Tuesday, 10 June 1980
Dáil Eireann Debate
Mr. T.J. Fitzpatrick: (Cavan-Monaghan): When I reported progress I was pointing out that I disagreed very violently with the proposed resource tax. This tax seems to be contrary to the explicit intention in the budget which stated that the Minister proposed through the budget to introduce greater equity into the taxation system. This resource tax does exactly the opposite. It is based on an inaccurate and discriminating yardstick, the poor law valuation system. I do not have to argue that that system is unfair, out of date, and discriminatory as between one holding and another.
As an example I pointed out that County Monaghan is one of the most heavily valued counties notwithstanding that in modern times and for all State benefits it is included in the 12 western counties which are regarded as underprivileged counties. County Monaghan is valued more or less as equal to County Kildare. I hardly need say more. A 70-acre farm in County Monaghan has £100 valuation while a 70-acre farm in County Kildare has £95 valuation. It is unbelievable that any comparison could be made between the two counties.
This resource tax seeks to consolidate this unfair and inequitable system of rates by removing the agricultural relief grant and thereby increasing rates from £200 to £500 on a poor law valuation of £40 and at the same time introducing  this resource tax, which is another form of rating. In my opinion this resource tax is a direct repudiation by Fianna Fáil of their solemn promise given through Deputy Lynch, the former Taoiseach, not to transfer rates removed from private houses to land or business premises. When the manifesto was published and when the promise was seen to be made by Fianna Fáil to deal with private houses, the Opposition and others said: “If they do that, they will transfer the rates foregone in this way to business premises or to land.” Deputy Jack Lynch, then leader of Fianna Fáil, gave a solemn assurance that there would be no such transfer of rates. What is this other than a transfer of rates from private housing to land? In addition to abolishing the agricultural relief grant in three stages since they came to power down to £40 valuation, thereby saving the State £17 million, they now introduce what I call a two-tier rating system by imposing a rate of £3.50 per £ on valuations of £70 or over.
This resource tax has no regard to the capacity of a person to pay. I know and the Minister knows a farmer in County Monaghan with a valuation of £81 who has a very large family and who last year was in such poor circumstances that he had to be paid a disabled person's allowance by the North Eastern Health Board. That same farmer will now be called on to pay a resource tax this year of £280. Deputy Leonard also knows about this because the Minister wrote to Deputy Leonard saying that it was a hardship case but he could not do anything about it. That is the one hardship case that we may be able to point to in such clear terms but it is an example of the inequity and injustice of this tax. Of all years that the Minister might choose to impose a resource tax on farmers, an additional tax, surely this is not the year, because farmers' incomes this year, according to all the reports and studies that have been made, will be well down, down by at least 10 per cent. I am sure they will be down by more than that.
Time does not permit me to develop all these points, but another point is that  this resource tax is a direct discouragement to agricultural production because if the farmer has to pay hundreds of pounds on top of additional rates he will have less money for artificial manure, for lime and for stock, and never in our history was an increase in agricultural production more necessary. Looking at the most recent report available, that of the Central Bank, we see that the most alarming aspect of our economy at present is our balance of payments. This year it will be over £700 million again. What will this tax do for our balance of payments? It will depress agriculture, reduce agricultural production, reduce agricultural exports and exacerbate the disastrous state of our balance of payments.
This is a reckless performance. The Minister has told us that the reason he is introducing this crazy system of taxation is to put an end to avoidance of taxation. He apparently looked back and saw that last year or the year before some farmers did not pay as much as they should have, but he has the income tax machinery to deal with that. He is simply saying that, regardless of income and regardless of their capacity to pay, farmers will have to pay £3.50 per each £1 poor law valuation.
We all know that evasion of tax goes on all over the country but I have not seen any Minister come in here with a proposal to put a flat rate of tax on professional men because it was thought some of them evade taxation. I have not seen any proposal from the Minister to put a flat rate resource tax on business people because some of them do not pay all the tax they should pay. Why has the Minister picked out the farming community this year in direct denial of the promise made to them by the former Taoiseach that this sort of tax would not be paid?
Several Ministers have said that farmers are prepared to pay the same tax as everybody else and the Minister for Finance tells us that this is what he is doing with this resource tax. The resource tax is a unique tax, a rate upon a rate, a method of taxation which has not been  applied to anybody else. There are 82 Deputies in the Fianna Fáil Party who could come in here to give their views on this tax but I have not heard any of them coming in here to defend this tax.
Mr. T.J. Fitzpatrick: (Cavan-Monaghan): Why have the rural Deputies in the Fianna Fáil Party from Cavan, Monaghan and all the other places around the country not come in here to defend the farmers? I understand on fairly reliable authority that when the Minister for Education tampered with school transport there was a rebellion in the Fianna Fáil Party and nearly half of the party signed a round robin document demanding that the proposal be dropped.
Mr. T.J. Fitzpatrick: (Cavan-Monaghan): Over 30 Deputies of the Fianna Fáil Party signed the round robin demanding that the proposal to interfere with school transport be dropped immediately. Why do not the agricultural Deputies in the Fianna Fáil Party sign a document demanding that this iniquitous proposal be abolished? It is not difficult to make a case to show that this tax is unjust and that it should be dropped. Perhaps the Minister has been picked out to do this particular dirty work before he goes to bigger and better things.
Mr. Enright: I am amazed to see the Minister, who represents a rural constituency, bring in this resource tax. People who live in rural Ireland who meet farmers are aware of the great difficulties the agricultural community are facing at the moment. The people I discuss agricultural matters with are seriously concerned at the disastrous trend in  agriculture during the past 12 to 18 months. The Minister's predecessor made a very grave blunder in bringing in the 2 per cent levy. Members of the Fine Gael Party asked the Government at that time to withdraw the 2 per cent levy. In spite of every warning from us and from the IFA leaders as well the introduction of the 2 per cent levy went ahead. Forecasts were made that there would be a drop in production and in livestock numbers but pleas to the Government went unheeded.
The Minister has now brought in the resource tax. Would the Government not consider the livestock figures which were published earlier this year? Those figures show a serious drop in cow and heifer numbers. This is the first occasion on which I have seen those numbers drop. The numbers rose over many years and now instead of a levelling off there is a drop in numbers. I am in touch with the farming community and they are being pressed on all sides by rate collectors, banks, the ACC and people in all business demanding that they meet their debts. They are unable to meet those commitments because of the unprecedented difficulties they have experienced.
The Taoiseach said that this resource tax would not be a permanent tax. Nobody said how long it will be there. I forecast that it will be the deathknell of the Government. If that resource tax is on the Statute Book when Fianna Fáil go to the country instead of the 82 Deputies they have at the moment they will be lucky if they come back with 40 Deputies. The resource tax has the most serious implications for our agricultural industry. Any Deputy in the Fianna Fáil Party who has any common sense must realise the grave blunder the Government are making by introducing this tax. I ask the Government, in the interests of Irish farming, to remove this tax. If they have not withdrawn it by the time they go to the country the people will show them their dislike of it. The system on which the tax is worked out is unjust and it should be withdrawn.
Mr. O'Kennedy: I dealt with this at great length on the last day and I do not intend to go back over it, but a few points have arisen today upon which I should comment, particularly in relation to the valuation system as a basis for taxation. Deputy Fitzpatrick particularly commented on this at some length. He emphasised the anomalies of the rateable valuation system. There are anomalies in the system of which we are aware. I was impressed by the conviction and almost vehemence with which he delivered his case against valuations as a basis of taxation in any event, but I think back to when the taxation of farming profits first came in and the Government of which he then was a member adopted the rateable valuation system as the criterion for farm tax——
Mr. O'Kennedy: ——on the basis of determining the threshold of liability and bringing it down subsequently each year. That same Government who are now in Opposition talk about the inequities of the valuation system and how inappropriate it is to use this as a criterion for any tax in relation to farming. I look to see who initiated this and I realise that it was the very people who are now in Opposition and who were then in Government.
Mr. O'Kennedy: Let me finish because I do not want to be cross-examined in my speech. When I sit down the Deputy may cross-examine me. There are anomalies in the PLV system  of course, but farm organisations, farm leaders and farmers generally—I am talking about the vast majority of farmers because, as Deputies opposite have said, I live amongst farmers and have done so for a considerable time —recognise that if you were to iron out the anomalies by a new system it would probably be found that for the vast majority of farmers it would work out worse than the present system. That is not the view of the Opposition Fine Gael Party. They have said that they propose to change this but I do not believe that that proposition is supported by farmers generally because they recognise that, while there are anomalies and some limited number may be at the wrong end of the anomalies, the vast majority of farmers benefit from the anomalies. Farmers are more conscious of that than the Fine Gael Party seem to be.
Mr. O'Kennedy: I have one point to mention before the Leas-Cheann Comhairle puts the question and which I should have mentioned already. I propose to bring in an amendment on Report Stage to exempt charities from the charge of the resource tax.
Burke, Raphael P.
Fitzpatrick, Tom (Dublin South Central).
Fitzsimons, James N.
Fox, Christopher J.
Haughey, Charles J.
Murphy, Ciarán P.
Wilson, John P.
Woods, Michael J.
Bermingham, Joseph. Cluskey, Frank.
Conlan, John F.
D'Arcy, Michael J.
Deasy, Martin A.
Enright, Thomas W.
Fitzpatrick, Tom (Cavan-Monaghan).
Burke, Liam. Kenny, Enda.
Ryan, John J.
Question proposed: “That section 26 stand part of the Bill.”
Mr. O'Kennedy: Under this section marginal relief in respect of resource tax will be available to persons in the range of £70 to £79 valuation. Those on £70 rateable valuation will pay only £24.50 under the resource tax. That is one-tenth of the full tax charged. Those on £71 rateable valuation will pay two-tenths, and so on. The full charge under the resource tax will not come into operation until one reaches £79 valuation, at which point the charge will be £276.50. I should say that a substantial number of farmers, approximately 3,000, will benefit from the marginal relief provisions under this section.
Mr. Bruton: This marginal relief should have extended up to £100. There are farmers in certain parts of the country with valuations of up to £100 who have quite low incomes. As Deputy Fitzpatrick illustrated, there are instances of farmers with this valuation in particular parts of the country who have practically no income at all. Therefore the marginal relief should be extended higher than £80.
Question put and agreed to.
Question proposed: “That section 27 stand part of the Bill.”
Mr. Bruton: I am very strongly opposed to this. When income tax was first introduced rates were allowed as an expense against income tax. Subsequently in 1978 they were allowed to be considered as an actual payment of income tax but it is proposed here that this resource tax will not even be allowed as an expense, let alone as a payment or an instalment of income tax. Regardless of what level of taxation one might pay one will pay resource tax. One could be in a situation where one would earn nothing at all in any given year and would still have to pay resource tax. If the Minister is concerned with fair taxation then there should be a unified system of taxation and whatever resource tax is paid should be considered as part of that income tax code and the payment of such considered as preferably a payment of the tax or, failing that, an expense against income tax. But to say that regardless of one's income tax position one pays resource tax clearly shows that the Minister is not concerned with equitable taxation; he is concerned not with treating farmers the same as everyone else but simply with extracting a certain amount of money from the agricultural community regardless of any consideration of equity or anything of that nature. That is completely wrong and belies all the oratory that the Minister and  members of his party put forward about wanting to see fairness and equality in taxation. No other section of the community is subject to a resource tax and there is no other section of the community whose tax payments are not allowed against income tax. In the case of rates for every other section of the community they are allowed as an expense against income tax but this resource tax will not be allowed as either an expense or a payment and is therefore cumulative and penal taxation of one section of the community only.
Mr. E. Collins: This section is really tightening the screw. It is extremely inequitable. Under the other codes of taxation, such as personal taxation, one is allowed expenses and this should be reckoned as one of them. In relation to a limited company is the resource tax allowed as an expense prior to calculating profit or is that also excluded? If it is, it is an extremely serious matter. But in relation to the ordinary farmer the Minister is being extremely unfair and extremely harsh in not allowing this against the payment of income tax or as an expense.
Mr. O'Kennedy: In relation to whether or not this resource tax should be allowed as an expense, one should look at the rate at which the resource tax is being applied. As I have indicated, we are not looking for a fixed predetermined yield from farmer taxation generally. I have said that many times. I have made an estimate in relation to it. The fact is that the estimate is very considerably less than the figure of £100 million that was talked about last year. It will be about £86 million included in which is a figure of £7 million for resource tax.
It is important to recognise that as a contribution towards what was seen as being a reasonable amount of tax revenue from the farming community, this is only a contribution towards it to bring it up to a figure of about £86 million in toto. It was important that one would have a reasonably precise base. There were two ways to go about this. If one wanted to take the proposals made  by Deputies opposite, to yield a figure of £7 million one could have levied the resource tax at a higher rate and given credit on that basis and I was not prepared to do that. An amount of £3.50 per acre is not a very high rate. Most of the criticisms from the opposite benches are in relation to the principle and not the amount. Increasing the amount and giving credit on that basis would not have been in ease of the people concerned and in many ways it would not have worked out as well as the existing proposal so that, one way or the other, if it were to be allowed as a deduction for the purposes of income or corporation tax the rate of resource tax would have to be increased to produce roughly an equivalent yield. Particularly in view of the temporary nature of the tax, which I have dealt with already, it is desirable to keep it in as simple a form as possible. The yield is now about £7 million. If that were to be allowed as a deduction in computing farming profits for the purposes of other taxes it would, in this year drop to £4,500,000, which would mean that the total expected revenue from farm taxation would be £83,500,000 instead of £86 million which would be almost £17 million less than what was talked about last year.
Mr. Bruton: Farm incomes have fallen.
Mr. O'Kennedy: I have acknowledged that at all stages and it is because of my recognition of that fact that I do not expect to get the same yield of revenue from farm income tax as was mentioned last year. It is because of that recognition that, already, I have introduced the various concessions that Deputies opposite will be aware of in relation to stock relief for farm buildings, plant, machinery, development and so on. That is the reality. If one were to make further inroads into what I have already done then the balance I am trying to maintain between the various sections of the community and their contribution to tax would be, to say the least of it, put in jeopardy and we would get some of the reactions that we saw last year and  which, I am pleased to say, we are not getting this year. On that basis the provisions of section 27 must stay.
Mr. Bruton: The Minister's reply reveals the inconsistency of his approach on this whole subject. He made quite an amount of song and dance in the budget speech about not looking for a predetermined yield from taxation of farmers and yet his sole excuse in this case for not allowing resource tax against income tax is that it would not provide the predetermined yield of £7 million that he had decided upon. So we see quite clearly that when it suits his book he does want a predetermined yield and when it suits his book he pretends that he does not.
The Minister also says that he recognises the fall in farm incomes this year in his tax package. Yet he is supporting a tax, namely the resource tax, which intrinsically pays no regard whatever to fluctuations in income. It would be paid even if the people actually lost money. Could there be any greater evidence of a Minister not having regard to fluctuations in farm income than his introducing a tax such as the resource tax which is based on the area of land alone and not on whether that land yields an income? The Minister says that this tax is to be temporary. He says it will be reviewed. But there is nothing in the Bill which provides that it will be temporary. The Bill is so framed that this tax can continue indefinitely. There is no provision for a cut-off date for the application of this resource tax. I would advise the farming community and their leaders to pay close attention, not to what the Taoiseach or the Minister for Finance may say during a Dáil debate, but to what actually appears in the Bill.
An Leas-Cheann Comhairle: We debated all that on the previous section.
Mr. Bruton: What are the criteria that are to be used in reviewing the continuation of this tax.
An Leas-Cheann Comhairle: The Chair has told the Deputy that we disposed  of that matter on the previous section.
Mr. Bruton: But the Minister has not given an answer at any stage to that precise point. He has told us in vague terms that the tax will be reviewed but he has not said when it will be reviewed. We have not even been told the criteria that will be used in respect of such review.
An Leas-Cheann Comhairle: I have reminded the Deputy that we cannot debate this matter on this small section which deals with a different aspect of the resource tax.
Mr. Bruton: Since there is nothing in the Bill about the tax being temporary, it is obvious that this element of the Minister's argument is bogus.
An Leas-Cheann Comhairle: The Deputy is attempting to debate all over again the previous section.
Mr. Bruton: I have made my point.
An Leas-Cheann Comhairle: The Deputy is wasting his own time by repeating the arguments put forward on the previous section.
Mr. E. Collins: Perhaps the Minister would answer my question about limited companies.
Mr. O'Kennedy: This would not alter the situation. The tax applies to land in the same way both in respect of an individual and of a limited company.
Question put and declared carried.
Question proposed: “That section 28 stand part of the Bill.”
Mr. Bruton: I made the point earlier that a very heavy burden will be placed on farmers in October of this year by reason of their having to pay at that time their income tax, as well as the second moiety of the rates and, if their valuation  is greater than £70, their resource tax. I estimate that they will be paying in one month 80 per cent of their total tax liability for the year. These demands will have to be met at a time when farmers tend to have cash difficulties anyway because of their having to pay bills for such items as fertilisers, seeds and so on, which accumulated during the summer. This is also a time when farmers who do not have enough grass to keep their cattle for the winter have to sell their stocks. Because of the normal tendency towards excessive disposal of stock in October, I could visualise a situation in which, because of the bunching together of the three taxes in question and their falling due for payment at that time, there would be another collapse in cattle prices at the end of this year. In these circumstances I would urge the Minister to postpone the date for liability for resource tax to 31 December, thereby relieving farmers to some extent by allowing them to pay their tax over a period rather than having to pay all the taxes together in October. This would not involve any loss in revenue but it would alleviate considerably the liquidity problems of the farming community. One recognises that in business there are liquidity problems apart from overall long-term financial situations. This applies also to farmers.
Mr. O'Kennedy: I think Deputy Bruton is aware that I have made an exception already in respect of farmers in so far as the date on which the selfemployed will be paying tax is concerned. Their liability for income tax falls due on 1 October as distinct from 1 September. This gives Deputy Bruton the opportunity of suggesting that two taxes become payable on the same day. We could have eliminated that situation by moving the other tax forward by one month but we decided not to do that.
The second point is that only half the income tax liability falls due at that stage. Therefore, I do not follow Deputy Bruton's argument that there is an accumulation of taxes to be paid at the same time. In addition, the Deputy must be aware that normally there is a period  of two months' grace before any interest becomes chargeable in respect of tax that has not been paid.
Mr. Bruton: That applies in both cases.
Mr. O'Kennedy: That is so but this provision enables payment to be extended from October to December.
Mr. Bruton: The fact remains that the taxes are being bunched together.
Mr. O'Kennedy: That is not necessarily so. It will be a matter for each individual to make provision for his own payments. I might add here that so far as other sectors are concerned, there is no choice in respect of when or how tax is paid. It is deducted at source. As I have already made special provision in respect of farm income tax, I am simply lining up the same date here in regard to when resource tax is payable. As I have indicated, the period of grace applies in any event. On that basis I could not contemplate postponing the date further. To do so would reduce further the actual yield in this year from farm contributions to income tax.
Question put and declared carried.
Question proposed: “That section 29 stand part of the Bill.”
Mr. O'Kennedy: I would just mention here that this is the section which provides that assessment in respect of resource tax will be made by the inspector of taxes or other authorised officers of the Revenue Commissioners and that the collection of the tax will be the responsibility of the collector general. In practice what will happen is that the assessment to resource tax will be combined with the income tax assessment and those farmers who are liable for resource tax will, in general, receive one notice of assessment in respect of the two taxes and also one demand for payment. Therefore, though there will be  only one notice of assessment, the liability to income tax and the liability to resource tax will be shown separately on the assessment notice. In terms of simplicity and of a reduction in documentation, both in respect of the administration and in respect of the farmers concerned, this is the most appropriate way of dealing with the matter.
Mr. Bruton: Will there be provision for appeal against resource tax in the same way as there is provision for appeal under the Income Tax Acts?
Mr. O'Kennedy: Yes.
Mr. Bruton: What grounds for appeal will be entertained?
Mr. O'Kennedy: We have dealt already with a number of areas in relation to the criteria to be used in this respect, for instance, there will be the criteria of ownership and occupation. It is not for me to start advising people as to how they should appeal against liability for this tax but if, for instance, the case was that the person concerned did not own or occupy the land in question, he would have grounds for an appeal.
Mr. Bruton: In the event of an appeal being lodged but not allowed, would interest accumulated on tax that was not paid pending the hearing of the appeal, be charged?
Mr. O'Kennedy: In this respect the same provisions will apply as those which apply in respect of income tax or any other tax. The provisions which would apply in respect of income tax or any other tax in this or any other sector would apply here, depending on the outcome of the appeal.
Mr. Bruton: Would the Minister agree that in view of the fact that this is a new tax it is somewhat unfair to apply the same penalty provisions in relation to interest on outstanding debts where appeals  have been lodged as would be applied in income tax which has been established for some time and under which people would be expected to understand their position? In the case of the resource tax, by contrast, which is a completely new, novel and unique tax in Europe, where people may well feel that there are grounds for appeal, to apply the same penal provisions in respect of interest on outstanding debts where appeals are pending as apply in income tax would be quite unfair.
Mr. O'Kennedy: There are a few points to be made on that. Firstly, it is entirely in line with the notional basis of assessment to which farmers have become accustomed. Secondly in the notice of appeal they are entitled to state, as in any other area, the amount they think payable. Obviously, the relief applies in the same way as it would in any other area. Thirdly, if there was one area where there is not a great degree of complexity, although it is new, I would have thought it is this area. The grounds on which one could or would appeal here would seem to suggest themselves as being either obviously meriting consideration or obviously not meriting consideration. It is quite precise. The fact that it is new does not seem to suggest that people would be confused. This is one area where, whatever else one's view might be, confusion will not be part of it.
Mr. Bruton: The fact is that whatever simplicity this tax may have derives solely from its crudity and unfairness.
Mr. O'Kennedy: The Deputy appears to accept the point made in my reply to him.
Mr. Bruton: If the Minister is making a merit of the simplicity of this tax, he is making a merit of a bad thing.
Question put and agreed to.
Question proposed: “That section 30 stand part of the Bill.”
Mr. O'Kennedy: This section applies to resource tax all the provisions of the Income Tax Acts which relate to assessment, collection and recovery of income tax, so that the provisions which the Deputy has been asking about governing appeals against income tax assessments will likewise apply in the case of appeals against assessments on resource tax. I should also mention that provision is made for combining any documents relating to resource tax with any corresponding documents concerning income or corporation tax. The procedure in the last section as well as facilitating administration should be helpful to farmers in reducing the number of documents they would have to cope with.
Question put and agreed to.
Mr. O'Kennedy: I move amendment No. 34:
In page 29, line 24, after “Chapter II” to insert “of Part I”.
Mr. P. Barry: This is purely a drafting amendment?
Mr. O'Kennedy: Yes, it is only a drafting amendment.
Amendment agreed to.
Mr. O'Kennedy: I move amendment No. 35:
In page 29, in the proviso, to delete paragraphs (i) and (ii) and to substitute the following paragraphs:
(i) for the said year of assessment a person is chargeable to income tax or to corporation tax under Case V of Schedule D in respect of profits or gains from any rent or any receipts in respect of any easement in relation to any part of the farm land occupied by him, and
(ii) the said rent or the said receipts are, having regard to  values prevailing at the time, not less than the amount which could have been obtained on the basis that the negotiations for the rent or the receipts had been at arm's length,
the said section 25 (2) shall not apply for that year of assessment to the rateable valuation of the part of the farm land from which the said profits or gains so chargeable under Case V of Schedule D arise,
(b) in relation to any farm land occupied, or deemed to be occupied, by a person in partnership with any other person or persons, there shall be taken into account for that year of assessment only that proportion of the rateable valuation of the farm land so occupied in partnership as bears to that rateable valuation the same proportion as his share of the partnership profits or losses, on an apportionment thereof made in accordance with the terms of the agreement as to the sharing of those profits or losses bears to the said profits or losses of the partnership.”.
Mr. Bruton: This amendment would need to be explained.
Mr. O'Kennedy: My numbering here does not correspond with the actual numbering. I want to make quite sure that I have the correct numbering.
Section 31 applies, for the purpose of the resource tax, the provisions relating to the occupation of land which apply for the purposes of income tax. The first amendment to the section is a drafting correction. There are two amendments here of which one inserts a reference to Part I of the 1974 Act, being the part of the Act in which the relevant chapter appears. The second amendment brings the provision into line with the new amended section 24, with which we have already dealt. As a result of the amendment of section 24, paragraph (i) of the proviso-there is no longer necessary. The new paragraphs, paragraphs (i) and (ii), now  being inserted, avoid a double charge to resource tax which would otherwise occur. Where a farmer with, say, land of £80 valuation rented that farm to another person who farmed it, the owner would, but for this amendment, be deemed to occupy the farm and would therefore be charged with resource tax as well as the person who actually occupied it. The amendment corrects this position. If the owner rents the farm at a commercial rent he will not be deemed to occupy it and will not therefore be charged resource tax in respect of it. The number “2” in the proviso is being changed to “(b)” for the purposes of presentation. This has been necessary because of the previous amendment. Otherwise, the paragraph remains unaltered. The purpose of this amendment, apart from the drafting is to ensure that there will not be a double charge of resource tax in respect of the same land.
Mr. Bruton: What is the significance of the deletion of subsection (8)? The Bill, as it now stands, says:
Provided that in determining the amount of the charge to tax in any case for any year of assessment under section 25 (2) subsection (8) of section 17 of the Finance Act 1974 shall not apply.
What is the significance of the removal of this subsection?
Mr. O'Kennedy: We dealt with this in the Bill in section 23. We amended subsection (8) at that stage. This was the provision relating to occupation, I think. It is a consequential amendment on what we have already done in relation to the amendment we have already taken.
Mr. Bruton: What is the difference?
Mr. O'Kennedy: There is no difference, in fact. Because of the original amendment, which was necessary in relation to the criterion of the threshold, this consequential amendment applies here. There is no difference. I can assure the Deputy there is no catch. There is nothing more than what I have said  already in relation to the purpose of this amendment, which is to ensure that there will not be a double charge to tax. The other amendment is consequential on what we have already done.
Mr. Bruton: For the sake of clarification, who will pay the resource tax—the fellow renting the land or the fellow who is taking the rent?
Mr. O'Kennedy: The man who actually occupies the land is the person who pays the tax.
Mr. Bruton: If I have a farm with £20 valuation and I rent another farm of £70 valuation, I shall pay resource tax, even though it is rented for only 11 months? Is that the situation?
Mr. O'Kennedy: Yes.
Mr. Bruton: A farmer who has, say, a farm of £300 valuation, if he decides to set £240 worth of the valuation of the farm, could get in that income and pay no resource tax even though he has a £300 valuation farm to his name. I have only a £20 valuation farm to my name. I shall pay resource tax and the big man with the £300 valuation setting his farm will pay no resource tax. Is that the situation?
Mr. O'Kennedy: The Deputy is not going to suggest that it would be inequitable. It would be inequitable if it meant that he would not be liable to income tax on what he received in respect of the farm letting. Obviously, the intention is that the same land cannot be chargeable twice to resource tax, and that is what we are ensuring here.
Mr. Bruton: It appears to me that the effect of this resource tax will be the reverse of the Minister's alleged intention of taxing under-utilised resources. A large farmer with a big, under-utilised farm, who decides to set it will be able to avoid resource tax completely. I can foresee a lot of farmers who are making bad use of their land saying: “I will get myself completely out of the resource tax net. All I have to do is let the bulk of  my farm. If I keep £69 valuation worth I can set the remainder and pay no resource tax.” Yet the very people we are trying to encourage, the small farmers with a valuation of, say, £50, as is very common throughout the country, must take land on the 11 months' system if they are going to raise their farms to a standard at which they can provide enough grass for their cows or provide silage ground for the wintering of their stock. These small farmers, who might own farms of perhaps only 30 acres, because they may take another 40 acres on the 11 months' system—land which they do not own and for which they are paying a high rent—will have to pay resource tax. But the big farmer who owns the land, who may have been working it up to now, if he comes along and says: “I do not want to pay this resource tax. I will set my land”, he can forget about it. He pays no resource tax whereas the farmer who takes the land from him will have to pay resource tax. The Minister was saying earlier that he understood these farmers. If he understands them all that well he should know that a lot of them are taking land on the 11 months' system because they have not got sufficient acreage. As a result of this provision they will now have to pay resource tax as well as a rates increase and income tax because they are taking that little bit of extra land. There will be a lot of farmers who will find that as a result of this amendment they will no longer be able to take land because they would be putting themselves into the resource tax net. I do not think the Minister has given much thought either to this amendment or to the resource tax.
Mr. O'Kennedy: I can assure the Deputy that I have. But, as happens on every occasion when one makes a concession, someone picks up the other end of it, as Deputy Bruton is now doing and tries to imply that one has not made a concession. I do not know whether in those circumstances Deputy Bruton is suggesting that we should leave the charge on the owner. If he is, perhaps he would say that, if that is what he is suggesting.
Mr. Bruton: Does the Minister want to know my position?
Mr. O'Kennedy: If he would at least let me know that much. I know what he is trying to imply but I do not know exactly what is his position. Of course, the Deputy's first position is that there should not be a resource tax.
Mr. Bruton: That is it. I do not accept the Minister's premises at all.
Mr. O'Kennedy: Well, on that basis I do not have to accept the Deputy's either, but I am not about to have it turned back——
Mr. Bruton: The Minister has put forward an amendment and I am endeavouring——
Mr. O'Kennedy: I would say this, for what it is worth. Where there is a letting—and the test, as it is in terms of all farm income tax, being occupation as distinct from registered title—this is no different from anything else. I am merely ensuring that it does not apply twice. That is all I am doing here. Everything else is the same as it always was. Indeed, the Deputy could have made the same case in respect of any other aspect of farm taxation. If the Deputy is grieving for the man who rents the land I should say this to him. If he rents enough of it to render himself liable to resource tax, I am sure he will take that into account in the amount he pays in rent. As I have indicated already, the owner who is not occupying, and who therefore will be relieved of resource tax liability, will be liable to income tax on what he receives. It seems to me to be the fair and proper balance, while at the same time guaranteeing that there will not be a double liability in respect of the same land.
Mr. Bruton: This provision will have the effect of placing small farmers with valuations of £40 and less—farmers who have been taking land in order to make up for their small acreage—in a very difficult position if they are now going to be prevented from renting land  because, by doing so, they put themselves into the resource tax net. The result of this provision will be that people whom the Minister never intended should pay resource tax will be forced into paying either resource tax or not having sufficient land to feed their stock.
Mr. O'Kennedy: I must take issue with that. I am not so remote from the land—indeed perhaps I am closer to the small farmer than is the Deputy—as to imply that because a charge would arise in respect of someone who gets up to £70 or £80 valuation, that would discourage the man who has been taking a letting of up to 50 acres. I know enough about what land rental costs on the 11 months' system to know that this would not be a major element. Deputy Bruton, who by profession or otherwise may be more directly involved in farming than I, should be aware of that also. There is no point in overstating the position.
We are again getting hung up on grounds of principle. Deputy Bruton has said that this will constitute a very heavy burden. In many cases in relation to the actual letting value of the land, which is the real issue, the extra £3.50 per acre will not be a major burden having regard to the going rents per acre. Deputy Bruton knows that better than I.
Mr. Creed: Here it is a question of the last straw breaking the camel's back. In the dairying area, where there is intensive activity in the case of, say, a farmer who uses his resources to the maximum but who will rent land from a neighbour or somebody not using that land thereby bringing himself into the resource tax net, would the Minister accept that he has one choice only because the profits from his dairying activities are so low? Inevitably the choice he will make is to get rid of his stock rather than involve himself in further taxation. Is that not the obvious way out? Is that not contrary to all the reports and indications today to the effect that increased production is so vital particularly to the dairying industry? Furthermore, is it not  true that the State owes more to somebody who farms intensively and uses his land to the maximum rather than somebody who does nothing with his land but rents it to somebody to work it for him? The Minister should bear that point in mind. If such a farmer is placed in that position obviously he will get rid of some of his cattle. It is true, as Deputy Bruton said, that where such people provide silage, where they graze followers for their dairy herd the choice now open to them, if they are coming into the resource tax net, will be to reduce their herd and thereby reduce production.
Mr. Bruton: What would be the relevant date of occupation for the purposes of assessment? Would it be occupancy for the entire year or for part of the year?
Mr. O'Kennedy: It would be in respect of the current year, but if the leasing period was for 11 months, the standard practice, it would be eleven-twelfths of the appropriate amount. On that basis it would not bring such farmers to the point the Deputies have been saying—it would only be eleven-twelfths of the valuation for the purpose of the resource tax liability.
Deputies are obviously trying to imply that this will have a very serious effect on certain people, that it will penalise those who work land and will not penalise those who do not work it. Our aim is to try to encourage people to work their land. Small farmers on or below a £40 valuation would have to rent land of up to £30 valuation to bring them up to the threshold of £70. At the £70 valuation he would be liable to £24.50 resource tax. Therefore, unless a man was renting a considerable area of land he would not find himself the victim of the resource tax because of the land he would be renting. If he is a good farmer this will not impose a burden on him or a penalty that would prevent him from doing this year what he did successfully in other years. The net will not be suffocating, as Deputy Bruton alleged. Deputy Bruton would be able to give an  indication of rental values of land in County Meath and I do not accept that £3.50 per £1 valuation would stop a person.
Mr. Bruton: Land values may be down.
Amendment agreed to.
Section 31, as amended, agreed to.
Mr. P. Barry: I move amendment No. 36:
In page 32, subsection (1) (d), line 1, to delete “112” and substitute “109”.
In 1975 or 1976 the previous Government introduced a provision designed to increase the number of people employed in industry. That provision allowed a reduced rate of corporation tax, reducing the rate from 55 per cent to 25 per cent with two conditions, one that there would be an increase of 2 per cent in the turnover of the company and two that there would be a 3 per cent increase in the number of people employed by that company. That was recognised at the time as being a dramatic, imaginative and highly successful method of encouraging firms to take on extra workers.
This has been continued, except that the figure in regard to the turnover was deleted in 1978 at a time when employment was going up. The base year taken is 1977, and 3 per cent has been added each year. The proposal this year is to bring the figure up to 112 per cent, a further increase of 3 per cent. I am proposing that the figure be 109 per cent. I propose this amendment because of the frightening situation—I hesitate to use such a strong word—in the employment front. Our suggestion is that the Minister leave a figure at 109 as it was in the 1979 Finance Act because of the threatened redundancies from closures and the forecasts in regard to the employment situation at the end of the year. This is a proposal to maintain our work  force at the expense of the Exchequer. This would be a welcome move as far as industrialists are concerned because it would give them the encouragement they are not getting at the moment to provide and to maintain employment. The Minister will be doing a good day's work not only for the Government but for Irish industry if he accepts this amendment.
Mr. O'Kennedy: I appreciate the purpose of the amendment. As Deputy Barry has said, the whole purpose of the scheme to charge corporation tax at 25 per cent was to maintain employment and increase it at the rate of 3 per cent each year It was a temporary measure for three years only to provide an incentive to increase industrial employment. That still remains its purpose. If we amended the provision as the Deputy suggests the cost would be £5 million and this could not be justified if the 3 per cent projected increase in employment was to be negatived.
I suppose anything could be justified on some basis or another, but this provision is a concession in any event and Deputy Barry's purpose is to abolish one of the conditions of the concession in a year in which there are limitations on the scope of public expenditure, as I would expect Deputies opposite to be aware of. In maintaining the scheme as it is I am showing awareness of the significance of it. If I were to adopt Deputy Barry's suggestion companies could increase their work force up to that level at this point of the year and they could qualify for relief for the entire year but could lay off 5 per cent of their work force in the latter half of the year. I am sure that is not what Deputy Barry wants but that could be one of the consequences of his amendment. For that and for other reasons I have already given, I regret I could not accept the amendment.
Mr. E. Collins: Would the Minister agree that employment in manufacturing industries during 1980 has become very serious and that the high level of redundancies which has been referred to on a number of occasions by the  Minister for Labour is a cause of concern? Would he agree that whatever action is necessary to preserve even existing employment should be taken? If we make it more difficult for industry to benefit from lower rates of tax, we will be doing something very negative. In the present climate where a recent survey indicated that up to 90 per cent of the people involved in manufacturing industry are very pessimistic about their future, the Minister is on the wrong track by making this more difficult.
Mr. O'Kennedy: I appreciate what Deputy Barry is attempting to do here, but it could have the opposite effect from what he has in mind. Because there could be no other expectation but that one would continue what has been done in previous Finance Acts—a 3 per cent increase in employment—the consequences of adopting Deputy Barry's suggestion could be that people who have increased their work force in anticipation of a 3 per cent increase with a view to benefiting from this scheme, could start to lay off these people and still qualify because there was a 3 per cent increase in employment. I know that is not what Deputy Barry wants but that is one of the main reasons I could not agree to the amendment.
Mr. P. Barry: The Minister is suffering from delusions if he thinks firms have the time or the inclination to play around as he is suggesting. Manufacturing industry are too concerned about surviving to engage in this kind of game. I am not suggesting that the section be deleted, merely that it be suspended for a year.
A few weeks ago we were debating a Bill to set up a fund of £20 million to provide resources partly from Government sources and partly from a further charge on the stamp on industry. This was referred to in the national understanding. The Minister made the very strong point at that stage that because of the very serious situation, the maintenance of employment was as important as the creation of new jobs. If that  principle applied in February or March, the same principle should apply under this legislation. I believe the Minister will get a very positive response from industry if he accepts this amendment, not only because of the financial benefits to an industry—they will not accrue until the middle or the latter end of next year—but because many firms and the associations representing manufacturing firms feel there is no point in approaching the Government because the Government have closed their ears to their problems. To most people, except the Minister for Finance, this seems to be a very simple problem for solution—the underwriting of the exchange risk for moneys borrowed abroad——
Mr. O'Kennedy: A very simple problem? The Deputy is demonstrating——
Mr. P. Barry: I am quoting this as an example of how industry feel about the Government. Even where there appear to be small problems the Government have a very unbending and unflinching attitude and do not appear to be willing to meet them even half way. If the Minister accepts this amendment and shows he is interested in at least maintaining employment, this would help to end the stand-off between industry and Government, which should not exist, and from it would flow further benefits for the Exchequer, Government, industry and employment generally.
Mr. O'Kennedy: I take the point that the maintenance of employment is very important. In the context of discussions on the employment guarantee fund I indicated that the partners to the tripartite committee had agreed that the maintenance of employment—the maintenance of jobs that would have been lost—should qualify for support from the fund in the same way as the creation of extra jobs. There is a range of avenues and agencies through which one operates and that is one of them.
We are talking here about a deliberate decision to give an incentive for increased  employment, which has been in legislation all along the line. I am not suggesting that any industrialist would play tricks with the scheme. He is more concerned with the profitability and viability of his company, but if he found he had already qualified for this special rate of tax—because of what he had done in anticipation of a continuing pattern of relief under this legislation—and then there were pressures, he could not be faulted if he let some people go. That is not playing games. That is something that might be considered as a real possibility. That is an important fact.
There are options open to companies whereby in lieu of the 112 per cent we mentioned—3 per cent each year since the beginning—they may qualify for relief for 1980 by reference to a 9 per cent increase since 1977, or a 6 per cent increase since 1978, or a 9 per cent increase  since 1979. In view of these options it makes it more unacceptable that there should be no addition in respect of 1980 to the overall increase of 9 per cent. This is the way this has always operated. From one year to another there was an increase of 3 per cent—over four years 12 per cent, three years 9 per cent and two years 6 per cent. Because of the purpose of this relief I could not agree to depart from it at this stage.
Mr. P. Barry: I do not intend to delay the House. This is a worthwhile amendment and I am very disappointed at the Minister's attitude to it. The spirit of my amendment is that people would still qualify if they maintained employment.
Question: “That the figures proposed to be deleted stand,” put.
The Committee divided: Tá, 53; Níl, 38.
Burke, Raphael P.
Fitzpatrick, Tom (Dublin South Central).
Fitzsimons, James N.
Fox, Christopher J.
|Haughey, Charles J.
Murphy, Ciarán P.
O'Connor, Timothy C.
Wilson, John P.
Woods, Michael J.
Boland, John. Cosgrave, Liam.
Cosgrave, Michael J.
Deasy, Martin A.
Enright, Thomas W.
Fitzpatrick, Tom (Cavan-Monaghan).
Conlan, John F. L'Estrange, Gerry.
Ryan, John J.
Tellers: Tá, Deputies Moore and Briscoe; Níl, Deputies L'Estrange and B. Desmond.
Question declared carried.
Amendment declared lost.
Section agreed to.
Question proposed: “That section 33 stand part of the Bill.”
Mr. O'Kennedy: This section relates to the new rate of corporation tax that will operate from 1981 to 2000. On 20 December 1978 the Minister for Industry, Commerce and Energy announced that the scheme of export sales relief and Shannon relief would be replaced from 1981 by a new incentive scheme to apply to manufacturing industry generally.
The new scheme will apply to income derived by companies on or after 1 January 1981 from the manufacture of goods in the State, including Shannon Airport, whether that income arises from domestic or export sales. That is the first point of special significance. Previously tax relief was in respect of export sales but this will now apply whether the income arises from domestic or export sales. The scheme will terminate on 31 December 2000. Therefore, it has the major advantage of being notified in advance to apply for a fixed and prolonged period. Obviously it will be a major contributory factor to the development of employment programmes generally.
As in the case of the export sales relief, the rendering of manufacturing services—that is, the subjecting of goods not owned by the person providing such services to a process of manufacture—will be within the scope of the new relief. I should mention at this stage that sales into intervention will be excluded. We had this discussion on an earlier part of the Bill. That is not to say that the meat industries will be excluded. In fact, they will qualify as will any other industry for this new relief but if it subsequently emerges that a company sells to a sister company that in turn sells into intervention, it will have to be noted that the sale was into intervention in the first instance and thus the 10 per cent rate will not apply. In a sense this is in substitution for export sales relief for which sales into intervention did not qualify.
Deputies will be aware that the scheme that operated hitherto in respect of export sales relief was called into question by the Commission. Because of the importance of having clear, longterm tax provisions for industry generally, the Government decided that this scheme, which will not discriminate between sales on the home market and export sales and will not run contrary to any provision of the EEC, was the appropriate approach to guarantee the attraction of industry and the development of existing industries.
Companies carrying on trade in respect of which they are entitled at the end of 1980 to export sales relief or  Shannon relief will continue to be entitled to such relief on the basis of the existing statutory provisions. If for one reason or another they decide to continue to operate under the provisions of the export sales relief scheme, under this Bill which introduces the new 10 per cent rate they will be entitled to continue to do so until 1990. However, companies whose manufacturing income is eligible for export sales relief will have the right to opt irrevocably into the new scheme at any time from 1 January 1981.
That is a very important option being left to companies who are now operating under the export sales relief scheme. At any time they can opt for the new scheme but, of course, they must stay within it and the option may be exercised from 1 January 1981 until the end of their span of export sales relief. If the period extends to 1990, at any time between the coming into operation of this measure and 1990 they are free to make their choice. Any such company that does not exercise the option can claim new relief immediately on the expiry of its span of export sales relief. In addition companies enjoying Shannon relief will be entitled to exercise a similar option. However, they are unlikely to avail of the new relief until Shannon relief is ended as it would involve changing a total exemption for a reduced charge of tax under the new scheme.
The legislation also provides for the grant of export sales relief in respect of trades which commenced after 31 December 1980 or trades already carried on at that date where exports of goods had not commenced and for the grant of Shannon relief in respect of trades commencing after that date where assurances to that effect have been given before 1981 by the IDA. The Government are not only introducing a new scheme which will be an incentive towards the development of industry but they are introducing it in a manner which will ensure that the choice for the industries concerned is being left as open as possible up to the date of the expiry of the export sales tax at the end of 1990.  Not many Governments can give such a long-term commitment in legislation but this will extend up to the year 2000. The security which this will give to would-be investors should make a major contribution to our employment programmes.
The calculation of tax at the new rate is being interpreted in a most reasonable and liberal way. It is proposed that the relief will amount to seven-ninths of the tax payable by a company on their income as calculated for corporation tax purposes from the sale of goods manufactured by them in the State. This means that a company which would normally be liable to corporation tax in respect of such income at the 45 per cent rate will become liable at 10 per cent. The 45 per cent is the standard rate at the moment but the rate at which they will become liable now will be 10 per cent and the relief will be applied at seven-ninths of the tax which would otherwise be payable by a company on their income. A small company is normally liable on their income at 35 per cent.
Mr. P. Barry: The seven-ninths is a relief on the 45 per cent which leaves a balance of 10 per cent.
Mr. O'Kennedy: That is right. A small company normally liable on such income at 35 per cent would be liable at only about 7.8 per cent under the new proposals. The application of this scheme could mean that some companies would be liable at less than 10 per cent. The corporation tax to be relieved is computed on a similar basis to that at present provided for in the case of export sales relief, that is by reference to sales of goods manufactured in the State by the company.
Mr. P. Barry: Will the Minister give me the reference to the last point he made about smaller companies and the 35 per cent rate?
Mr. O'Kennedy: Section 36. On the face of it the implementation of the scheme can seem complex so I will deal briefly with other aspects of the application  of the scheme. A company's income which is chargeable at the proposed reduced rate less the relevant tax will form what is referred to in the Bill as a primary fund and distributions will be regarded for credit tax purposes as coming primarily out of that fund. To the extent that the primary fund is insufficient to meet these distributions they will be regarded as coming out of other distributable income. A distribution out of the primary fund will carry a tax credit of one-eighteenth and other distributions will carry the tax credit appropriate under existing law, that is normally three-sevenths of the distribution. A tax credit of one-eighteenth represents 50 per cent of the corporation tax at the new 10 per cent rate on the profits out of which the distribution are made. This is in line with the position in relation to the existing tax credit of three-sevenths which imputs to the shareholder about 52 per cent of the tax at the normal rate of 45 per cent on the relevant underlying profits.
The primary fund will also contain distributions carrying the one-eighteenth tax credit which will be received by companies from companies which themselves benefited from the new reduced rates of tax. A distribution which carries a tax credit of one-eighteenth and which does not fall to be treated as franked investment income will be liable to tax in the normal way. Any increased liability thus falling on a shareholder would be capable of being offset by an enhanced distribution out of a tax saving accuring under the new scheme to the company making the distribution. In cases where double taxation agreements do not make special provisions the credit which a non-resident shareholder would be entitled to set against his income tax liability in respect of a distribution out of relieved manufacturing profits will also be reduced. Such liability rarely arises.
In relation to the extension of the new scheme to certain non-manufacturing activities under the export sales relief the definition of “goods” includes certain items not covered by the new scheme. Depending on the outcome of the discussions  with the EEC Commission it is proposed in next year's Finance Bill to extend the new relief to cover fish produced on a fish farm, cultivated mushrooms and the repair of ships. That would extend it in line with the scope of the existing export sales relief. It has not been possible to do this in this Finance Bill as the discussions with the Commission are still under way. I am giving a clear notice of the Government's intention in this area.
The publication of books and greeting cards not printed by their publisher and design and planning services rendered within the State in connection with certain engineering works executed abroad do not involve the production of goods or a process of manufacture, but the rendering of non-manufacturing services. The extension of the new relief to those services would give rise to demands which could not in logic be resisted for the bringing of all professional services within the ambit of the new relief. If one were to do that it would give rise to difficulties with the European Commission.
One point remains to be mentioned and that is the question of extending this new relief to non-manufacturing services at Shannon. We will be continuing our discussions in this area with the EEC. Depending on the outcome of these discussions we propose to introduce provisions in next year's Finance Bill. I have dealt with the purpose of it, the duration of it, the application of it, the option to avail of it and the security that will be provided in it. I have also dealt with the extension of it to certain non-manufacturing activities. It should be clear that the scheme being introduced by this section should be a major continuing boost to industrial development here. On the face of it the operation of the scheme may appear to be complex but I am assured that it will not be. It is only after detailed discussions with interested parties and detailed examination by the Revenue Commissioners that they have given effect to the Government's intention in the form in which it follows in this and subsequent sections.
Deputy P. Barry and Deputy Leyden rose.
An Leas-Cheann Comhairle: Deputy Barry will speak first and then I will call Deputy Leyden.
Mr. Leyden: Surely I can offer as well to give the positive side? Surely I am entitled to say a few words.
An Leas-Cheann Comhairle: I shall call the Deputy in a few minutes.
Mr. P. Barry: Deputy Leyden's presence has been sporadic to say the least. If not he would know that what I have said has been mostly positive and he should not have inferred that just because he is here now I will become negative and that he is the only person with something positive to say.
Mr. Leyden: I have heard a lot of negative things from that side.
Mr. P. Barry: Deputy Leyden will have ample opportunity to find out that it is part of his job on this side of the House. This legislation, inside a very complex and difficult Finance Bill is extremely important. This was first announced by the Minister for Industry, Commerce and Tourism in November 1978. This is now June 1980. Why this was not introduced as legislation before now I do not know. It is very difficult and complex. It should be a Bill taken, not in Committee here but in a Special Committee where it could be teased out line by line and where, as is customary in a Committee of that nature, the officers of the Department involved would have a chance of giving their contributions directly. It would have been far more suitable than putting it in as a sub-paragraph in a Finance Bill.
I do not say this as a criticism of the Minister, as it is a difficult Bill, but obviously he does not understand it. Neither do I. The Minister is a layman in this matter and so am I. In that regard I should like to pay tribute to Deputy McCreevy who because of his specialised knowledge in accountancy made a very valuable contribution to the VAT committee about two years ago. He was the most informed and constructive  contributor to that debate. The contributions of other accountants who are Members of the House, who have seen the operation of the Bill dealing with export tax relief, would have been important in relation to this Bill.
It is not adequate that we should be debating important legislation and have only three-quarters of an hour left to finish the entire Bill. The Leas-Cheann Comhairle may rightly say that that is our own fault because we spoke too long on earlier sections and left ourselves inadequate time to discuss this. There is some truth in that, but the other side is that the other sections of the Bill were important and needed teasing out. This is my third time following a Finance Bill—I do not say putting one through—and the method of dealing with them is totally inadequate. They need for more time than Members, with the exception of Deputy McCreevy and others who are accountants, can afford to give them.
This is an ingenious way of substituting for what was the most valuable contribution to the establishment of industries since the last war, that is, export tax relief. It more than anything else attracted job giving industries to the country and because it was so valuable the IDA or enticing body could use some leverage to get them to start up in different parts of the country. There were a battery of grants but this was the bait by which we got the fish on the hook. When industries came here they were “enticed” out of what might have been their first choice of location. The export tax relief was the most important attraction we had in bringing foreign industry to Ireland over the last 20 years. I am sure the Minister will note my restraint in not mentioning how it came to be on the Statute Books. That has to go now because of EEC regulations. It is being substituted for by the 10 per cent tax relief. The Minister explained about it but not adequately and we will not have time to tease out adequately how it will operate. It is on the basis of seven-ninth relief on the standard rate of corporation tax of 45 per cent. The Minister told us it operates at the lower level of 35 per cent  for small companies and that the tax charge will be seven-eighteenths. As regards people who can avail of the previous section of the Finance Bill where they are given the benefit, because they increased their employment by 3 per cent in a tax year, of a rate of tax at 25 per cent, will they be given relief also in that regard? Their real tax charge would be about 6¾ per cent.
In 1950 I did not think I would see the year 2000, but this is 1980 and I think I have a good chance of seeing it as it is not that far ahead. There is nothing in the Bill to prevent a Government in the year 2000 increasing the standard rate of tax from 45 per cent to 63 per cent and increasing the tax relating to industries from 10 per cent to 18 per cent. There should be some mechanism for preventing foreign interests feeling they had been had after coming here in the expectation of a 10 per cent rate and ending up with a 14 per cent rate. It is possible that the extra 4 per cent would not be a deterrent to a company—I do not think that after ten years operation a company would pull out because of that amount—but it would damage our reputation abroad. The external view of the country would be hampered. The Minister for Industry, Commerce and Tourism on Sunday last referred to that in the course of a radio broadcast. That is something which is of concern to him as the person in charge of the IDA, but the language he used and the time he chose were wrong.
It must be remembered that we are in an open market and that there are many other countries offering very attractive packages to establish industries. We must not give a lever to such countries or put them in a position of saying that the Irish Government said one thing and did another, or that the Irish Government are incapable of keeping their word. We should not allow that situation to arise. My amendment, No. 37, covers categories mentioned by the Minister—fish farming, mushroom cultivating, ship repairing and books and printing cards not printed by publishers.  The Minister has told us that he will include three of those four categories by way of amendment in the 1981 Finance Bill. He believes that the fourth, bookbinding, cannot be included at any stage. Presumably, the Minister can give an assurance to the House that the three categories he intends including in next year's Finance Bill will not cut across any EEC regulation or law? If he can give that assurance I do not see why he cannot accept amendment No. 37 and have them included in this Bill. There may be a special case in relation to books and printing cards not printed by publishers; but fish farming, mushroom cultivating and ship repairing have gone through very lean times because of the energy crisis and need every encouragement. We must ensure that there is not any danger to the employment they are providing.
If while the Minister is still in office a further major change in direction as regards tax relief for manufacturing companies should occur he should bear in mind that it is not satisfactory from any point of view that it be given a limited debate. Having announced these changes 18 months ago I cannot understand why they did not come before the House earlier to permit us a better opportunity to debate them. The contributions to this change would be of benefit to industry in the future. Those interested in the creation of jobs would be anxious to have a say in regard to this because all Members realise the value of export tax relief in the creation of jobs. We all want to ensure that the 10 per cent corporation tax level is made as attractive as possible for our job creation programme.
Mr. Leyden: I should like to welcome this provision because it gives industry security from 1981 to the year 2000. I should like to re-assure Deputy Barry that as it is our intention to remain in office for that period there is no danger of any revision or change of the provision. Such a guarantee could not be given if, by any misfortune, there was a change from a Fianna Fáil Government. We will ensure that such a provision is continued  and that there will not be any variation. It will prove attractive because it will help manufacturers selling on the home market as well as those who are geared for export. At present exports are tax free but home sales are taxed in the normal way. It is good that the Minister has decided to continue with the total export relief until 1990. I do not believe firms will object when they are getting such advance warning of the change. They now have an opportunity to readjust and are aware of what the future has in store for them. They can now gear themselves for the change in the years ahead. Firms who opt for the 10 per cent tax rate from 1981 will know where they stand and can look forward to prosperity in the years ahead.
At present there is a relief for those working in Saudi Arabia and other countries in the Middle East. I understand that there is tax relief on some if not on all of the export of services whether they are architectural, engineering or others and I urge the Minister to continue to allow that relief. I know of a firm in Roscommon engaged on contracts in the Middle East who are in a position to avail of such tax relief.
In addition to this tax relief at present we also have the rates relief which is applicable and of which many people are not aware. Individual county councils are always very willing and anxious to give this remission or allowance to manufacturing industry and this is also a great incentive. As Deputy Barry has said, the actual total relief of income tax on exports for manufacturing companies based in Ireland is one of the greatest possible incentives to the creation of employment. I agree totally with Deputy Barry on that. It has been a tremendous factor in attracting foreign industry which has allowed our people to have work in their own country. This consistent continuation of the Fianna Fáil policy of job creation, the attraction of industry and the promotion of native industry is a very welcome provision in the 1980 Finance Bill and one I particularly welcome.
People should be aware of all the  positive provisions of this Finance Bill. The package contained in the Finance Bill is very welcome and every provision is of a positive nature. As a result of the Government's work since January we have a Finance Bill which is geared to give incentives to industry and also incentives for the PAYE sector. According to the Opposition, they appear to see nothing positive in the Bill and they are trying to negative many of its really good provisions. I assure Deputy Barry that I hope he lives that long but I also hope he will be on the same side of the House as now for the next 20 years as Opposition spokesman on Finance. That is where he will remain. With this type of Bill and its provisions we shall stand over all our policies and be here until the year 2000 and possibly after that.
Mr. E. Collins: I should like to refer to section 34 in a general way——
An Leas-Cheann Comhairle: I think we are still on section 33 but we are debating generally this whole series of sections.
Mr. E. Collins: In view of the time constraint I should like to welcome the introduction of 10 per cent in substitution, especially after 1990, for firms that have been and are on export sales relief benefit. I wish to bring one aspect of the matter to the Minister's attention and that relates to sales intervention. This is a rather important subject which affects perhaps one of our industries currently under tremendous pressure, the meat processing industry. Under the provisions of section 34 (3) (a) sales to intervention are excluded. That is very serious and I would ask the Minister to reconsider it.
In 1972 I was on a special committee dealing with a VAT Bill. We discussed the question of eligibility of intervention to VAT at that stage. The question of intervention relief has not been cleared up adequately. I want the Minister to say if it is because of an EEC directive that sales to intervention agencies are not allowed the benefit of exports sales relief. Can he say that specifically? I have  always got clouded replies containing “ifs”, “ands” and “buts”. Nobody has said quite clearly and distinctly that sales to intervention are allowed export sales relief.
In passing I must say that I am involved in the meat trade and to a certain extent I suppose I should in a vague way state that I would have a vested interest or potentially have a vested interest in this but nevertheless it is an area that I know is very important to the whole economy and that is why I am speaking on it.
Another question now arises under the Bill in relation to the possibility of having sales to intervention benefit from the 10 per cent rate and be reckoned as sales of manufactured goods for the benefit of the company. I am extremely disappointed that the Minister is not allowing the 10 per cent rate to apply to companies involved in the meat processing trade in respect of sales to intervention agencies. Even if there had been a directive from EEC in relation to not allowing export sales relief in this case that goes by the board when there is a global rate of 10 per cent applicable to manufacturing production, production of manufactured goods. Technically, therefore, it is possible to allow the 10 per cent rate to apply to goods sold through the intervention scheme. That is something that should be seriously examined. I see no reason why that cannot be done even if it has not been possible to allow the export sales relief in respect of these goods.
I should like the Minister to answer this specific point which has a great bearing on the hard-pressed meat industry. The Minister knows well that quite a number of meat processing firms of a very substantial nature are in a serious financial position. This would be of help to them. It would have been a help if they had been allowed export sales relief on intervention but now, to have them positively discriminated against as is the case under section 34 is deplorable. I do not know where that advice has come from but, certainly, in  relation to the EEC directive if you are having a 10 per cent rate, that at least should be applicable to the sale of products into intervention. I see no reason why that should not be done.
There are a number of interpretations of what is allowed for as manufactured goods. I am sorry that a greater attempt has not been made to define goods that have been manufactured. I know that in fairness to the Revenue Commissioners, they have always been liberal in their intepretation of “manufactured goods.” I hope that in relation to this Bill when enacted the liberal stance in regard to the definition of manufactured goods will continue and that no narrow interpretation will apply.
The reason for the introduction of the 10 per cent rate is that we are finding it more difficult to attract industry here in an extremely competitive European economy. After 1990, our export sales relief will go and we are now properly introducing this 10 per cent. I should like to give the Government credit for it. We are giving recognition to the fact that it takes a lot and costs a lot to ensure that foreign industry comes into this country. We are competing with Governments that are better off than we are and who are prepared to spend substantial sums of money to attract foreign industry. Would the Minister state what are the comparable rates of corporation profit tax applicable in the EEC member states? That would be interesting information for this House. I want to be sure that ours is the best and most attractive rate.
If we are to have foreign industry here we must ensure that our case is pitched at the optimum point, and one of the weapons we have is corporation tax. It is very important, as the House knows, that what is being done here is at the most competitive possible level which will attract foreign companies. The British Government have been far more competitive in relation to their underdeveloped areas such as the north and north midlands, leaving aside Northern Ireland. Their policies have been very active in attracting foreign industry. Could a cost-benefit analysis and a cost-benefit  comparability study be undertaken by the IDA to ensure that the package the Government offers to foreign firms is the best vis-à-vis our EEC partners?
Mr. O'Kennedy: Could I interrupt the Deputy for a moment? I appreciate that there is a time constraint but there are a number of questions that he and Deputy Barry have raised which I would like to answer.
An Leas-Cheann Comhairle: The Chair was about to suggest that we give Deputy Tom Fitzpatrick of Dublin five minutes and also give the Minister time to reply.
Mr. E. Collins: I have made my points.
Mr. O'Kennedy: I am anxious to reply to some of the points which have been made.
Mr. T.J. Fitzpatrick: (Dublin South-Central): I know the Minister would like to clarify a lot of points which have been made so I shall be very brief. I welcome this section in the Bill because we all realise, as Deputy Barry has said, that our exports tax relief over the years has been one of the major factors in promoting industry and attracting investment. Many of the companies throughout the country which we see employing people would not be there except for the export tax relief which was given over the years. Doubts existed as to whether it would be acceptable within the EEC context. I am glad to see the matter has been clarified in the Bill.
The package which the Minister has brought in will be welcomed by everybody in industry and also by anyone who is interested in job creation. I am glad to see that the 10 per cent also applies to manufacturers on the home market. I have always felt that the home market is as competitive as our export market. There is a great influx of foreign goods in our supermarkets throughout the country. I hope the reduction which companies are now getting will enable them to become competitive. This reduction  in corporation tax should make it possible for them to have goods manufactured at more competitive prices. Our manufacturers on the home market are facing considerable competition today. We have only to look around at the various stores throughout the country and we can see that there are large stocks of foreign goods on sale. I am very glad the Minister has extended this concession to the home market.
We know that there is competition from other countries to attract foreign investment and we have seen projects going to other countries instead of here. The 10 per cent corporation tax must be one of the most attractive taxes in Europe. I doubt if there is any rate throughout Europe as low as this. I believe that foreign investors who are thinking of coming here will find this very attractive. I would have preferred a flat rate of 10 per cent instead of the 7.78 per cent if it could be worked out. The flat rate would probably be more attractive to businessmen but this is how it is worked out. The people who are already in business can opt for the export tax relief and I imagine a considerable number of them will. If they extend considerably into the home market they will have to make a decision as to which will benefit them most. I am sure if some firms feel that they can extend their outlets considerably into the home market they may move very quickly to the 10 per cent corporation tax which will be of greater benefit to them.
Mr. O'Kennedy: I appreciate the manner in which you have allowed us in the time available to us to deal with matters which arose in relation to the whole chapter as distinct from this particular section. It was the best approach to adopt in view of the time constraint and enabled us to deal with the many issues which have been touched on.
With regard to how this system compares with any other system applying elsewhere there is no system operating in Europe or anywhere else that compares with this incentive towards manufacturing industry. It can also be said that the existing system, which will be replaced at  the end of 1990 by this system, is also the most generous on offer to industry in any one of the countries in the EEC or elsewhere. There is nothing to compare with what is now being introduced. It is a measure of the concern of everybody—I appreciate the views expressed by the Opposition particularly in this area—to promoting industrial activity but it is also a measure of the incentives by way of tax relief that have been given, are being given and will be given to manufacturing industry here.
It is sometimes forgotten that the level of tax relief which applies here is far ahead of that available elsewhere. While I know that there are difficulties for industry here, as there are elsewhere, one could be forgiven for noting that certain views seem to be on the basis of taking for granted all that is already on offer and asking for more in addition which would also cost a considerable amount of money from the revenue. That is the first point I would like to make in relation to Deputy Collins's query and also Deputy Fitzpatrick who touched on it as well. I appreciate the welcome they have expressed for this.
The second point I would like to make arises particularly from what Deputy Fitzpatrick said is in relation to the competition we have on the home market. It is vitally important that our people are aware of their obligation to give preference in their purchasing habits to native industry. It was never more important than it is now. I will be very irrelevant for a few moments but in relation to balance of payments it is quite important to consider where people spend their holidays as well at a time when we are facing balance of payments problems. The two fall in together. In this context obviously manufacturing industry on the home market is going to get a new boost here. To the extent that it does get a boost, if there is one element that will now be boosted in a way that it was not under the existing scheme it is industry manufacturing for the home market and particularly, almost by definition, small industry which for one  reason or another will not be engaged in exporting to other markets. Deputies will be aware that the development of the small industries activities of the IDA, particularly that being promoted by SFADCo on a pilot basis in the mid-western region, is crucial to our employment programme. Obviously the small industries which are catering much more than the medium or bigger industries for the home market are going to get a major boost in this, and that is something that I am sure everybody here will welcome. At a time when there are difficulties for industry generally we hope that the implementation and application of this will be a particular incentive to small industries catering for the home market and that—as we keep asking and preaching—the home consumers will become much more sensitive to their obligations than some of them hitherto have demonstrated.
Deputy Collins raised another point which is important. Again, I express my agreement with what he said when he talked about the definition of manufacturing industry, though he recognises that the general interpretation put on this by the Revenue Commissioners is liberal. That has been my experience too. The Deputy says that if one were to define manufacturing industry, if you were to put a definition in this Bill of what manufacturing represents, the consequence of it inevitably would be that it would have to be, by reference even to the definition, more restrictive than the interpretation that has been put upon it generally in the liberal fashion that is there. A definition in itself would tend to be, if only for the purposes of precision, more restrictive than the application——
Mr. E. Collins: I raised the matter hoping that the Minister's expression of opinion in the matter and mine would coincide——
Mr. O'Kennedy: They do.
Mr. E. Collins: ——and that he would realise that this is what we wish.
Mr. O'Kennedy: I appreciate what the Deputy is saying now also. But he can appreciate that when you have to pass this on to the parliamentary draftsman and say, even with the benefit of advice from the Department of Industry, Commerce and Tourism, my own Department and the Revenue Commissioners, “Right, put that down in the Bill and tell us what you mean”, you would find that what you would get would be very much more restrictive perhaps than the interpretation put on it by the Revenue Commissioners at this moment. A Leas-Cheann Comhairle, have I a few more minutes to deal with some other points?
An Leas-Cheann Comhairle: The Minister has six minutes.
Mr. O'Kennedy: I assure the House through Deputy Barry, who asked a very pertinent question on this, that the clear intention is—and any Government would have the same intention and want it to be known as their intention—not just now but into the future for the duration of this to keep the rate at 10 per cent so that, for instance, if corporation tax went up to, as the Deputy asked, 50 per cent, then the reduction, which is seven-ninths, would be amended to whatever would be an appropriate fraction—four-fifths in those circumstances—to keep the effective rate at 10 per cent.
Mr. P. Barry: You can amend the fraction.
Mr. O'Kennedy: You could amend the reduction to ensure that the effective consequence of it will be an effective rate of 10 per cent. While on that, Deputy Barry asked about the 25 per cent rate that we touched on earlier. As Deputy Barry knows, although perhaps he overlooked it when he asked the question, the 25 per cent rate he referred to will end this year. We were discussing it on an earlier section. It was a temporary arrangement which has been extended this year and is being ended this year. Therefore Deputy Barry's query in relation to how these revisions would apply to the 25 per cent rate will not arise.
Mr. P. Barry: I do not want to interrupt the Minister, but the Minister for Finance said exactly the same last year, that it was in for only one year and for the duration of the Finance Bill.
Mr. O'Kennedy: I accept that. The difference this year is that what I am doing is bridging the gap between the implementation of this new scheme, which will come in at the beginning of next year. For that reason what the Minister for Finance said last year probably would have been well warranted and was the intention, but I am continuing it this year for one further year until the introduction of the new scheme. I sympathise with Deputy Barry because I must acknowledge that his experience is mine too. A Bill of this sort might be more appropriately dealt with in Committee, or at least this section of the Bill as he suggested, although that would apply to other sections as well. We found from experience that the enthusiasm of Deputies for Special Committees, perhaps due to pressure of time, is not quite what it might be. I have always appreciated what is done on Committee Stage in this House by Deputies, where the work they put in does not even get the publicity that it warrants, much less the problems they have in staying away from dealing with their constituents. However, it is understandable that Deputies do not show great enthusiasm for the detailed kind of work that a Committee examination of this element will involve. At the same time we have given more notice here than on other occasions. We have given notice now of what is going to come into effect from the beginning of next year. While we are still in this area, I remind Deputy Barry that it is for that reason almost unusually long prior notice. I am not saying that it is not desirable to do that, but it is unusually long and had we introduced it earlier it would have been unprecedented by standards. For instance, the 1977 manufacturing companies' scheme for the 25 per cent rate was brought in in the 1977 Finance Bill, so that by moving now in the Finance Bill to implement something that will take effect at the  beginning of next year we are not behind the pattern.
Mr. P. Barry: They are two totally different things. One is simple and this is an involved piece of legislation which deserves attention being drawn to it.
Mr. O'Kennedy: One last point. I tell Deputy Collins that it is not because of any EEC restriction that intervention is not being included. I say that definitely and I have never hedged from this. The main reason for excluding intervention sales from the new relief is the long term interest of Irish agriculture, which would not be served if the tax relief were to encourage sales of processed products such as beef, butter and milk powder into intervention. This has been stated by Ministers for Agriculture. The important thing from our point of view is to encourage the promotion of our own marketing of our agriculture as distinct from selling it into intervention.
An Leas-Cheann Comhairle: There has to be intervention from the Chair at this stage.
Mr. O'Kennedy: At least I hope I have been able clearly——
Mr. E. Collins: Not really.
Mr. O'Kennedy: ——if not satisfactorily from Deputy Collins's point of view, to tell him that it is not an EEC provision; it is a matter of Government policy.
An Leas-Cheann Comhairle: In accordance with the order of the House today I must put the following motion:
That all amendments set down by the Minister for Finance and not disposed of are hereby made to the Bill; the Bill as amended in hereby agreed to, and, as amended, is reported to the House and that the Report Stage be taken tomorrow.
Question put and agreed to.
Mr. P. Barry: I should like to say a word of appreciation of the Leas-Cheann Comhairle's long stint in the Chair. He has been there since 2.30 p.m. and that cannot be easy. Thank you for your understanding.
Mr. Moore: Hear, hear.
An Leas-Cheann Comhairle: Thank you.
Mr. O'Kennedy: It is very seldom that so much goodwill is generated around the Finance Bill.
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