorandum.

Part III of the Bill is concerned with stamp duty. Sections 29, 30 and 32 are aimed at counteracting the avoidance or the possibility of avoidance of stamp duty in the case of various transactions. The transactions in question are the transfers of leasehold interests in property, transfers on marriage, conveyances or transfers in contemplation of a sale and the making of gifts subject to the retention of a power of revocation in the donor.

Section 31 revokes an order made last year which covered the matters now dealt with in sections 29 and 30.

Section 33 abolishes the stamp duty on contracts for the construction of office buildings. The purpose of this measure is to promote output and employment in the construction industry, which is one of the country's largest [560] employers, and is thus a continuation of the Government's policy of boosting activity in this sector of the economy which I referred to in my budget statement. Part, at least, of the stamp duty revenue forgone will be recouped by way of increased stamp duty arising from conveyances of sites and increased income tax receipts as a result of the new development projects which can be expected to materialise as a consequence of this measure.

Parts IV to VI of the Bill contain provisions on capital taxes. As Deputies will be aware, I announced on 5 April that a separate Bill will be introduced later this month to implement the changes in capital gains tax proposed in the budget. Section 34 reduces by half the period of time in which a charge to death duties remains on real and leasehold property in the hands of purchasers or mortgagees. This provision, which relates to taxes which ceased to apply after 31 March 1975, should be of considerable assistance to purchasers of such property and to practitioners.

Section 35 is a relieving measure which provides for an adjustment of estate duty in certain cases. It applies in the case of certain deaths occurring between 1 April 1972 and 1 April 1975 where there was a loss due to the decline in the value of securities between the date of death and the date when the securities were sold to pay the estate duty liability.

Section 36 gives effect to the decision I announced in my budget statement to abolish the wealth tax. As a consequence of the abolition, the section provides in addition that purchasers of property after 4 April last shall not be affected by any latent charge to wealth tax. The section also reduces the rate of interest on outstanding wealth tax and on repayments of that tax from 18 per cent to 15 per cent per annum as from the date of the passing of the Finance Act. I might refer at this stage to sections 41 and 44 which make similar provision in respect of other taxes. The reduced rate of interest is considered reasonable in current circumstances.

[561] Part VI of the Bill deals with changes in capital acquisitions tax. Section 37 gives effect to the proposal in my budget statement to grant relief from capital acquisitions tax to gifts and inheritances of heritage houses and gardens subject to certain conditions being met. One of these conditions is the provision of reasonable facilities for viewing to members of the public. Section 38 amends the conditions for the granting of an exemption from capital acquisitions tax in the case of certain Government securities which are taken by persons who are neither domiciled nor ordinarily resident in the State.

Sections 39, 40 and 42 relate to the changes in capital acquisitions tax which I announced in my budget statement. The thresholds of liability for three categories of beneficiaries are doubled and the ranges relating to the rates of tax to be applied in the case of such beneficiaries are correspondingly adjusted upwards. The relevant thresholds for obligatory delivery of returns are also doubled as is the annual exemption for small gifts.

Finally, I turn to Part VII which deals with a number of miscellaneous matters. Section 45 deals with two matters relating to the disclosure of information by the Revenue Commissioners. In relation to the scheme of £1,000 grants introduced by the Government last year to help first-time owner occupiers of new houses, Revenue staff will be empowered to disclose certain information to staff of the Department of the Environment. I might mention that a similar authority in relation to pay-related social welfare benefits is provided by section 12 of the Social Welfare (Pay-Related Benefit) Act, 1973. The section also empowers the Revenue Commissioners to disclose information to rating authorities in relation to the occupation of agricultural land for the purpose of establishing the entitlement of persons with valuations at or above the valuation threshold for income tax liability when the system of national aggregation of valuations provided for in the Rates on Agricultural Land (Relief) Bill, 1978 is brought into [562] operation. Because of the administrative difficulties in applying national aggregation in 1978, aggregation this year will be on a rating area basis rather than on a national basis.

Sections 46 and 47 have been introduced in order to overcome certain technical difficulties in relation to Government guaranteed debt and to the management of the national debt. Section 48 deals with the winding up of the Road Fund with effect from 1 January 1978. The fund was originally based on the assigned revenue principle, that is to say that all revenue collected from motor taxation would be assigned to roads. This principle came to be diluted from 1966 onwards when increases in motor tax were for general Exchequer purposes. The assigned revenue principle as applied to roads was further diluted last year with the abolition of motor tax on cars up to and including 16 h.p. The fund has thus become something of an anachronism in our public finances. Instead of the Road Fund the finances for roads from this year on comes directly from the Exchequer through the Environment Vote. This does not mean any reduction in finance for roads. In fact there is a greater investment in roads this year than for some years past.

Section 49 is intended to give the Minister for Finance certain powers in relation to our official development assistance programme. As Deputies will be aware, Ireland now makes a significant contribution to developing countries both directly by way of our bilateral programme and, indirectly, through the aegis of certain international organisations, for example, the European Communities or the United Nations. The provision of loans by developed countries and their guaranteeing of loans given by a third party to developing countries are important instruments of development co-operation. Section 49 will allow the use of such instruments as and when it is considered appropriate.

Section 50 provides for the repeal of certain enactments. The effect of one of these repeals is to abolish the remaining part of the rebate payable to brewers using home-roasted, homeflaked [563] or home-malted cereals. This is being done in response to a formal complaint by the Commission of the European Communities that the rebate is incompatible with the EEC Treaty.

I commend the Bill to the House.

Mr. P. Barry: Information on Peter Barry  Zoom on Peter Barry  The Minister said that this Bill gives effect to the taxation changes announced in the budget and that is what a Finance Bill generally does but there are two provisions in this Bill that were not announced in the Budget and that are taxation provisions. One is section 50 to which he has now referred but no mention was made of it in the budget. The other, and the more serious one, is section 27 which deals with tax credits. Tax credits are matters that are normally the concern of accountants, solicitors and people of that type who are familiar with the very technical problems involved and the ordinary person does not realise that he also may be involved. And to bring in this section 27 which the Minister says will have no effect on shareholders in the Finance Bill without making any announcement in the budget is dishonest on the part of the Minister because it will have an effect on shareholders' funds.

It is difficult to estimate this because you have to go through balance sheets of various companies to see how much was distributed and how much tax credit was claimed prior to that. You have to make a number of estimations on the dividends paid and on the size of the stock market in Ireland and so on. My estimate is that this will mean £2 million to the Government. It is a form of taxation. Smaller amounts than that were announced by the Minister in his budget speech. This is a very technical matter but from the point of view of its effect on people it is a wide ranging form of taxation. It will have an effect on all shareholders because they will be caught. Even those not paying tax who invested their money in Irish companies will be 7 per cent worse off if section 27 is passed.

Many people will express the view that the fact that such people are shareholders in a company means that they must have money and, therefore, such an imposition would not matter [564] because they are wealthy. That is not so. This will also affect every pension fund that invests in an Irish company. The income from investments by directors of pension funds will now be 7 per cent worse off. It will also prove a disincentive to those anxious to invest money here. Those who invest in a business in America, England or anywhere else will not be at the same disadvantage. Their dividends will be paid to them without this tax adjustment. At a time when we are seeking to help Irish companies the Minister is not doing much about it. Many companies will pay the same amount out in dividends and there will be no option on the shareholders' part but to accept the loss of this 7 per cent. Many other shareholders will be so organised that they will insist on a general meeting of their company and demand that their loss of income be restored to them through a higher dividend. That in turn will reduce the amount of profit that can be retained in the company for investment.

The Minister said this was consequential on the reduction from 50 to 45 per cent in corporation profits tax announced in last year's budget but if that is so why was it not included in last year's Finance Bill? Why did the Minister decide to do it this year when his predecessor evidently refused to do it last year? If this change was thought necessary it should have been made in last year's Finance Bill and not one year later. I suppose in a narrow way one could say that what the Minister stated is correct, that the shareholders are no worse off than they were prior to the reduction but those whose shares are in companies affected by the new 45 per cent rate will be worse off than they were last year if this section is passed.

If the amount of money involved is £2 million and it is spread over all the companies on the Irish stock market it will be a small amount but the way it is being introduced will affect business people and investors in Irish companies. The measure should have been more carefully spelled out and should have been announced in the budget. The Minister should have referred to the provisions of section [565] 50 in the budget also. These two forms of taxation were not alluded to in the budget. The taxation provided for in section 27 is so technical that it is probably only understood by accountants, stockbrokers, solicitors and such people. The most serious criticism I have of the Minister in this regard is that he did not refer to this in the budget and he did not tell us how much he expected to get in 1978 as a result of its introduction.

The Minister told us in the course of his speech that the climate was right for industrial expansion in the private sector. Since the budget was introduced we have heard a number of statements by the Taoiseach, the Minister for Finance, and the Minister for Economic Planning and Development of a threatening nature to the effect that the Government had done their bit, were now finished and if the employment targets were not realised the blame would rest squarely on the shoulders of the private sector of the economy. This was not an off-the-cuff remark in the course of a casual conversation after dinner somewhere; it is a theme that has been constantly coming through the speeches of various Ministers over the last three months. If private industry accepts the role of being the most significant group of people involved in helping the Government to realise their job target then it will be blamed if the target is not reached. They would be stupid to allow themselves to be put in that position.

I was glad to hear the chairman of one of the biggest public companies here refusing, at the annual general meeting of his company, to allow himself to be cast in the role of villain if the targets of the Government are not realised. That person, the chairman of Cement Roadstone Limited, in the course of the annual report of the company, said:

At the same time, private enterprise is unwisely allowing a responsibility in the provision of jobs, to a measure that is impractical to be attributed to it. We read—“Private enterprise is on trial” and—“Private enterprise will be held accountable to society”. If this be [566] not countered now, will private enterprise be the whipping boy in a year's time?

The chairman of that company was right to refuse to allow the private sector of the economy to take the blame if employment targets are not reached. It is the Government's job to create the atmosphere in which the private sector can operate and make profits. Profits are an essential part of the private sector of the economy because, without profits you will not have reinvestment and without reinvestment you will not have more jobs. This is why the thin end of the wedge in section 27 will be a disincentive to that investment.

The Minister listed a number of other inducements in the budget and in the Finance Bill to companies to expand their employment and their activities. He listed corporation profits tax relief for small companies. That was always there. It is being expanded now, but the relief is not being expanded at the same rate as hitherto. It was at £5,000 with marginal relief up to £10,000. That was changed to £10,000 with marginal relief up to £20,000. One was 100 per cent more than the other. Now it has been cut-back. The Minister has reduced the marginal rate. A small company is now defined at £25,000. On the basis of the previous two levels of corporation tax relief for small companies, the level of £5,000 and £10,000, the marginal relief was given for 100 per cent over that. Now that is reduced to 35 per cent and, even though it maintains the 100 per cent differential, it is marginally less beneficial to companies above the level at which they can get the full relief. The Minister said:

... simplification of the arrangements governing a special reduced rate of corporation tax for manufacturing companies which achieve expansion...

The Government did not introduce that relief. That was in the previous Finance Bill. The Government have removed the sales qualification. Two forms of qualification were necessary. One was a 3 per cent growth in employment [567] numbers as measured by the social insurance stamps used by the company, and the other was a sales increase. They have removed that. That is a good idea. As I said earlier, private enterprise will create employment only if it is allowed to invest its profits and expand. Part of that expansion would be in sales which would allow for the employment of more people. Therefore the Minister is right. The increase in sales is superfluous. It does not really make any difference. No private company will increase its employment level without getting or anticipating an increase in sales from the extra production they will get from increased employment. Therefore, the increase in the level of sales is superfluous in that regard. Once you have the increase in the level of employment the increase in the level of sales will follow. That relief was there already. It is nothing new. This is just a refinement of it by removing the sales element.

The Minister referred to an indefinite extension of the period of operation of free depreciation in respect of capital expenditure. That is a good idea and I approve of it. There is one point I should like to make to the Minister and it applies also to the abolition of the stamp duty on office blocks. It is too late now because the Bill has been published, but it may come up in another context later on and the Minister might bear it in mind. When stamp duty on the construction of office blocks was abolished, it was abolished for a period of two years. Anybody in the construction industry will tell the Minister this had a dramatic effect on employment in the construction industry last year. People who had plans for the building of office blocks brought them forward to make sure they would qualify for the relief on the stamp duty.

There is no such pressure on them now. They do not have to build now because, since the stamp duty has been abolished, they need not build the office block until they are ready. This is a question of hoping to lean on the construction companies to start work earlier than they otherwise might do [568] because there is no pressure on them since the removal of the stamp duty. I have spoken to a number of people in the construction industry and they believe an extremely important part of last year's budget was the lifting for a period of the stamp duty on the construction of office blocks. It made people go ahead and build if they wanted to take advantage of the abolition of the stamp duty.

The Minister says all this creates the climate for the confidence necessary for business people to expand their activities. It needs more than that. It needs some certainty about the future. There is an air of euphoria amongst business people now, but they are worried about what will happen next year. They are worried about the level of borrowing the Government are engaging in. They are worried about the level of taxation they feel will be necessary to finance that borrowing. They are resentful of the onus being put on them to increase employment. From their point of view, the climate may not be correct for increased employment.

They have an obligation to their shareholders and to their employees. They see that as an obligation to protect their shareholders' funds and to protect the employment of those now in their firms. After that, given the right environment, they want to see that stable environment extending over more than just 12 months. They cannot recoup the cost of investment in 12 months. Therefore, they want to see it extending two, three or four years into the future before they will risk more capital investment. Understandably they are cautious.

I want to bring another matter to the attention of the Minister and the House. How soundly based is the present euphoria? A book was issued recently. I do not think the people who compiled it would attach any great significance to it because it is compiled from a series of questionnaires sent to a large number of firms right across the whole spectrum of Irish industry. This is the Business Forecast for March 1978, produced jointly by the CII and the ESRI. I am sure the Minister has read this report. It lists [569] about 25 categories of industrial activity and gives the views of the people in those industries about the immediate past and the immediate future. In about 95 per cent of these categories a warning is given. In regard to textiles it is said that the level of orders has fallen sharply. In regard to garments, the level of demand is still below normal; production and home sales are forecast to increase but exports are expected to fall.

The section on the leather and footwear industry reads as follows:

An upturn is apparent in this sector. Employment has increased slightly but Home Sales, Production and Exports report sharp increases. The level of demand has fallen.

The section on the wood and cork industries reads as follows:

Although Production, Employment and Exports have increased sharply, Home Sales have fallen.

The section on the furniture industry reads as follows:

All firms report that Production, Home Sales and Employment were stable and Exports fell.

In regard to the production and processing of paper it is stated that the level of demand has again fallen off slightly.

Perhaps I am being rather unfair because in each of these sections I am just quoting the warning given. There are many good points too. The full section dealing with the production and processing of paper reads as follows:

The upturn in activity has continued. Exports and Employment have remained stable but Production and Home Sales record increases. The level of demand has again fallen off slightly. Stocks of raw materials and Stocks of finished products are adequate. Insufficient demand is reported to be the sole constraint to Production. In the coming months Production, Exports and Home Sales are forecast to continue to increase and Employment to remain stable.

In all these sections there are mixed comments about what is happening. The section on the printing industry [570] is one of the exceptions; all the indicators are good. It is stated that the level of orders has fallen sharply in industries dealing with the processing of plastics. The section dealing with the chemicals industry reads as follows:

Production, Home Sales and Exports have continued to record increased growth and Employment has remained stable. The level of stocks of raw materials is still considered to be adequate though the level of Stocks of Finished Products is now excessive.

The section dealing with the building materials, pottery and glass industries reads as follows:

There has been an upturn in activity in this sector. Exports have declined though Production, Employment and Home Sales increased.

In each section there seems to be a small cloud on the horizon.

The sector which appears to be the most depressed is that dealing with domestic electrical appliances, radio and television. I had thought this would be the most buoyant. With a big sporting event taking place next month in another part of the world I had thought there would be increased sales of radio and television sets, but this does not appear to be so.

Mr. Quinn: Information on Ruairí Quinn  Zoom on Ruairí Quinn  They are travelling out to see it live.

Mr. P. Barry: Information on Peter Barry  Zoom on Peter Barry  I hope not. The section dealing with this industry reads as follows:

A less buoyant picture is apparent this month. Production, Exports and Home Sales have remained stable and employment has declined. The level of demand has improved but is still below normal. Stock levels of finished products however are still reported to be adequate though stocks of raw materials are excessive. The sole constraint to Production reported is insufficient demand. In the months ahead, this picture is expected to deteriorate with Home Sales, Employment and Exports forecast to decline and with Production forecast to remain stable.

[571] I do not want to read too much into this. The people who compiled this survey will be the first to admit that it was compiled from the answers to questionnaires sent out around the country. In spite of the air of confidence during the past few months, are we sure this is soundly based? The private sector are certainly resentful of the way various members of the Government are seeking in advance to lay the blame on them for any shortfall in the employment levels prophesied by the Government. They are also unable to foresee the policies which the Government will pursue and they have not any idea what will be contained in the Finance Bill next year or in 1980. Until these doubts are removed they will not risk the funds of their shareholders and the jobs of those employed at present. They are entitled to adopt this attitude.

This Government were elected almost 12 months ago and they promised instant action. They had no doubt about what they wanted to do and how to set about doing it. We now find the Minister for Economic Planning and Development saying in the May edition of Magill:

The Green Paper which will be published in June will provide a shopping list of job creation policies which we will have to debate and consider with the social partners and the people at large.

Twelve months after the election of a Government who had all the answers we are to be given a shopping basket of policy options. We must remember that the target from July 1977 to the end of that year was 5,000 jobs, with a further 25,000 in 1978. Perhaps it was 25,000 all together. We are now two-thirds of the way through that period and we are told that we are to have a shopping basket of job creation policies.

Mr. Quinn: Information on Ruairí Quinn  Zoom on Ruairí Quinn  Á la carte planning.

An Leas-Cheann Comhairle: Information on Seán Browne  Zoom on Seán Browne  The Deputy will have to relate it all to taxation. This is purely a taxation measure.

[572]Mr. P. Barry: Information on Peter Barry  Zoom on Peter Barry  I understand that, but if one looks at the Official Report for 10 May 1977, Volume 299, No. 4, one will see that the then spokesman for Finance for the Opposition filled in the economic background to the Finance Bill introduced that day.

Can any entrepreneur or businessman take seriously a Government who came into office with such a promise, not a promise identified by commentators outside their ranks but one that was trumpeted from the rooftops by themselves? Can any investor take seriously these knights in shining armour who, two-thirds of the way towards their first set of targets, are going to present the people with a shopping list of job-creation policies? They were elected to govern but now they are going to ask the people to make the choices. The social partners will be asked now to accept the responsibility. First of all it was the industrialists but now it is being broadened to include the social partners. If anything goes wrong, who will be blamed? The Government will tell them that they made the choice. However, the Government are there to govern. We do not want a shopping list of job-creation policies. We want to see a policy justified in this House by the Ministers responsible and pursued to its conclusion but we are not going to get that.

Before Christmas the White Paper talked in terms of three years—1978, 1979 and 1980. The Finance Bill must be passed, the Bill dealing with capital gains tax must be debated and other Bills must be dealt with. In addition, the Green Paper must be published and that may not be debated before the summer recess. A White Paper will have to be produced, legislation must be prepared, introduced here and passed. Can all of this happen before Christmas? We are one-third of the way through the Government's “dynamic” programme but they are still telling the people what they want to do and how they propose to do it.

Mr. Quinn: Information on Ruairí Quinn  Zoom on Ruairí Quinn  Did the Deputy expect anything else?

[573]Mr. P. Barry: Information on Peter Barry  Zoom on Peter Barry  I thought we would get something concrete but obviously we are not going to. The old firm is back in business again—elect us and take the consequences yourselves. This Bill has two measures that should have been introduced in the budget but it does not contain a number of other measures. I would remind the Minister for Finance of a motion he introduced in this House on 19 February 1974. In Volume 270, column 1011 of the Official Report he called on the Government to provide by legislation that income tax and other allowances be adjusted annually in relation to movements in the cost of living index but such a provision has not been included in the Finance Bill or in the budget. In fact, the reverse has happened. It is a strange thing that in the budget and in the Finance Bill there seems to be a strong anti-family bias. Tax allowances in respect of children were not increased and neither were the children's allowances. I do not intend to remind the Minister of remarks he made in another place on another occasion. I shall come back to them when we are on Committee Stage.

A married man with two children who is earning between £3,500 and £7,000 is worse off now than he was when the Minister in 1974 introduced the motion I referred to. The allowances and the tax bands have not been adjusted upwards. In addition, adjustments have not been made with regard to capital acquisitions tax even though the then Minister for Finance gave a firm undertaking three years ago that they would be adjusted every three years. They were due for adjustment in the 1978 budget.

Taking account of inflation and the extraordinary prices fetched by agricultural land, the value of the thresholds has been halved. The vast majority of transactions with regard to the transfer of land involve farmers passing on their property to their children but the thresholds have not been increased. Many of the landowners are reasonably well off but we do not want to get back to the situation obtaining when we came into office where small businesses and relatively small firms had to be broken up in [574] order to pay estate duty. If the thresholds are not adjusted and if the land continues to increase in value, in a few years' time farms with an acreage of much less than 100 acres will be liable for capital acquisitions tax.

I wish to repeat again that a Minister for Finance should not come here with a Finance Bill that includes taxation measures that were not announced in the budget. I do not believe the Minister means this to be surreptitious but I am sure he understands that the House is the place where announcements of increased taxation should be made at budget time so that they can be identified as that and not brought in here in a Finance Bill in a section that to the vast majority of the people is double dutch and is only understood by solicitors and accountants but affects a wide range of people. It is not consequential on the reduction of corporation profits tax from 50 per cent to 45 per cent in the 1977 budget. If it was it should have been introduced then and not here today under this Finance Bill.

Mr. Quinn: Information on Ruairí Quinn  Zoom on Ruairí Quinn  In speaking on the Finance Bill I would like to take this opportunity of making a brief reference to the unfortunate announcement the House heard today from the Taoiseach. In the context of this Bill and in the context of the social problems which confront our society and with which this Bill attempts to deal, I believe all Members of the House are firmly committed to the democratic solution of those undoubted social problems which confront us and believe that democracy, through the courageous use of parliament and instruments such as fiscal policy, as indicated in the powers demonstrated by the Minister today, has the capacity to resolve the problems which confront our society. In asserting my belief and my party's belief in the capacity of a society such as ours to deal with the social problems about which we are all concerned, to reject totally the assertions made by people like the Red Brigade and people who support them that democracy does not have the capacity to solve social problems. I know that I have transgressed your indulgence in raising this point.

[575]An Leas-Cheann Comhairle: Information on Seán Browne  Zoom on Seán Browne  I have given the Deputy a bit of latitude in view of what went before but we will now deal completely with taxation.

Mr. Quinn: Information on Ruairí Quinn  Zoom on Ruairí Quinn  I believe the point is fundamentally very relevant but I accept the indulgence of the Chair on this point. This Bill was introduced by the Minister in a comparatively brief speech in which he stated that it is the follow-up to his budget speech and that it gives effect, in financial and fiscal terms, to the taxation measures announced in the budget speech. I submit on the Second Stage debate of this Bill that it is relevant, in order to review the effectiveness of those taxation measures proposed in the Bill, to have regard to the state of the economy as defined in the budget and in the document, to which the budget relates, the election manifesto, on which the Government received their massive mandate in June 1977. That is not an attempt to widen the terms of reference of the debate. I propose to stick very tightly to the taxation proposals in the Bill.

I want to point out that the entire strategy on which the Government have based their claim to be able, uniquely of all the political parties in the country, to get the country moving again, is their capacity to stimulate the private sector to such an extent that they, stimulated by either direct capital investment or specific taxation proposals, having had the benefit of this Bill when it becomes law, will produce the levels of employment that are required to solve our problems.

It is interesting to note that in the manifesto document and in the speeches leading up to the election the emphasis was much more on the creation of employment and on solving the problem of employment than it was on either boosting the profitability of industry or increasing the productivity of industry. If it is suggested now in the House that the measures contained in the Bill will have the effect of boosting either the profitability or the productivity of industry in general we would not seriously argue with that.

There are many measures outlined in the very many sections of the Bill, in the area of income tax and corporation [576] tax particularly, which if they are effectively availed of by the private sectors will have the effect of increasing profitability and probably greater productivity particularly if depreciation and certain other clauses are availed of. We do not see anywhere any claim that the hoped for increase in productivity or profitability will have either an overall affect on job creation in the enterprises which benefit from that profitability or productivity or that there will be anything even approaching a direct line proportion between employment creation and profitability and productivity.

That, as far as we are concerned, is a very important point. There has, in our view, in the Government statements from the time they democratically took office until now been a shift away, in the context of the private sector debate, from the emphasis on job creation within the private sector to the idea of allowing the private sector to get the country moving again. The emphasis, which was dangled like a juicy carrot before the young people last June, that those measures would have the specific effect of creating new jobs, has been shifted. I would like the Minister to detail specifically how he and his Government colleagues see how any of the taxation proposals before us in this Bill will have the direct effect of creating new jobs in the private sector. That sounds like a simplistic question but it is not intended to be so.

Estimations, obviously, will be required in a lot of areas. In so far as it can be answered in principle this side of the House would like to see an attempt made to answer it. Why do I raise that particular question at the outset of an economic debate on the taxation proposals in the Finance Bill? I raise it on behalf of the Labour Party because we believe that the disastrous over-reliance on the private sector, in the terms that have been presented to the country by Fianna Fáil, is statistically and economically dishonest because they cannot, in our view, support their argument. Consequently, because of its dishonesty it is damaging to the democratic process which will undoubtedly come under great [577] strain in the next ten or 15 years when the projections of population growth take effect. It will undermine the dependability of Governments to analyse problems seriously and consequently to respond with measures that can resolve them. Thirdly, let me be clear that the Labour Party have no argument in this context at this time in this House with the idea of a mixed economy, but in a mixed economy it is extremely damaging to the private sector because it hangs around the neck of the private sector a responsibility for delivering political promises for which the private sector neither sought nor obtained a mandate. Therefore, on three grounds it is damaging. It is dishonest, it undermines the credibility of democratic government and—perhaps in the short term much more serious—it is damaging to the private sector itself.

As politicians forced to catch the eye of the media or keep our listeners attentive when competing with the distractions in Argentina or with other forms of Muppet Show which happen to come on the screen, we tend of necessity to be forced to speak in slogans. Being forced to speak in slogans, we are sometimes forced to concentrate and reduce our arguments to simplistic statements. When we— I mean the Labour Party and the labour movement—talk about the private sector we do not have some caricature of a large anonymous company concerned exclusively with how they are going to exploit their workers and invest their profits. That caricature is not true and does not exist.

An Leas-Cheann Comhairle: Information on Seán Browne  Zoom on Seán Browne  The Deputy is getting away from the Bill before the House which deals purely with taxation and has nothing to do with the private sector versus the public sector except in so far as they are affected by taxation in this Bill.

Mr. Quinn: Information on Ruairí Quinn  Zoom on Ruairí Quinn  I accept, a Leas-Cheann Comhairle, your right to intervene in this, but we are talking about a sector which is going to benefit explicitly from tax concessions, and I am trying, in order to assess whether that sector will take full advantage of those tax reliefs, to give something to the House of [578] what that sector is. The private sector extends from very small companies to large companies. With specific reference to how the private sector will respond to tax concessions and incentives designed in this Finance Bill it is relevant to refer yet again to what was said by a former public sector employee who is now chairman of the largest single Irish quoted company on the Irish Stock Exchange. He stated that he on behalf of his shareholders— of which I believe the Government are one—very clearly and explicitly rejected any responsibility for delivering to the present Government jobs which that company never promised and for which they cannot consequently accept any responsibility.

Mr. P. Barry: Information on Peter Barry  Zoom on Peter Barry  That is perfectly right.

Mr. Quinn: Information on Ruairí Quinn  Zoom on Ruairí Quinn  On numerous occasions the Government have claimed that this would be the aim, that it must be encouraged and that taxation is the most direct way it can be encouraged. This Bill, as distinct from the budget speech, is the first tangible evidence in which we can measure that encouragement and in which we can look in detail at the provisions. The Bill presupposes that if you give enough tax concessions to people either in personal income tax allowances or corporate tax or by abolishing tax on co-operatives and so forth, you will create the climate of enterprise and expansion. That is an argument that can be very truly advanced. If you do that, how can you guarantee that it will produce jobs? It is purely, exclusively and totally on the basis of the creation of new jobs that the present Minister sits where he sits today while my colleague, Deputy Barry, sits where he sits today.

It is legitimate and correct for us to look in detail at the measures in the various sections of this Bill and to assess them on the basis of how many new jobs they will create, where, how, of what kind and what stability and duration. It is legitimate at this stage to look at the thinking behind the various concessions and inducements printed in this Bill which are designed to create this climate of enterprise and expansion.

[579] In our view as socialists, there is a fundamental contradiction in the way in which the Government in the measures of this Bill have applied their own values to some sectors of the community and not to others. Let me give examples. One section of the Bill gives encouragement for employers and directors in certain companies to borrow money to purchase shares in their own company; in other words to take a stake in their own enterprise. It is a proposal with which we would not have any disagreement. Another proposal in section 19 states that a company— there are various ways in which this is calculated—which in effect initially increases its sales and in the long term increases its employment, will get a reduction from 45 per cent to 25 per cent, of its corporation tax if it can demonstrate that these sales have increased in the short term and that in the long term the payroll, social welfare contributions and so on have increased.

Mr. Colley: Information on George Colley  Zoom on George Colley  The sales are an inheritance from the Coalition.

Mr. Quinn: Information on Ruairí Quinn  Zoom on Ruairí Quinn  I accept that.

Mr. P. Barry: Information on Peter Barry  Zoom on Peter Barry  They were really superfluous.

Mr. Quinn: Information on Ruairí Quinn  Zoom on Ruairí Quinn  Without getting into technicalities on Second Stage, both the Minister and the spokesman for Finance in Fine Gael will recognise that the objective of the measure, which the present Minister inherited, was to encourage companies to create employment in the short term. If the Minister and the Fianna Fáil Party seriously wanted the private sector to be the exclusive generator of net employment in the economy the least we would have expected was that somewhere in section 19 there would be some proviso which would enable the employees—not the shareholders—in that company to have a say in how the new profits which will be generated in the short term will be invested. Any company which has surplus capital to dispose of will consider a number of options, and one of those options may very well be to increase that company's [580] plant or to build new premises, both of which are very clearly encouraged in the Finance Bill before us. Therefore the company in which profits have been generated and which has surplus capital to invest will, when either the shareholders or the board of directors, who are in reality in many cases the financial controller and the managing director, draw up the options for what to do with that investment, and may very well opt for an investment that will maximise other tax provisions in this Bill such as the free depreciation of machinery, without specific regard to the direct employment content of their decision on that enterprise.

We would like to hear from the Minister how the present Government propose to ensure justice for workers who accept his patriotic call for wage restraint and who forego increases which their enterprise could legitimately pay because productivity, profit levels and growth generally in the manufacturing sector of our economy have been much higher than the norms established in the national wage agreement. Why should such a worker accept and continue to accept those constraints if the product and benefit of the surplus value of his labour is invested in such a way that it neither secures his employment in the short term nor in the long-term? The provisions of this Bill are designed to give taxation effect to the economic strategy of the Government, the prime objective of which was the creation of jobs by the private sector. We should like to see the rhetoric of the weeks of June last, the weeks leading up to the election, in fine print and legislated for by the party who now have such a massive majority in Government. Until such time as this is done, we can only regard all those promises as rhetoric. There is a major issue of credibility involved for this administration and for the Minister for Finance, who has staked his claim as a senior member of the Government on being someone capable of creating the climate in which our social and economic problems could be solved.

We would like some response in that specific area. On Committee Stage [581] it would be in order similarly to go through other such provisions of this Bill and to make the connection between the gap that exists between the promises and the rhetoric of June last and the performance of the Government to date.

The Bill attempts to give effect to the taxation policy of the budget and in so doing it must be measured against the effect of the budget. In that context it is interesting to recall some comments that have been made about the economic climate in which the Bill has been introduced and to look at the capacity of the private sector, who will be the enormous beneficiaries of the provisions of this Bill, to deliver the jobs that have been promised explicitly by the Minister and by the Government.

Both the budget and the provisions of this Bill have been used to give an enormous financial cash boost to the economy in the area of major tax concessions, whether in the form of personal tax allowances or the abolition of certain taxes, or additional allowances in one form or another— the non-collection of taxes because of incentives and so on which might otherwise have applied. The result of all this is that there is a budgetary deficit for the year of £400 million, while there will be a deficit on the capital side of a similar amount. Although there is this injection of finance on this scale into the economy, let us consider what kind of economy the money has gone into. One economist, Mr. Paddy Geary, writing in Magill of April 1978, said that during the years from 1975 until now the economy was in a healthy state. He describes how, so far as Fianna Fáil were concerned in the run-up to the election, the economy was viewed as being in recession and that there was warranted a pump-priming exercise to renew economic confidence and hence the growth of investment, employment and output. That was the official view before June. The reality was that in some sectors the economy was doing exceptionally well. Mr. Geary continued in that article and I quote:

This view was seriously incomplete. In the third quarter of 1975, [582] there was evidence that the recession was coming to an end in the industrial sector. In that quarter, the volume of output of transportable goods industries showed a small rise after five successive quarters of decline.

The recovery continued in the final quarter of 1975 and gathered momentum during 1976, when the volume of production grew by 9.0 per cent....

The writer then proceeds to point out one of the great ironies and contradictions that has preceded this apparent recovery of the manufacturing sector. He continues:

However one significant aspect of the recovery during 1976 and early 1977 was the failure of the unemployment rate to record a significant decline. The level of employment in transportable goods industries did not begin to increase until the second quarter of 1976 but it rose by about 6,500 in the period June 1976-June 1977. Despite this, there was little change in the number of people on the Live Register. The level of unemployment failed to show much response to more than eighteen months of sustained growth in industrial output. It was this failure that the manifesto concentrated on and made the reduction in the level of unemployment the central target of Fianna Fáil's economic policy....

This is the first attempt to put into law the taxation progress and the economic policy put forward by Fianna Fáil. Mr. Geary continued:

These policies may be assessed from a number of standpoints. The first concerns their implications for the role of macro-economic policy. As was noted above, the economy had begun to recover from the recession in late 1975. Growth in industrial output and exports contributed to an increase in real GNP of 3 per cent in 1976.

There we have a picture of the industrial sector, the area from which many of the new jobs are expected to come, but that sector had been growing [583] already. It had begun slowly and painfully to recover from the worst economic recession in the western world since the thirties. Against that background we now have, not an economy that was on the verge of collapse, but an economy which, despite this apparent health in certain sectors, was failing totally to deal with the problem of unemployment. Mr. Geary goes on to assess what effect the budgetary measures as indicated in this Finance Bill will have on this problem and he says:

First, the Government's budgetary measures were biased towards personal consumption, a bias due almost entirely to the various tax concessions. Increased personal incomes will lead to increased demand for goods and services; the extent to which it will be for Irish goods depends on the proportion of income increases spent on imports and on the extent of unused capacity in Irish industry to meet the increased demand.

An Leas-Cheann Comhairle: Information on Seán Browne  Zoom on Seán Browne  The speech the Deputy is making now would be more appropriate to the budget, which is still before the House. We are dealing with the Finance Bill and it is purely a taxation measure.

Mr. Quinn: Information on Ruairí Quinn  Zoom on Ruairí Quinn  I accept that.

An Leas-Cheann Comhairle: Information on Seán Browne  Zoom on Seán Browne  I accept that the Deputy is entitled to refer to unemployment—the Minister did—but in a passing reference only. As far as taxation relates to it the Deputy is quite entitled to speak on that, but he is making a budget debate speech.

Mr. Quinn: Information on Ruairí Quinn  Zoom on Ruairí Quinn  Would the Chair accept that, as quoted earlier by Deputy P. Barry, the Minister for Finance, in opposition, used the Finance Bill as one on which it was essential, first of all, at least to review the economy.

An Leas-Cheann Comhairle: Information on Seán Browne  Zoom on Seán Browne  I can only deal with my time in the Chair. I am not going to deal with what happened previously.

Mr. P. Barry: Information on Peter Barry  Zoom on Peter Barry  Volume 299, No. 4 of the Official Report.

[584]An Leas-Cheann Comhairle: Information on Seán Browne  Zoom on Seán Browne  Deputy Quinn is on the measure before the House, which is a taxation measure. What he is saying is quite good, but it is for another measure; it is for the budget debate.

Mr. P. Barry: Information on Peter Barry  Zoom on Peter Barry  It is very good.

Mr. Quinn: Information on Ruairí Quinn  Zoom on Ruairí Quinn  My respect for democracy is supreme. I will move on to review what the Minister for Economic Planning and Development had to say with regard to the budget and the question of taxation, because the measures proposed in this Bill will have the effect of giving reality to this massive deficit and will confer on the private sector massive advantages in terms of taxation. He states, in the same issue of Magill, in reply to the debate:

Again I agree that the challenge to the private sector is unprecedented, that it will require a trebling of the growth rate here over the next few years. But we are confident that this will occur. In the first place there is an unprecedented influx of foreign investment here. Secondly, we have got to maintain our competitiveness abroad...

Then he goes on to say:

But don't forget the psychological impact our policies are having in the private sector. Here they have a Government willing to help them and to stimulate them. This creates confidence, which is the sine-quanon for expansion.

I know the Chair can again refer to the fact that I am not talking about taxation.

An Leas-Cheann Comhairle: Information on Seán Browne  Zoom on Seán Browne  Long quotations are not in order. It is not necessary to put all Magill on the Official Report.

Mr. Quinn: Information on Ruairí Quinn  Zoom on Ruairí Quinn  I am not proposing to do that. We have in this Bill specific taxation proposals designed to stimulate extensively the private sector. We are asked, as a House, to either agree with them or not. As far as my party are concerned, we are not in the business of destructive opposition. In fairness to policies which we believe have been at least well thought out and considered for some time by senior [585] politicians on the other side of the divide, it is reasonable to assess their likely impact in obtaining the stated policy objectives of this Government. We would submit that there is no economic evidence yet presented, either in the Minister's opening speech on Second Stage, in the manifesto, the White Paper or indeed in the budget speech that would suggest that, on the basis of this Bill and the action taken so far by the Government in the area of taxation, there is a direct correlation between increased productivity, profitability and the creation of new employment. That is a central point and one could return to it over and over again until such time as the Minister for Finance and the Government can demonstrate that in this, that or another sector we can reasonably expect that availing of the tax concessions, so many new jobs will be created and therefore we can go ahead and say we are delivering these jobs on the basis of their manifesto.

The effect of this Bill is to confer on one sector of the economy an enormous financial benefit at the possible risk of other sectors of the economy. Obviously the Chair is not in the mood for taking any more quotations from Magill. Therefore, I shall paraphrase——

An Leas-Cheann Comhairle: Information on Seán Browne  Zoom on Seán Browne  All I said was that quotations should be brief. Long quotations are out of order. Quoting whole sections of Magill is not in order.

Mr. P. Barry: Information on Peter Barry  Zoom on Peter Barry  The Deputy should quote the date and the month, that will do.

An Leas-Cheann Comhairle: Information on Seán Browne  Zoom on Seán Browne  I will not be led into commenting on Magill. Deputy Quinn on the Bill before the House.

Mr. Quinn: Information on Ruairí Quinn  Zoom on Ruairí Quinn  The Minister for Economic Planning and Development states that this year's budget and Finance Bill are a one-shot operation, that it cannot be carried on indefinitely, that the level of borrowing, of virtually no new tax collection, cannot be sustained and that, in the event of the jobs not materialising and consequently revenue not being generated, some cutback will [586] have to take place in the area of over-all increased taxation or, to quote him specifically—because I would not wish to do that eminent person an injustice—

... or at least restraint in the non-job creating areas, which are social welfare, health, housing and education.

We have from the Minister for Economic Planning and Development the statement that if this Government's strategy—to which this Bill proposes to give partial effect—does not create the jobs in the private sector and consequently the buoyancy of revenue required in order to reduce our dependency on overall borrowing, we can anticipate some restraint either in increased taxation or, to quote him again:

... in the non-job creating areas, which are social welfare, health, housing and education.

I should like to know what the Minister for Health and Social Welfare has been doing in the area of job creation. I should like to know how and what Deputy Barry——

An Ceann Comhairle: Information on Joseph Brennan  Zoom on Joseph Brennan  That would hardly arise on this Bill.

Mr. Quinn: Information on Ruairí Quinn  Zoom on Ruairí Quinn  I do not wish to engage in argument with the Chair.

Mr. B. Desmond: Information on Barry Desmond  Zoom on Barry Desmond  I think he has gone to Iran to get a few jobs there.

An Ceann Comhairle: Information on Joseph Brennan  Zoom on Joseph Brennan  Anyhow, it does not arise on the Finance Bill.

Mr. Quinn: Information on Ruairí Quinn  Zoom on Ruairí Quinn  If this is the effect of the possible failure of the provisions of this Bill, then the implications for some sectors are enormous. I would suggest it would also indicate an extraordinary contradiction in the approach of the Government to industries such as the construction industry, which I believe is responsible for producing housing. I should like clarification at some stage of the position outlined by the Minister's colleague in this regard. If he considers that, in the event of the possibility that the taxation of this Bill are not availed of to the extent he would like, effect will be given to the options outlined by [587] the Minister for Economic Planning and Development. Perhaps he could continue and consider whether the creation of jobs in the private sector, which reaps great benefit from the taxation proposal generally, is considered to be productive and if the creation of jobs for local authority housing tenants is considered to be non-productive. Perhaps he could explain somehow or other the Government's attitude in this regard because it is my understanding that it is the private sector that builds public authority housing.

I should like to conclude on the section about the overall economic strategy of this Bill by saying that we view with considerable alarm the ideological dogmatism that runs right through the thinking of this Bill, that sets up the private sector in such a way that if it does not avail of every one of the provisions it cannot produce the jobs required. Even if it does avail of the options in this Bill, it will have to exceed its previous performance to an extent that it does not believe it is capable of doing. We have already heard what the chairman of the largest Irish quoted company had to say in that regard. We have had some indications from various spokespersons for the industry, including the director general of the CII on a PM programme, that the primary objective of the private sector is its own survival. With this measure. I would suggest that the Fianna Fáil Party, the Minister for Finance in particular, are doing great damage to the private sector, a sector which they purport to represent. They are doing it on the basis of political expediency which can only be considered dishonest. Unlike them, we believe the private sector when it describes itself so.

The Bill makes a number of proposals and I should like to refer briefly to some of them. In fairness, I should refer to the ones which I welcome and which we will support. I commend section 37 which recognises the heritage of building. This is a positive move on the part of the Government, one that was long-sought by An Taisce, a move which we will support in principle.

[588] However, we will be looking for some definition of what is meant by the phrase “the provision of reasonable facilities for viewing to members of the public”. We should like this extended by the incorporation in some form or another of access to such properties within the development plans for local authorities and some relationship of benefiting from this provision with the local tourist development bodies and the local authorities themselves. We do not believe that the proviso clause in section 37 is adequate. I will be pressing the Minister for clarification of this matter and for some definition of what would be considered as “reasonable facilities”.

The overall proposals in relation to personal allowances in Part I of the First Schedule could be welcomed in so far as they remove certain constraints and restrictions. Section 8 removes tax remissions for certain cross-Border workers and people who find themselves in these anomalous situations, which can be extremely annoying. These proposals are overdue and we welcome them in principle.

Chapter II relates to the taxation of farming profits. It is the Labour Party's view that no service has been done to the community at large by the artificial debate that has been exploited to produce some sort of divide between town and country, between farmer and industrial worker, on the assumption that all farmers pay no tax and all industrial workers pay too much tax. Politicians are sometimes forced to telescope their arguments into slogans in order to retain the attention of the public. In so doing, we do great damage to our credibility and insult the intelligence of our opponents. If one combines the proposals in this section for taxing farmers with the recent Bill that was introduced by the Minister for the Environment, and connects the effect of the Agricultural Rates Relief Bill, what emerges is a fairly serious attempt at taxing farmers which, in some cases, would be less than equitable. I regret that the Government had not the political courage to say to the farming community before and after the election “Irrespective of what you do in our society, if you earn an [589] adequate income you should be liable for tax”. The form of taxation to be used should be equitable and administratively easy to collect instead of being based on outdated notions of valuations.

I regret that the Minister for the Environment was forced to come into the House to collect money from the farming community, which is direct taxation on an unequal and distorted basis, when that job should have been done by the Minister for Finance. One can only look at the provisions in this section in the context of what was promised in the past and what now appears. On Committee Stage it is our intention to look in detail at the real effect of what amounts to nothing more than circular transfers, when all the juggling has stopped, between many of the provisions in this area.

At the outset I referred to corporation profits tax and to the various proposals in Chapter III of the Bill. The major one is in section 19. It streamlines incentives that were established by the previous Government to the private sector. In view of the Government's total dependence on the private sector for exclusive salvation in the area of productive jobs, and bearing in mind that the Minister for Economic Planning and Development does not regard jobs in social welfare, housing, health or education as real jobs, whatever they happen to be——

Mr. Colley: Information on George Colley  Zoom on George Colley  That is not what the Minister said.

Mr. Quinn: Information on Ruairí Quinn  Zoom on Ruairí Quinn  The quotation is there.

Mr. Colley: Information on George Colley  Zoom on George Colley  The quotation does not support what the Deputy said.

Mr. Quinn: Information on Ruairí Quinn  Zoom on Ruairí Quinn  The Minister may well have meant productive jobs. If he considers that a Professor of Economics who is paid out of the public sector is not being productive, then I would be prepared to debate that point with him. I would argue that the role of a doctor, a teacher, or a person in social welfare is a productive role and can increase the national wealth. If he has another insight into the point it is a pity he did not see fit to write it into the article in Magill.

[590] In section 19, Chapter III on corporation tax, in effect the incentives to the private sector have been increased dramatically and we should like to see some provision whereby the employees in the company would have some say in the investment plan of that company. One has only to glance at the financial pages of the newspapers these days to see that companies are registering massive profits. It is reasonable to assume that these companies have gone through this Bill. Indeed many accountancy firms in the city have produced detailed and excellent analyses of the effects of the Bill, and reading those analyses companies will find that there are major incentives to directors and shareholders to invest the profits which they are publicly declaring in the newspapers.

Is it unreasonable to assume that workers engaged in such enterprises and who had some effect in creating these profits should have some say in how that money should be reinvested? If the Government are to be considered as caring about the creation of jobs as distinct from the creation of employment, surely we would have seen some intent, some clause or some reference to that concern in this proposal. I ask that question somewhat tongue-in-cheek because we have not seen anything to date from the Government. Even in the area where they have power to give workers some representation, they have not yet availed of the opportunity. I refer to the seven semi-State companies to which workers, as a result of legislation passed by the previous Government, have a right to elect members of those boards. That legislation has not been put into effect yet, and no elections have taken place yet in any of the seven companies.

Therefore, it is not surprising that there is an absence of such a provision in section 19. Perhaps the Minister overlooked it and I should like an indication from him whether on Committee Stage he will consider an amendment from the Labour Party on such a proposal. If so, we would be more than happy to sit down to consider the wording and the structure of such an amendment prior to having [591] it typed so that we can get a constructive debate in the House and not impede this Bill being enacted.

Taking this Bill with the contents of the business pages of various newspapers, exortations regarding wage restraint will be very difficult to put into reality unless people directly employed in enterprises are to be given some say in the way in which the profits which they helped to create will be invested to their benefit.

Chapter IV deals with income tax and corporation tax and there are a number of proposals which I will refer to. I will come back to some of them but at this point I will refer specifically to section 25 in respect of which the explanatory memorandum states :

Section 25 provides that where a taxpayer, for the purposes of his trade, makes a contribution to a local authority towards capital expenditure incurred by it on a scheme of effluent control approved by the Minister for the Environment, the taxpayer will be entitled, in respect of the contributions, to the same capital allowances as if the taxpayer himself had incurred the expenditure.

Deputy Fitzpatrick from Cavan and I have been attempting to press the Minister for the Environment for definitions regarding the environment and the role of the Department of the Environment since their name was changed in June. We have been given a number of assurances by that Minister about the new concern for the environment that permeates this administration. However, in this provision in section 25 we have a major reversal of one of the most fundamental principles involved in environmental protection, of something that has been trumpeted by every conference on the environment, that is the polluter phase. It happened in Stockholm and at other major conferences and throughout the US; the principle is quite clear in all the documentation. It is that if you mess up the environment you will pay for it; if you do open-cast mining you will pay to put it back; if you damage the environment [592] in one way or another you will pay for its restoration.

What does section 25 do? It gives tax relief for polluting the environment. It is unbelievable. It gives tax relief if the local authorities incur expenditure to clean up the mess. One cannot consider seriously the proposals from that side of the House when it appears on the one hand that the Minister for Economic Planning and Development does not consider jobs in health and social welfare to be jobs at all, and the Minister for Finance considers that the environment is fair game and that if a local authority have to clean up after you you will still get tax relief for having caused the mess. Why bother with the pretence of making a contribution to the local authorities if you can claim tax from this? Surely the Revenue Commissioners are not so under-employed that they need this to be added to their problems. An industrialist should either pick up the cost of exploiting the environment for his economic gain and absorb it within the profitability or the viability of his enterprise or go out of business.

Therefore, I ask the Minister seriously to consider this matter. Another colleague of his—I presume they talk to each other from time to time—the Minister for Tourism and Transport has received a development plan from Bord Fáilte, an industry which they say will attract two million visitors this year. What are they coming to see? Among 16 clauses or so, that Bord Fáilte document sets out that the primary resource of Irish tourism is the environment. Now we are faced with the reality in section 25 that we will have to pick up the tab for an industrialist who will later get a depreciation allowance on the plant that will have created the mess.

Somebody on that side of the House should have said clearly that there should be some cohesive comprehensive way to deal with this problem of the environment. I can only wonder whether any account has been taken by the Department of Finance of the various reports that must have been produced by the officials who went to Stockholm a couple of years ago and [593] to Vancouver three years ago. There is a section in this Bill which makes it relatively easy for us to do these things. Does the Minister read the stuff that comes back from Nairobi and is he aware of the impact in real terms of these things on what is regarded by everybody as of prime economic importance? If so there is no evidence of it in section 25, the implications of which are very serious in our view.

In Part II, the excise sections, we are giving effect in legal terms to provisions regarding the abolition of tax on cars not exceeding 16 hp. We regard that proposal as being extremely regressive. Of course it is very comfortable for people driving cars not to have to pay tax and of course this provision was presented as a cosmetic package. However, it is hard to see how this could be considered as part of an economic strategy. It has implications for our overall economy and the environment which will have direct bearing on the Department of Finance. I refer to a recent article in The Irish Times by Ken O'Brien. I regret I do not have the specific reference, but we know from that article that the number of car registrations has dramatically increased and the ownership of cars is now at a fantastically high level compared with the 1960s. Since we have virtually no car assembly workers left the result is we are now subsidising and underpinning employment in British Leyland, in Renault, Volkswagen and other car plants in Europe. Secondly, we are adding to the riches of the oil moguls by consuming imported fuel and thereby adding to our balance of payments problems. Thirdly, we are destroying our environment and clogging up our roads.

Our roads are not capable of taking anything like the volume of traffic they are now required to carry. The progress of transportable goods is impeded. We suffer the impact of EEC legislation which has designed the axle loads, a decision taken in Brussels on the basis of a road system we do not have. This is having a dramatic effect on the fabric of our roads. Many major roads are in need, not just of resurfacing, but of total restructuring. The roads in many towns [594] and villages are virtually destroyed. In addition, there is almost chaotic congestion. Buildings are being damaged through constant vibration. Congestion is affecting the time taken to transport goods from the factory to the port for export and that cost can be and has been measured by professional economists who have some sense of reality.

One could go on, but that is just a rough picture of what this abolition of road tax has done. Admittedly, it did what it was intended to do—it got the boys back on that side of the House. In economic and physical terms it has caused untold damage. More people are now transferring into the car section of the community. That has a multiplier effect the full extent of which no official in the Department of Finance can fully calculate. There is a blank cheque offered to people, whether they be Arabs or foreign car manufacturers. Some benefit might result were the car manufacturers operating within the EEC, but I can see no sense in subsidising car manufacturers in South Korea or Japan. As recently as three weeks ago our permanent representative in Brussels said the South Koreans are due to release a flood of cars on the western markets, so many cars that the Japanese will find themselves undercut in their penetration of the market. We know the effect the Japanese car industry has had.

This election gimmick was popular and, therefore successful. But the effect is that, through a complex system of multipliers, the country is now being bled of many resources and we are being forced to spend money on areas of our infrastructure which would not have been necessary but for this gimmick. Extra cash will be required for roads. Extra cash will be required for environmental improvements all over the country.

Mr. P. Barry: Information on Peter Barry  Zoom on Peter Barry  And extra cash for CIE.

Mr. Quinn: Information on Ruairí Quinn  Zoom on Ruairí Quinn  CIE can whistle for extra cash so long as this Government are in power.

Mr. P. Barry: Information on Peter Barry  Zoom on Peter Barry  The gimmick has had the effect of drawing people away from CIE.

[595]Mr. Quinn: Information on Ruairí Quinn  Zoom on Ruairí Quinn  Not only that, but CIE are very much the poor relation as far as this Government are concerned. They have always been. We are still awaiting a simple reply to a request for the electrification of the suburban rail system and the Ceann Comhairle has had to bear with me as I tried to press——

An Ceann Comhairle: Information on Joseph Brennan  Zoom on Joseph Brennan  I trust I shall not have to do that now. I suggest the Deputy keeps on the rails.

Mr. Quinn: Information on Ruairí Quinn  Zoom on Ruairí Quinn  The consequences of the abolition of car tax are enormous. I do not expect the Minister to reintroduce the tax before the next election but I would like the Government and the Department of Finance to do the sums to show what the abolition of this tax will mean from the point of view of our balance of payments and increased energy consumption. Answers to questions about energy consumption addressed to the Department of Industry, Commerce and Energy certainly do not come across the floor of this House. The impact of this abolition will create a great many pressures on the infrastructure. There will be a damaging effect on the economy in general. The Minister is introducing measures the financial effect of which he does not know and cannot therefore calculate. The Minister for Economic Planning and Development has said unequivocally that, if restraint is necessary, it will be those depending on social welfare, local authority housing and health who will have to bear the burden of such restraint. Anything like that would be totally unacceptable to my party and I am arguing now that, if the Minister for Finance insists on these provisions, he will have to implement measures for restraint.

Debate adjourned.


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