Wednesday, 7 May 1986
Dáil Eireann Debate
Minister for Finance (Mr. J. Bruton): I had been referring to the necessity for this amendment which excludes deposits belonging to the administrator of the Insurance Corporation of Ireland from application of the deposit interest retention tax. I pointed out that already interbank deposits — that is, deposits by one  bank with another or deposits by the Central Bank with a licensed bank — are themselves also relieved from the deposit interest retention tax. In order not to upset the finely drawn financial calculations upon which the recovery package for the Insurance Corporation of Ireland has been drawn up, we are providing that this calculation would not be in any way upset or changed by the subsequent introduction of the deposit interest retention tax.
In anticipation of points that might be made in respect of this amendment it might be appropriate to point out that the recovery package for the Insurance Corporation of Ireland is not being financed by the taxpayer, as is very frequently claimed by interested parties who are looking for public money, making the spurious claim that, if it can be done for the ICI, it can be done for them or that, if one is making a financial promise — as was contended by the Opposition recently — well, it is a small amount of money only in comparison with the cost of the ICI rescue package. This is being financed on the basis of a loan, the vast bulk of which is being given by Allied Irish Banks — £70 million — and the remainder, £30 million, by the Central Bank. The interest on that loan to the administrator is in the region of 2 per cent per annum. The difference is being made up by the banking system generally.
The banks are contributing, essentially, in the form of interest subsidy, £7 million per annum, towards the cost of servicing this loan. The balance is the 2 per cent that is to be paid by the administrator. Therefore, it should be obvious that it is the banking system essentially that is financing the arrangements for the recovery of the ICI, which is not unreasonable because the necessity to intervene, to provide a means of keeping the ICI in being arose from the fact that it was owned by a bank. Therefore, it was considered necessary that the banking system should not be subject to the danger that might have arisen if the action taken by the Government had not been taken quickly, as it was.
Of course, the danger to the banking  system is something which would affect every household in the most adverse way, for example, people who have money on deposit. Those who have money on loan from the bank would find suddenly that all that money was due to be repaid immediately although they might have made provision to repay it over a number of years. In order to keep the banking system in operation on a reasonably secure basis, on which so many jobs directly rely but practically all jobs indirectly rely, the Government's action was reasonable. It was achieved in a manner which does not involve the taxpayers in financing it, but rather the banking system itself in the way that I have outlined.
I am saying this because it is necessary to put the record straight. Even though it was put straight at the time, many people since — and I cite most particularly some of the disputants in the present argument about teachers' pay — have been making inaccurate statements about the taxpayers financing the ICI when, in fact, that is not the case, as I have illustrated. It is only reasonable, although it has not a great deal of reference to this section but has some, to make the points I have just made.
I should like to make a few references to amendments that I wish to introduce on Report Stage. These will be circulated in time to allow Members on all sides of the House to consider them, but in order to give the House notice of the subjects to be covered, I should like to draw attention to my intentions on these matters.
Mr. J. Bruton: There is a danger, as the Deputy will appreciate, that some of the sections will not be reached today,  because of the way the timetable is operating. In order to give the Deputy the notice that I know he earnestly desires to have, I wish to mention it now. If he is interested, he should have this information. I shall not take two minutes to do this if he allows me to do so.
Mr. O'Kennedy: On that basis if it is just a matter of two minutes, I agree. We are constrained on time. If the Minister is proposing to make references to other sections he will understand that we would want to have an opportunity to see the amendments in the first instance.
Mr. J. Bruton: First, there is a requirement in regard to research and development companies which qualify for the tax relief that the sponsoring company may own no more than 20 per cent shares. I am considering raising that to 49 per cent. I am also looking at section 54 of the Bill which concerns capital gains tax incentive  for shares debited in the smaller companies market on the Stock Exchange. At present this incentive is available solely to the smaller companies market. It has been represented to me that some other possible sponsors of similar markets would be disadvantaged by this scheme being available only to the Stock Exchange smaller companies market which, of course, was the only one in being at the time. I intend to look at that matter to see if anything could be done. I have not made up my mind finally, but I intend to look at the matter.
Mr. J. Bruton: On Report Stage we will be debating the whole matter if I propose to change the Bill. If I do not propose to change the Bill, we shall not be debating it, because there will be no need.
Changes are also required in relation to the tax arrears situation where there is a fixed charge held on the book debts of a company. An amendment to effect such changes will be circulated prior to Report Stage. This amendment will provide that in certain circumstances the holder of a fixed charge on the book debts will be liable for the tax arrears of the company in question. This change is necessary to ensure as far as reasonably possible that taxes collected by a company are paid to the Revenue Commissioners.
On Report Stage I shall also be moving an amendment to insert new sections 49 and 50 in the Finance Bill. These new  sections will provide for amendments in sections 40 and 41 of the Finance Act 1984 to take account of objections raised by the EC Commission in their existing scope. In the case of section 40 which imposes certain limitations on tax based leasing, the proposed amendment could enable an machinery or plant leased for use any manufacturing or exempted Shannon activities to qualify for unrestricted capital allowances. Otherwise leased machinery or plant not grant aided will be subject to the limitations imposed by section 40.
In the case of section 41, the effect of the proposed amendment will be to exclude some IA assisting services from access to section 84 finance. In view of that being quite a complex statement, I shall have copies made and given to the four Deputies present.
Mr. O'Malley: May I inquire from the Minister in relation to this amendment why, for example, the administrator of the PMPA is not included if the administrator of the ICI is? The ICI are at present trading. It seems to put them at a very major advantage as against all their competitors, not just the PMPA in administration, but all the companies which were prudent enough not to get themselves into administraton, liquidation or anything else. These companies are trying to operate in the light of severe difficulties in the market place, particularly so far as general insurance companies are concerned, of which the ICI are one.
The ICI got themselves into the situation they are in today due to extremely imprudent actions over a period of years. Why is their administrator given these very generous facilities that their bank deposits will be free of tax when no other company with which they have to compete is given them? In particular, why is the administrator of PMPA not given these? He has funds at his disposal not provided by the Central Bank or AIB but by the levy on general insurance. No doubt, he has some income from the  deposit interest that these funds accumulate from time to time before they are used up and replenished. Surely he must be in the same situation.
Ordinary insurance companies which are not in administration and are trading at present have funds at their disposal from time to time on which they seek to obtain an investment income, because most of these general companies are operating at an underwriting loss. Is it not therefore going to affect their investment income and accordingly their overall results if their deposit funds are subjected to this retention tax but those of one of their main competitors, the ICI, are not? The ICI are given this privilege simply because they were foolish enough to put themselves in a position where they had to be bailed out.
Mr. S. Brennan: It is quite clear that the Minister's amendment, as he said, is put in there to remove the ICI from the tax retention. This poses questions, not only the ones Deputy O'Malley has rightly posed about the PMPA. There are other areas where one has to pose questions. The Minister is exempting relevant deposit takers and they are listed in the Bill as being building societies and so on, but what about companies like Fóir Teoranta and the Electricity Supply Board, the poor liquidator of Irish Shipping, the local authorities, the Housing Finance Agency who are all handling State funds at one time or another and who are putting these funds on deposit? They are not being exempted as the ICI are being exempted. We have to put this rather strongly today as it is important.
What is happening in this amendment is that it is part of the rescue of the Insurance Corporation of Ireland. The Minister did not put it like that, but this section of the Finance Bill is now becoming part of the rescue of ICI. I put it to the Minister that, if there is to be a rescue  package involving all sorts of areas to assist the ICI, it should be done in a more direct way as part of a package to keep the company moving, and not slipped into the Finance Bill to give them a competitive advantage over other people in the market. This is the wrong way to be of assistance to the ICI if that is what the Minister wants to do and clearly it is.
I accept that the Minister is trying to steady the nerves in the market place and Ministers have to do that, but I must take issue with the Minister over his statement that the ICI do not cost the taxpayer any money and only cost the banks money. The Minister said the figures are £70 million from the AIB and £30 million from the Central Bank. I hear the Minister saying that it has been easy for the people of Ireland and that between the AIB and the Central Bank the ICI have been sorted out. The Minister gets angry when people say this costs the taxpayers money. I have to say this to the Minister. At the end of the day the money provided by the Central Bank and the AIB will ultimately be taxpayers' funds because successive Ministers, long after the present Minister has gone, will come into this House and tell us that we have to keep the banking system afloat. Therefore, they have to get this, that and the other concession. After all, it is part of building up banking confidence. The State must yield on this and on that, yield on this tax matter and on this confidentiality matter and all the areas which are designed to support deposits in our financial institutions. Of course, this is what we all want to do.
I do not think we should let it go out from this debate this evening that suddenly the whole ICI debacle magically is being dealt with with mirrors at no cost to the public. That is not the situation in my view. It may not be of direct cheque signing cost to the public this year or next year, but at the end of the day that £100 million or so will come out of the pockets of the Irish people because that is where the banks get their money. If it is going to cost the banks today, it is going to cost the public tomorrow. I should hammer that on the head in this debate because  it is a bit disingenuous to suggest that suddenly the ICI are sorted out and the public get off scot free. I doubt very much that will be the situation. Why pick out the ICI in this Bill at this time? As Deputy O'Malley rightly said, why not the PMPA which are in a broadly similar situation?
Mr. J. Bruton: The ICI have to hold substantial moneys on deposit as part of the rescue package in order to meet their foreign liabilities. The PMPA, to which Deputy O'Malley referred, do not have foreign liabilities. Because of the critical position of the ICI the banks, mainly foreign ones, in respect of the foreign liabilities required the ICI to hold funds with them. It was part of the original package that the money paid over by the AIB and the Central Bank by this very circuitous route to the administrator had to be put back in turn into the banking system. Obviously, it was available for use by the ICI. This is not a new concession for the ICI in the sense that all it is doing is ensuring that the introduction of the deposit interest retention tax does not change the pre-existing position as far as the ICI are concerned.
Naturally enough, given that this was a very large rescue operation, the figures were extremely finely drawn in order to ensure that the minimum amount of money was put in to ensure that the rescue was successful. The figures were calculated very carefully, needless to say. Anything which came in subsequently such as this tax which changed the basis of the rescue was something which had to be provided for. It could not be provided for by bringing in new money because the banks have done what they are going to do as far as putting money in is concerned. There is no question of the taxpayer putting in money and the Central Bank have also put in all they are going to put in. If the situation was changed by extraneous action, such as the introduction of this tax, it had to be provided against by ensuring that that did not apply to the ICI. Essentially, all we are doing in this amendment is maintaining the situation as it was. There is no  new concession. It depends on what way we look at it.
Mr. J. Bruton: This is a necessary measure to achieve something that truthfully everyone needs to achieve. Deputy Brennan made an interesting point when he pointed out that in essence the banking system ultimately is the same as the taxpayers of Ireland and that money taken out of the banking system ultimately affects the same people who are paying taxes.
Mr. J. Bruton: That is a fair point. It does, in a sense, put in context the simplistic ideas such as that the Government should not step in and should not have provided a mechanism whereby the banks could save themselves. Obviously, the people who would suffer, if the Government had not taken the action they took, would have been the very taxpayers Deputy Brennan and I and everyone else in this House are concerned with. He made the point quite well that essentially it is the same people ultimately. As I have pointed out already the taxpayers are not making a contribution. This is being done by means of the AIB which is a private bank providing the bulk of the funds, the private banking system providing the interest subsidy which comes to £7 million a year.
There is also a contribution by the Central Bank. The Central Bank is owned by the State and any contribution that it makes ultimately affects the amount of their surplus. That, in turn, affects their ability to make a contribution from their surplus towards the Exchequer. There is no guarantee as to whether they will have a surplus of any size, because many other factors affect the size of the surplus. They also have a means of increasing their surplus, if they so wish, by decisions that they take, so that they could still maintain the same level of contribution to the Exchequer even though they may have  other provisions to make. I hope that I have answered reasonably the points that have been made.
Mr. O'Malley: The Minister has not dealt with the competition from the other insurance companies, not just the PMPA. They have money on deposit with banks and they have to bear the tax. Why is this most improvidently run company, or the remnants of it, given this advantage? Whether or not it was correct for the Minister to claim that the taxpayer had not made any contribution to the ICI, that it was banking money and Central Bank money, the position now is that the taxpayer is making a major contribution on this amendment. We are told by the Minister that the administrator of ICI has to hold £100 million on deposit against certain foreign liabilities. On that sum of money he would be likely to receive an interest rate of about 13 per cent which is £13 million. The interest on that at 35 per cent amounts to almost £4.5 million. The other taxpayers of Ireland will have to make up that £4.5 million. It is £4.5 million less yield on this tax. One could ask why should the administrator of the ill-fated and improvidently run ICI receive a present of £4.5 million each year from the taxpayer when other organisations such as the GAA have to pay tax on their deposits. I do not think the GAA have done much harm to the economy or to any other aspect of Irish life over the last 100 years. These questions deserve more precise answers. The competitors of the ICI, in particular, deserve an answer. They do not get £100 million handed to them. They get limited funds from their policyholders. Some of those are short term funds which they deposit in banks from time to time. They do not get vast amounts of interest the same as the ICI. They get smaller sums, which are vital to them. Why should they be subject to 35 per cent interest when the ICI are not subject to it?
Mr. S. Brennan: In view of what has been said, would the Minister not accept  that amendment No. 43 is, in effect, introducing a new subsidy for the ICI in the sense that it is not being made subject to what is quite a heavy taxation being imposed on the other institutions. As far as I am concerned, it is a straight subsidy. Let us call it that and get it out of the way.
Mr. S. Brennan: It is a tax foregone. If I am let off a tax bill, it is semantics as to whether it is a subsidy or a tax foregone. If the State is foregoing taxation that it should be collecting from the ICI, I call that a subsidy by the State.
Mr. J. Bruton: As I explained in response to Deputy O'Malley's original question, the ICI, peculiarly among insurance companies because of the nature of its foreign liabilities, is required to hold money on deposit in banks. Other insurance companies who have similar money available to them would not keep it on deposit in banks. It would not be sensible because of the rate of interest. They would tend to put it in other savings instruments, one of which be gilts, which are not liable to deposit interest retention tax. Because of the competitive position of the ICI they have to hold the money on deposit in a bank.
Mr. J. Bruton: It is not possible for me to change it. As I explained to Deputy O'Malley, that arises from the nature of their foreign liabilities. The competitive position of other companies is not therefore affected in the way that Deputy O'Malley suspects. The other companies would not be holding money on deposit in the banks to the same degree. They would tend to hold their money in other forms of savings which would not be liable to the tax. The same effect in respect of the other companies that will in any way apply is now being achieved in the case of the ICI in this regard.
The ICI are really only gaining a cash  flow benefit from this change in the sense that they will not be liable for £2 million worth of deposit interest retention tax. Even if they had been liable, they would have been able to set that off against tax liabilities next year in the form of tax losses that would otherwise be claimable. In practice, the main benefit to them is in terms of cash flow or of a timing nature and is necessary because of the very fine drawn way in which the rescue package for the ICI has been constructed. Even the timing disadvantage which would have arisen if the tax had to be paid this year, even though it could be negatived in subsequent years, was something that was inconsistent with the very finely drawn package which had been put together for the ICI. Therefore, it was considered not to be wise from the point of view of the policyholders and of the public generally, who have an interest in the maintenance of stability both in the insurance market and in the banking system.
This is a technical amendment to correct a drafting fault in paragraph (c) of the definition of “relevant deposit”. The word “by” in the phrase “held by a branch” should be changed to read “held at a branch”. This has a particular meaning which I can explain but I am not sure that it would be the best use of time.
Mr. O'Kennedy: The significant thing about the provision in relation to deposit takers identified in the section, including the ICI, is that a very specific advantage is being conferred on Government gilts. Advantage is being given to the ICI, though a similar provision was not made for the PMPA. The Minister said this  is because of the necessity to maintain confidence in the banking system. This tax, which we oppose totally in any event, discriminates between one and the other. On what grounds can the Minister justify excluding gilts from the application of the tax?
This provision imposes a discrimination in favour of Government security as against any other deposits in any other financial institution. Representatives of the CII have expressed a view on this and my main concern, which coincides with theirs, is that it has been evident for some time that when the equity market is so weak and when the rate of investment in equities is so poor in contrast with gilts — the Minister admittedly is moving in this Bill to try to relieve the burden on dividends — what we are likely to get as a result of this exemption is that the money which should be available for investment in the private sector through the banking system is being swallowed up more and more by public funds, in this instance by Government gilts.
In the course of the past two years the main reason for the unusually high interest rates here by comparison with elsewhere is that the money available to the private sector in such scarce supply has been scarce because of the interest rates. The high interest rates in the banking sector are affecting every sector in the economy, including farmers and most people interested in investment and, instead of providing a right balance between the banks and the other institutions, what the Government are doing is further distorting the position by excluding gilts from the application of this tax. I am not arguing for the application of this tax to gilts or to anything else, but if the Government are hell bent on implementing this inequitable and unfair tax there does not seem to be any reason why the whole range of Government gilts should be made exceptions.
Mr. G. Mitchell: I want to speak on deposits. The explanatory memorandum defines “relevant deposit” as the deposit accounts to which retention tax applies. Certain categories of relevant deposits  should be exempt, and the only people exempt are the permanently incapacitated and those older than 65 years. I feel strongly that the provision regarding relevant deposit should include people who would not have tax liability in the first instance. To tax them is therefore very unfair and unjust. Many people would not have a tax liability but now, for administrative or financial reasons, they are being taxed under the DIRT provision though they would not be liable to income tax otherwise.
The Minister rightly said that anybody who says we should not have this tax should point out where the revenue would come from otherwise. I have had a number of parliamentary questions in the past few weeks about the agricultural sector tax and I am concerned that there is a disproportionate view in favour of agricultural interests in this House and indeed in the Cabinet. I submit that more could be done to spread the tax burden more equitably. For instance, in the Estimate for Agriculture, we are to spend £336 million on agriculture, and that is just the Estimate.
Mr. G. Mitchell: I am just making a passing reference. EC grants can be added, but the agricultural sector last year contributed only £37 million in income tax, about 10 per cent of the total, the remaining 90 per cent being contributed by other members of the community. Bigger farmers hide behind the smaller farmers——
Mr. G. Mitchell: If we were to extend the exemptions in this section to other categories of relevant deposits we could finance this extended relief by a more equitable and fair spread of the tax to others in the community. We have to pass  an Act of Parliament if we want to drop a threshold, and so forth, in regard to other taxes but here we are imposing an unfair tax which could be financed if others who do not contribute or who contribute too little were asked to contribute more.
Mr. S. Brennan: Section 27(1)(e) refers to “a deposit denominated in a foreign currency”. Why does the Minister feel he has to exempt deposits nominated in foreign currencies? Does he think it makes sense? Will that provision stay there? How will the Minister monitor foreign currency nominations? I presume sterling has been regarded by Irish banks as being a foreign currency.
I presume the Revenue Commissioners are operating from a list that goes somewhat beyond that definition. It is legitimate under this section of the Bill to raise the position of, say, a parish church fund, a sports club or the various other community groups that do not strictly fall under the definition of a charity as defined in the 1967 Act.
The import of the section is to exempt from the retention tax any income that was clearly excempt under section 333 of the 1967 Income Tax Act but in doing that it quite cleverly ignored a range of other areas that are not the subject of income tax but will now be the subject of the retention tax such as parish funds, sports clubs and voluntary organisations. It would have been better to exempt in a straightforward way any club or institution already exempt from income tax. It would make sense that they should automatically be exempt from retention tax. It is not sensible to have a long list in the original Act exempting people from income tax and then to select only a few  from that when drafting section 27 of this Bill.
Mr. J. Bruton: I was interested in the comments of Deputy O'Kennedy regarding gilts. I appreciate he has acknowledged that the Finance Bill is trying to move away from what has been an historical discrimination against equities in the productive sector so far as tax treatment is concerned. In that light we are both talking the same language.
As far as extending the tax to gilts is concerned, a number of points should be made. First, issues of gilts are made under terms that cannot subsequently be varied and obviously any change would apply only to new issues. Secondly, the change the Deputy suggests would probably have an effect on the rate at which the State would have to issue gilts. In other words, it would have to increase the rate it would pay for the money to make up for the tax liable to be collected. Essentially, one could have a circular transfer with no net financial gain at the end of the process. To some degree, the point the Deputy has made is merely looking superficially at the matter. However, the net effect might be rather different for the reasons I have given.
Mr. O'Kennedy: Is it not the net effect that people are encouraged to invest in gilts? Even if one were to accept the point made by the Minister, is it not the case that people are being encouraged to invest in gilts and away from the banking system which provides funds for the private sector with the consequences I mentioned.
Mr. J. Bruton: If what the Deputy has suggested were done it might not have the effect he thinks it would have in the sense that the State would then have to increase the rate of interest it paid on gilts. This would counteract the effect he is seeking to achieve of making gilts less attractive and the end result would be the same as at present. I realise that one would not be in a position of leaving oneself open to the charge the Deputy is making but that would be all one would achieve  in the sense that the financial effect might be nil. Ultimately it is the taxpayer who pays the interest rates. The more fundamental problem is one on which Deputy O'Kennedy and I are agreed, namely, that the volume of money being borrowed by the Government is really the problem in so far as interest rates are concerned——
Mr. J. Bruton: It will not. I do not want to repeat myself for the third time. I do not think that will be the case for the reason I have given. Even if we did what the Deputy is urging it would probably end up in an increase in the rate of interest to be paid by exactly the same amount as the money that came in. We would end up with the same result, except for the fact that there would be a higher nominal interest rate on gilts. I suppose there can be different views on that matter at any given time, depending on the elasticity of demand for funds in the market on any given day. It is not possible to generalise. There may be times when what the Deputy is saying is true, although I do not think it would be true in the generality of cases. It is not a question of black and white. The problem is the volume of borrowing overall. That is what pushes up interest rates.
Deputy Mitchell made one point and a number of observations. The observations do not necessarily affect the section. Farmers are liable to income tax. Farmers have a restriction of 30 per cent on capital allowances they may claim which does not apply to other taxpayers claiming capital allowances. As a result of the farm tax, farmers essentially will be in the same position as other commercial operators who are paying rates in the sense that they will now be paying the equivalent of rates. It is the case that substantial interest charges are offset by many farmers against their tax liability. It seemed a wise thing to borrow in the seventies in order to reduce their tax liability but most of them now realise it was a very foolish thing to do for that  reason. Many of them are now paying much more in interest than they would ever have paid in tax.
Deputy Brennan raised an interesting question about the definition of relevant deposit in relation to foreign currencies. For an Irish company to hold foreign currency in the bank they need the approval of the Central Bank. The funds would be of two kinds — funds held for trading purposes in respect of a company's foreign trade and funds held by foreign companies established in Ireland, which funds could be moved out at any time. It would be wrong to penalise the former because in a sense it is an accident that the money is here rather than overseas. The provision of exempting funds ensures that the money stays here. If we did not exempt it the money could be moved out at any time. It is not a marvellous opportunity for finding a new way round a tax by putting money into foreign curency. It just cannot be done. The people who can do it belong to a very limited category and have a good reason for doing so.
The definition of charity being used is the one which is well established in the tax code. There were others who could claim that their objectives or activities were benevolent in intent. That list would be virtually limitless and obviously we have to draw a line somewhere. We draw it at those who are charities in the strictest sense within the existing interpretation. However, it is possible for people who feel they can come within the definition of a charity and make a claim to the Revenue Commissioners for their designation as a charity. The Revenue Commissioners will be quite happy to facilitate anybody who wishes to make such a claim and any cases made will be examined carefully.
Mr. O'Kennedy: I regret that, due to the procedure so far today, we are as yet only on the first of 37 sections which we had hoped to cover. The Minister may say that this is a consequence of the agreement I gave. If he suggests that we have time to get to the other sections in  the whole Bill, that is patently not the case.
I should like to address myself to the principles proposed under this section and following sections and to indicate the reason we are opposing this section. It gives effect to a tax which in principle is both unfair and inappropriate at this stage. It is unfair because it applies income tax at the rate of 35 per cent to relevant deposits, irrespective of whether the deposit holder is liable to income tax. That is the first time this principle has been incorporated into any financial legislation. We must not overlook the fact that this is income tax at the standard rate of 35 per cent being imposed on all deposits in institutions other than the ones the Minister has now chosen to exclude, Government gilts being among those. It is entirely inequitable. Many people are not earning sufficient interest from their deposits, which constitutes their sole income in some cases. Many of them are now to be subject for the first time to income tax at 35 per cent. It does not matter whether they are widows, young people or old people or whether they are in very needy circumstances, as many of them are. Under the appropriately named DIRT tax the Minister is taking tax from people who are not and never would be liable for income tax. That is totally unacceptable. I hope every Member would agree that those who are not liable for tax should not now be subject to it. We have tabled amendments to these sections to ensure that such people would be exempt from the provisions of this section. By exemption I mean that they would not be required to present to the Revenue Commissioners documentation to establish that they have not been earning income sufficient to bring them within the income tax net.
The Minister said more than once that this provision is necessary because difficult measures like this new tax must be contemplated to achieve the overriding priority of reduced income tax. In effect the Minister is proposing to subject people to income tax at 35 per cent who have not an income which makes them  liable to income tax in order to reduce the tax level on those who are liable to income tax. That is a most unfair statement from any Minister. He proposes to impose income tax on those who are not liable so that he can reduce the burden on those who are. I would be the last person to argue that the burden of income tax is not outrageously high and has not grown hugely under this Government to the extent that it is well over twice what it was when they came into office. I am not arguing that the burden of income tax is not too high. I am arguing that it is a nonsense to include those who are exempt from income tax in the income tax net as the only way to reduce the burden on those who are already in that category. The Minister has made the specious claim that this is the only way to reduce the burden on those who are liable.
Refunds for all non-liable persons cannot be considered, however, because this would be far too costly. Have we ever heard anywhere from any Minister for Finance such an outrageous statement that people who are not liable to tax have to be subjected to tax because the cost of not subjecting them would be far too high? If this Minister and the Deputies supporting him and this Government can actually support the two principles that tax is to be imposed on those not liable because to do otherwise would be too costly and, secondly, that tax is to be imposed on those not liable to lift the burden on those who are liable, let them come into the House and let the Minister state that this is his position. The Minister stated that here twice. That is what we are being asked to accept. The Labour Deputies are  always absent when we touch on these delicate issues, but I am sure that when we put our amendment they will come in when the bell rings and vote against it. But, if they happen to be listening in their rooms, I want them to know that they are voting to impose income tax at 35 per cent on people that the Minister admits are not liable and could not be liable to income tax.
In an afterthought the Minister has provided for exemption for old people, people aged 65, 75, 80, 85. But he is obliging them actually to fill up forms to the satisfaction of the Revenue Commissioners disclosing every detail of their circumstances. These people are old, feeble and, in many cases, unable to write even their names. What kind of society have we got when we are going to force those people, who are apprehensive about filling up applications for grants, never mind the Revenue Commissioners, to apply at the end of the year for a refund of what should not have been deducted at the beginning of the year? The concession being granted by the Minister, if it could be called a concession, is that they can apply for a reduction, but only to the extent that their income does not bring them within the tax net. That is ignoring the reality of our people and particularly our old people. If the Minister is saying that he needs this money from our old people to maintain this State, then that is a sorry admission on his part. Has the Minister any idea of how much he would have to forego if he were to exempt old people from the requirements of this nonsensical outrageous tax? The Minister will find that many of them will have to be helped to fill up the forms to claim back from the Revenue Commissioners what belongs to them in the first instance. That is outrageous.
The next group concerned is young people. Who is to say that those young people who have money on deposit in the banks or whose parents have money for them have an income that makes them liable to income tax? Is it not the case that in most families prudent parents put money on deposit for their children to encourage them to save and to give the  children, when they come of age, a start so that when they need money for their education, for their first bicycle, for their first car or for their first home they can go to the bank manager with a proven track record having had money on deposit for a certain number of years? That is the main reason people put money on deposit for children. But, no matter what age they are, 13, 14, 15, they are suddenly being raised to the status of fully-grown mature citizens. This Minister is going to impose a tax on children although under every other aspect of the law children are meant to be and are in a special position and must not be discriminated against. This proposal is discriminating against them so that the Minister can get some extra money. He says that to do otherwise would be too costly. Does the Minister know how much it would cost if he exempted children and old people? If he does not know that then he should not say it is too costly to exempt them. That is totally and utterly reprehensible. This tax is, for that reason, appropriately called the DIRT tax.
The Minister has indicated that charities are exempt. I am relatively familiar with the definition of legal charities and trusts established for the purpose of legal charities. We are different from other countries. Where Britain has a register of charities, we do not. The decisions here are taken on an ad hoc basis, albeit guided by principles. They must be wholly and exclusively for one of the following reasons: for the advancement of religion, for the promotion of education or for the relief of poverty. If they happen to be engaged in other activities as well, they are not exempt. This is where the parish funds, funds for buildings and for various other activities such as recreational functions and so on, come into it. They, by definition, are not charities within the strict legal requirement. It may be that a benign interpretation by the Revenue Commissioners or some inspector in the office will help them; but they are not legal charities. It is wrong that so many organisations should be subject to this  tax. Let me give an example of one such organisation, the Lions Clubs. Most of the work they do would be charitable in the legal sense of the word, the relief of poverty. But a lot of the work they do goes to funding everything from children's outings, outings for old people and providing medical facilities in hospitals, and these are not designated as charitable. Because some of the work they do — excellent, worthwhile community work — is not strictly charitable work, by virtue of doing that worthwhile community work they are included in this awful DIRT tax. If they did not do all of those other things, providing facilities, taking children on outings, providing necessary medical equipment in hospitals and so on, they would be all right. If they just collected money to give to the poor, they would be all right. But, because they do more, they are not. That is outrageous and all of this is the consequence of what is outrageous, inequitable legislation. Edmund Burke said on one occasion that any fool can dream up new taxes, but even Edmund Burke would not have thought that such fools could be found in 1986, who are not just foolish but absolutely inequitable in their attitude to the poor and the needy.
Let us turn to the others who are going to be included. We are totally opposed to this and have amendments down later. I refer to all the voluntary organisations, among them one that has been referred to already, the Gaelic Athletic Association. I want to read onto the record a telegram I got from that association:
Munster Council of GAA shocked at proposal to impose DIRT on GAA. Implementation would have gravest consequences on promotion and development at club, county, provincial and national levels. Strongly demands exemption as amateur voluntary body servicing youth and promoting the national games. Such recognition given in legislation since foundation of State.
To that we in Fianna Fáil say hear, hear. We support the principles incorporated in that telegram because that organisation and every other sporting organisation — the Rugby Football Union, the Football Association of Ireland, the Irish Amateur Athletic Union, the boxing groups and so on — are promoting sport and other healthy activities for our young people. Yesterday the Minister made great play of introducing a new amendment to enable people to invest in Cospóir, the promotion of sport and the healthy activities associated with sporting organisations. What is he doing today? He is levying a 35 per cent income tax on the interest income of every sporting organisation, among them those which made a major contribution to the well-being of this nation.
In a measc sin tá an Cumann Lúthchleas Gael mar dar ndóigh tá a fhios ag gach éinne go bhfuil obair an-tábhachtach á dhéanamh acu i ngach baile, gach sráidbhaile agus gach contae sa tír. Tá a fhios ag gach éinne go bhfuil obair fhónta á dhéanamh ag Cumann Lúthchleas Gael le tamaillín anois agus tá súil agam go mbeidh leis na blianta.
Long after this Government and this Minister, who will not be seen as a committed supporter of that or any other sporting organisation, have gone from the scene, this DIRT tax will be biting into the funds of organisations which have done magnificant work for this country. Why? Because the Minister says to exclude them would be too costly. There will be no exemption for the marvellous work these organisations have done, because he is saving the country money. But it will cost the country a lot more if we force these voluntary and community organisations into a decline. At a period when so many things are going into a decline one of the things which must reassure us is the healthy state of our games and, I say it deliberately, our national games.
We in Fianna Fáil insist that Deputies on all sides should come in here and say they are in favour of taxing the poor who are not otherwise liable to pay income tax. They should say they are in favour of making the old who cannot see or write fill out forms when they are not liable to pay tax, they are in favour of taxing every  voluntary organisation although in their constituency they go to meetings and say they are willing to help them in any way they can. Let Deputies be clear what they are about to do. Let them do what I am demanding on behalf of my party; let them vote to exempt these groups, citizens young and old, from this tax. I do not know how many people would be liable for tax, but there would be a considerable number; and it is outrageous for a Minister to impose tax on individuals and organisations who hitherto were not liable to tax.
We are totally opposed to this awful nonsense, this DIRT tax. We intend to oppose it in this section and on any other occasion. If the Minister would indicate that he is prepared to accept our amendment to section 35, we will give this part of the Bill immediate passage without further opposition, but if he is not prepared to accept the principles incorporated in that amendment, then he can face the fact that he will have to rally the forces of his own party and of the Labour Party, those who care for the poor, to impose income tax on all, irrespective of income or voluntary community contribution.
Mr. G. Mitchell: What Deputy O'Kennedy said is an appalling piece of parliamentary hypocrisy. He asked everybody to support this amendment which would raise the revenue loss. There are sections of the community which are not making their just contribution, in my view. In a wide-ranging appeal to the House the Deputy did not even refer to this matter——
Mr. G. Mitchell: On 20 February£8.7 million was outstanding from farmers in  health contributions. It is true that farmers have not paid rates in the recent past, unlike other businessmen, and that they get favourable treatment by way of stock relief. While I do not mind small farmers in certain circumstances being treated favourably, I do mind large farmers being treated favourably at the expense of the rest of the community, including the taxpayers. They make a contribution to the general Exchequer and carry the can for enormous outpourings of revenue. I am thinking particularly of large sums provided for agriculture. Farmers are not paying even 10 per cent of that amount. There are a number of reasons why this legislation is trying to raise funds in the inequitable way Deputy O'Kennedy referred to, and I acknowledge that it is inequitable to ask sombody to pay tax for which they would not be liable if their income had come from another source. The first reason is that in order to release that income we have to cut Government expenditure, including the interest on the enormous borrowings which were made by people like Deputy O'Kennedy when they were in office——
Mr. G. Mitchell: If this section is inequitable it is because we are not prepared to tax a section of the community who are not making their fair contribution, and we are not prepared to cut  spending. People like Deputy O'Kennedy are not prepared to extend taxation to large farmers in an equitable way.
Mr. G. Mitchell: This tax is being imposed because there are sections of the community who are not paying their fair share and at the same time the Government have very high expenditure, including the repayment of borrowings and interest on those borrowings which were made recklessly. Attempts have been made to bring some sort of equity. Equity has been the main point which Deputy O'Kennedy alleged he was referring to, but any attempt to bring any sort of equity into this country has resulted in the character of the people who tried it being destroyed. One thinks of the former Minister for Finance, Richie Ryan.
It has resulted in promises being made that it is not necessary to have equity because taxes such as wealth tax can be abolished and resource tax can be refunded. That happened when Deputy O'Kennedy was in Government. He has some neck to come in here and talk about equity. We would not have to impose the tax that Deputy O'Kennedy refers to on those people who are not liable if we were prepared to go along with a more equitable tax system in the areas I have mentioned. There is no point in coming in here and pretending to whinge and cry about inequitable tax systems when we know the reasons for them. There is no magic formula. We know the formula. Either we cut spending or we share out taxation more equitably, and we are not doing that. Unless we are prepared to do that and to include large farmers we will make no headway with equity in taxation.
I gave figures when I stood up to speak and I will not repeat them, but this side of the House will not get away with bringing in the sort of equity the Deputy referred to because the House is too much dominated by argicultural members.
Mr. G. Mitchell: This side of the House is under too much pressure from the other side of the House while Deputies are running around rural constituencies telling the IFA and others that they do not have to pay tax when they are in Government. We are under pressure for that reason and the sooner we realise that the inequity will remain as long as that system goes on, the sooner the House will be dealing with the thing more fairly.
Mr. Hilliard: Regarding the 35 per cent tax I would like to ask the Minister one question. Let me give an example. Two people have been in business all their lives owning, say a public house or a grocery shop, and they sell for health reasons. They reinvest the money they get and go out of business and live on the income they get from that investment. They cannot qualify for a tax free allowance in any shape or form or for the noncontributory pension because the income on the investment disqualifies them. Every penny of that income is taxed at 35 per cent, according to this Bill. I assume that those two people are entitled to £2,000 each tax free at least which is the normal tax free allowance. Am I to assume that for such a couple in their old age the first £4,000 of the interest from the investment is not taxable at 35 per cent?
Mr. J. Bruton: I make no apology for giving Deputy Hilliard preferential treatment. I would like to reassure him on the points he raised. As a result of the change in the proposal contained in the Finance Bill now — I take it that the Deputy is referring to a couple, one of whom is over 65 years of age — they will be able to make a claim for a refund of the DIRT that will be deducted at source on the money in the bank to the extent that their personal allowances, which are larger than those mentioned by the Deputy, reduce the liability and they will get the money back. Arrangements will be made to deal with such cases of claims for refund as quickly as possible and thought will be given to providing information as to how older people — those over the age of 65 — can make the necessary claims and to ensuring that the forms concerned are as simple to fill in as possible.
It is not all that unusual. Deputy Hilliard will be aware that many PAYE taxpayers at the end of the year have to submit a claim for a tax refund because either they may not have been working for part of the year or for some other reason the amount deducted would be greater than the amount due to be collected from them. They submit a claim later in the year giving certain information that enables a refund to be made. This is a fairly normal process. In this case it will simply be a refund which will have to be accompanied by a certificate from the bank of the amount of interest paid and the amount of DIRT deducted. Once they are aged over 65 they will be able to get the money back. We selected people over 65 because these people are not in a position to earn money other than their means of income because of age. We have extended a similar concession for refund to those who are permanently incapacitated because they cannot go out to earn a living. Therefore, those two categories will be entitled to the refund.
Deputy O'Kennedy went further than  my colleague in suggesting that people over 65 should be exempt from tax. To have them totally exempt would cause many problems. People under 65 who have substantial holdings of money which they will not be required to disclose now to the Revenue Commissioners and on which they might if they disclosed them have to pay 58 per cent tax because their holding might be on top of a reasonable income, would start to put their money in the name of their aged parents into the bank where not only would the amount not have to be disclosed but no DIRT would be deducted from it. Therefore, Deputy O'Kennedy's proposal for total exemption could be used for large scale evasion not just of DIRT but of normal income tax. By shifting the money into that form, where it is not necessary as a result of these changes to be disclosed anyway now that non-disclosure has been introduced, people would be able to avoid normal interest on income tax quite apart from and above being at, say, 58 per cent rather than 35 per cent, the amount that would fall during the normal course.
Deputy O'Kennedy made a case about the GAA and other organisations and inferred that this was a new and difficult problem for these organisations. I do not deny that the tax causes problems, but this is not entirely a new proposal. After all, GAA clubs or any individual who had money deposited with a building society have had DIRT levelled on them for years——
Mr. J. Bruton: —— which was not the subject of any scheme of refunds for those over 65 or of any exemption in the case of charities. Now admittedly this tax is at 35 per cent and applies to a wider range of institutions, but to infer that it is totally different would not be correct.
Deputy O'Kennedy made another interesting point about parish funds which he pointed out may be used partly for promotion of religion, education and  relief of poverty but some of the other activities undertaken with parish funds, while worthy and benevolent activities, would not come within the definition of charities in the normal course of events. It is possible for organisations like that to open a separate account to deal specifically with purposes which come under the definition of charity. Therefore, they would not be paying any tax on the money whose interest is used for charitable purposes. I strongly advise any parish fund manager who is worried about the matter to look at this possibility and I shall naturally be happy to help them in an advisory capacity to achieve that result.
Sporting organisations, especially those with substantial sums of money, should look at the other saving instruments available such as savings certificates and the possibility of investing in Government gilts. Where there is a substantial sum of money which has been accumulated gradually and is not being called upon on a weekly basis for withdrawals, the longer term financial instruments to which I referred would be quite suitable for at least some of the purposes. It would be wise for the organisations concerned to look into the possibilities in this regard. I do not want to go into the whole matter. Deputy O'Kennedy made a Second Stage speech and I do not wish to repeat my Second Stage reply.
Mr. Lyons: I support the points made by Deputy O'Kennedy which centred around four principal issues. He mentioned the proposed tax on children's savings. Parents and teachers always encourage children to save, and having succeeded in getting children to do so, this proposal means that children will now be taxed. It is no wonder that many  people have no confidence in public representatives when the Government introduce this form of taxation. It adds insult to injury when one considers that over the past two years we encouraged people who kept their money in biscuit boxes or under the mattress to put it in financial institutions to avoid the risk of attacks. Is it any wonder that there is a lack of respect for public representatives by these people having been encouraged by us to lodge their money? The Minister said that even those who are not liable for tax will be taxed and they will have to go through the whole process of applying for a refund. This bankrupt Government will have the benefit of money which does not belong to them.
My colleague, Deputy O'Kennedy, has outlined eloquently and adequately the elements of the section and there is no need for me to be repetitive. Deputy Hilliard mentioned those over 60 years of age who are liable for tax and even where one spouse is over 60 years of age, the tax will still be taken from them and they will have to apply to get it back. What about those under 60 years of age? I quoted a case on Second Stage and I will repeat it now. The only source of income of the family to whom I referred comes from interest on a sum lodged in the bank from the sale of a business because the husband is suffering from a heart ailment. It is amazing that he recovered from the shock of learning that 35 per cent will be deducted in tax from this income. They do not seem to be entitled to anything although they have three children attending school.
I wish to put further emphasis on sporting organisations, in particular Cumann Lúthchleas Gael, who served this country well in their 101 years, not just in the sporting arena but in their development of a spirit of nationalism, Irishness and of people doing something for themselves, which is the hallmark of the GAA. It took a Coalition Government to penalise them for their century of activity for the people. That organisation struggled for many years under oppression by another  regime outside the country but they overcame it. It takes a native Government to punish them for their efforts.
The Government even acknowledged the fact that in 1927 the work of the association was the prime factor in the GAA being exempted from taxation in the Finance Act of that year. To his credit Earnán de Blaghd recognised that and exempted the GAA from taxation. The Finance Act, 1932, and the Income Tax Act, 1967, acknowledged and recognised the input of the GAA and also exempted them from taxation. The Minister said that some organisations have substantial sums of money.
Mr. J. Bruton: I said that if they have substantial sums of money, and I was not saying that any particular organisation had substantial sums of money. I was not making any comment about the financial standing of any organisation.
Mr. Lyons: If the Minister can legislate in that hypothetical manner to cover an organisation such as the GAA, we will be satisfied; but his reference to organisations having substantial sums certainly does not apply to the GAA.
Mr. Lyons: I should like to tell the Minister, in case he and other members of the Government do not know, what the GAA means to people, the efforts they have to make to collect money and the work they do in local areas. The Minister must be aware that all units of CLCG, at club, county, provincial and national level put surplus finances on short-term deposit to try to earn some income to meet demands throughout the year. Clubs acquire playing pitches, build dressing rooms and erect social centres with money obtained from various fund-raising efforts and interest earned on short-term deposits.
 There should not be any need to elaborate on that point. It is well known that money collected by GAA clubs and boards is put on short-term deposit and earns a few pounds in interest. Every junior club in the country is aware of that. Money earned in that way helps provide facilities for our young people. Those involved in GAA clubs leave surplus funds in banks in the hope that it will earn some interest while they continue with their fund-raising efforts to buy a pitch or erect a dressing room. Would the Minister prefer if our young people had to tog out at the ditches as players had to do for many years until the association developed? I may be sectional in the way I am making this case but the members of other organisations can make their case. The position of the GAA was recognised in Finance Acts introduced in 1927, 1932 and 1967. But in 1986 this penniless, pauperised Government want to put an end to the progress of Cumann Lúthchleas Gael by taxing its short term investments in financial institutions. The GAA provide community centres and other facilities in parishes where Government agencies have failed.
I appeal to the Minister to make provision for organisations like the GAA. He should recognise the work they have done, are doing and, hopefully, will be able to continue to do. If the Minister allows the DIRT tax to remain, it will seriously damage the efforts of sporting organisations to provide facilities for their members. There is a lot of talk these days about the extra leisure time many people have. Some people, the unemployed, would prefer if they did not have that leisure time. The Minister should give serious consideration to the proposal to tax sporting organisations. We cannot have statements of concern by the Minister responsible for sport, and others, about leisure time and how it should be used while at the same time the Government introduce legislation that will be detrimental to the efforts to provide facilities for those who have leisure time.
Mr. O'Malley: I should like to refer to the principle of this tax, which seems to be very dubious, and to those who will have to pay it. The figures I propose to give are not mine or those of any economist. They are figures given by the Minister for Finance on 4 April in a press release when he circulated the Finance Bill. In the course of that statement he said that representations had been made to him to exempt from liability for this form of income tax people who were not liable for income tax. The Minister said he had considered those representations but he could not accede to them because, if he did, 60 per cent of the yield of the tax would be lost. I should like to draw the attention of the House to that remark. That is a statement by the Minister for Finance that 60 per cent of the tax that will be collected under this and the succeeding sections will be collected from people who are not liable for income tax. Therefore, that represents a major new imposition of tax. It is not a major imposition on people who potentially might be able to bear it but a major imposition of tax on people who through their circumstances have incomes that are so low that they are not liable for income tax at the moment. We all know that one has to have an exceptionally low income here not to be liable for income tax.
The Minister told us that the yield in a full year will be between £120 million and £130 million and 60 per cent of that, according to the Minister's statement, will be paid by people whose incomes are so low that they are not liable for income tax. I cannot conceive of anything that is not more of a vicious imposition on the very poorest sectors in our community than that. Socially and economically it is grossly unfair and, inevitably, must cause severe hardship and difficulty for very weak and poor people. There are some people who are able to make their case in relation to this; but the very poor, those who will be worst hit by this, are not able to do so. Members on all sides will have to bear that in mind. I did not dream up the figure of 60 per cent. The figure was given by the Minister for Finance.
Mr. O'Malley: Taking £60 million in 1987 from people whose incomes are so low they are not liable to any income tax is nothing but gross inequity and it is only clouding the issue to bring in farmers or anybody else. That simple fact should be looked at on its own. It is indefensible, should not be proceeded with and this House should seek to reject it as rapidly as possible.
For example, the GAA have been exempt from tax since the foundation of the State. They now find themselves subject to this tax. I was interested in the Minister's reply on this point when he told the GAA, other sporting organisations and people like that, to put their money in gilts. If one takes a small GAA club in some remote part of the country, I do not think they would even know what gilts were——
Mr. O'Malley: To tell a small GAA club in some remote part of the country to take out of the bank the £500 or £1,000 they had accumulated over the last few months and invest it in gilts seems to me to be really a bit of a joke or, as the Minister recommended, to put it in savings certificates. This is short term money. Savings certificates have a life of five, seven years, or whatever and, if one does not leave the money in for the full period, one does not get the full benefit of the interest. Savings certificates were never intended as a vehicle for short term funds of that kind.
For example, if a sporting body, a community or parochial body are collecting funds to build a pavilion, church, school or whatever, wanting to accumulate funds over a period of a year, two, or whatever, until the building can begin, certainly they will not be in a position to leave the money there for five or seven years. To give them that sort of advice flippantly in the House, saying that we recognise this is a problem but this is the way out of it, telling some club down the country with, say, £1,000 to go off and put it in gilts, is really not very useful advice.
This whole thing will have to be rethought because clearly it is inappropriate and inequitable. Above all, it is inequitable to people on very small incomes but, in the nature of things, they are the very people who are not able to complain, who can do nothing about it. If this tax is retained it should be simply on the basis that anyone who is not liable to income tax should not be liable to this form of income tax. It is worth drawing the attention of the House to the heading of Chapter IV — Interest Payments by Certain Deposit Takers. It was called in the budget a tax on financial institutions. Of course, it is not at all; it is simply a tax on people with very small incomes who deposit their funds in a financial institution.
As I am sure the Minister has been reminded before now, it is not much more than a year ago that his predecessor and various other members of this Government were advising people to put their  money in banks, telling them how safe it was, that they would not be penalised for so doing, that they were not to keep money at home, not to have cash, but to put it in the banks where it would be safe. Here we have this most iniquitous form of income tax now being imposed. Perhaps the Minister would tell me, when replying: is there any other country in Europe that imposes income tax on people whose incomes are literally negligible, perhaps a few hundred pounds a year? Is there any country in Europe that imposes tax in those circumstances? I believe there is not, that it is grossly unfair and simply should not be tolerated.
Mr. Yates: Perhaps I might start with a facetious point. Sometimes I think, for the debate on the Finance Bill, we should provide Opposition Deputies with boxes of Kleenex tissues for the very profound cases they make.
Mr. Yates: I welcome the principle of the deposit interest retention tax because it has been very wrong that some financial institutions have been treated differently from others, leading to a basic inequity in the financial system.
In relation to some of the points the Opposition made, while there was accuracy in what they said, certainly there is not precedent involved in this tax. If we are talking about the taxation of people's incomes we must remember that all notional taxes do not take account of people's tax-free allowances; whether someone pays value-added tax on any product or commodity does not take into account whether or not that person has a tax-free allowance. Equally whether people pay a farm tax bill does not take into account whether or not they have a tax-free allowance. It is the same principle with all notional taxes. While I am not arguing that two wrongs make a right, it is not a new departure to have a notional tax because our tax system — ranging from customs and excise duties to all indirect spending, through valued-added tax and many other notional forms of tax — take account of tax-free allowances. That point has been lost by the Opposition.
Mr. Yates: I think it was Deputy O'Malley and Deputy Lyons who said the GAA have been exempt from taxation. Certainly in my constituency hurley sticks and the premises of GAA clubs are both liable to value-added tax and to rates.
Mr. Yates: I should like to seek clarification from the Minister on some points. I was most alarmed to note that some building societies decided, when this was announced, that they would saddle its cost on mortgage account holders. I am glad the Minister intervened in this respect. However, I should like some clarification vis-à-vis some building societies because there are very few regulations preventing them doing what they like in many areas. I should like confirmation that mortgage account holders will not be hit by the provisions of this measure.
I should also like clarification in relation to the position of credit unions. I notice they are not specified on page 36 of the original Bill as are the Post Office Savings Bank, the Industrial Credit Corporation, the Agricultural Credit Corporation, the Trustee Savings Bank and building societies. I am very interested in the position with regard to credit unions. I think we shall see an increase in their importance, not only in the establishment of very small businesses but also as a means of keeping people away from moneylenders. While deposits within credit unions are exempt the deposits of  credit unions in banks must be considered. In other words, apart from the 1 per cent per month they have on outstanding loans they get from their shareholders, it is well known that friendly societies and credit unions put money into banks and invest it. This means their whole financial structure could be upset if they were liable to this tax. I should like clarification on their position from the Minister.
Indeed I would encourage the Minister to go further, through the vehicle, not of Government gilts — which as Deputy O'Malley rightly said are remote from ordinary people and which have proved to be a very lucrative haven for substantial savings at the expense of the productive sector of our economy — but through the Post Office, through the Trustee Savings Bank. There must be a simple way of giving an annual return, as opposed to five or six year returns. If short term savings certificates could be introduced it would be of great benefit to many people under the existing exemption.
The Minister said in his last intervention that non-disclosure would be applicable to everybody. My understanding was that that would not necessarily be the case if they were liable to tax over 35 per cent. Perhaps the Minister would clarify that point also.
Also in relation to incapacitated persons, many different criteria are applied within the Department of Social Welfare. Can we take it that a doctor's letter would suffice or will a particular test be applied? Does a person have to be in a wheelchair, does one have to be permanently incapacitated, or what would be the criterion applied? Some institutions, such as the Trustee Savings Bank, have been lobbying very strongly for the introduction of the retention tax and it will bring equity within the financial system. Leaving aside the points on which I need clarification, however, it is hard to justify. I have no difficulty in supporting the Government in the overall context, but feel that there is inequity for some one not liable for income tax who is not incapacitated and not over 65 years of age.  As I said on Second Stage, it is unfair and I would favour some modification in that area. At the same time, the overall retention tax with its effect on the financial services sector is positive and must be welcomed.
Mr. N. Treacy: I rise to support the total opposition of my party and the case put forward by our spokesperson for Finance, Deputy O'Kennedy, against section 27. It is totally discriminatory and unfair and will destroy the economic and financial base of the country. With the introduction of the direct interest tax, a massive amount of funds has moved across the Border into Northern Ireland, or out of the country into the Isle of Man, Nova Scotia and other places. This will have serious consequences on the economic fabric of the country. I ask the Minister to reconsider the case. It is unfair and inequitable on old age pensioners, on young children who have savings and on many institutions.
I cannot understand a Minister for Finance who has served in Government for a long number of years saying that people can make an application for a refund of tax. This is a cumbersome, bureaucratic, crazy system. What will be the administrative cost for the Exchequer? What about the local authorities who are already under financed? The local authority services are already crumbling and the authorities are being asked to make their contribution. What about voluntary charitable and sporting organisations? I concur with the outstanding case made here by Deputies on behalf of voluntary and charitable organisations and particularly on behalf of Cumann Lúthchleas Gael — the Gaelic Athletic Association. They are in a very serious financial position. In 1986, due to the high cost of insurance cover and the high risk involved in sport, they cannot get insurance cover from any Irish company. They are faced with having to provide a national accident scheme which they intended to fund — and have funded in the past — from contributions and levies on the various gates taken at matches throughout the country. Above all, they wanted to create a fund  of £1 million from savings and interest accruing on deposits which they have placed in various financial institutions, particularly the banks. Most of the GAA financing is short term investment, having funds on short term deposit. This proposal will erode that finance and deprive the players and members of the Gaelic Athletic Association, numbering one million people, of an accident scheme to protect them. Voluntary charitable and sporting organisations are investing and creating funds to provide facilities which the State should be providing. They are doing this in a voluntary capacity and they are now to be deprived of that opportunity.
What about the job losses that will result from this tax? Moneys accruing on deposit and interest have often cushioned and safeguarded many jobs in the voluntary and social sector. These jobs are now at risk. There is a danger that many charitable and voluntary organisations will have to let go some of their permanent staff. We should be giving people leadership to create savings, to be thrifty, to save and invest in order to provide their own homes. We will now put extra pressure on the State to provide more houses and more finance for housing. There will be terrible social consequences as a result of this tax. The Minister has talked about invasion of old age pensioners' accounts if these people are to be exempted. Nobody will interfere with the savings of old age pensioners, relations, or otherwise. Nobody will put money into the accounts of such people. For a Minister for Finance to talk in those terms in modern times is absolutely ludicrous.
Deputy Gay Mitchell talked about the contribution from farmers. He fails to recognise that farmers today owe £1,500 million to financial institutions. He also fails to recognise that farmers are the biggest contributors in indirect taxation of any consumer group. That has not been recognised generally. I ask the Minister to reconsider the matter and completely remove this section from the Finance Bill.
Mr. McLoughlin: I want to ask the Minister a simple question, and I am not embarrassing him by it because he inherited this Finance Bill, which is a Cabinet Bill. I welcome most aspects of the Bill, but I want to highlight a very serious problem particularly in this section. I know numerous small business people who sold businesses, in one case because his child went blind. The sale was for £45,000. Such a person would get £5,353 a year interest from Bank of Ireland Finance because he invested the money from the sale of the property in that institution. He would be allowed £5,000 tax free a year, which meant that he should pay income tax on only £353, leaving him to pay £127 income tax a year. Because of this new tax, £1,874 will be stopped from him. That is not fair. Something will have to be done to help such people. In my personal view, groups such as the GAA in particular and voluntary organisations who are providing a good service for young people, should be exempt. Let us take the cities of Dublin and Cork, for example.
Mr. McLoughlin: In some small clubs there are between 700 and 800 young people taking part in GAA youth sport and this is preventing eruption of violence and is helping the community greatly. I would like consideration to be given to exempting the GAA and voluntary bodies.
Mr. McLoughlin: What worries me most, as a Labour backbencher from the same constituency as the Minister, is that people in small business who, perhaps through robbery and violence and deaths in the family, have to sell their businesses and only have the sale price in the bank  are not wealthy people. They will be paying this new tax and it is grossly unfair and unjust.
Mr. O'Kennedy: Could the Minister reconcile two different figures, to one of which Deputy O'Malley has already referred? The first was given on 4 April 1986, when the Minister, introducing this Bill, said that to exempt all non-liable persons would probably have reduced the yield in 1987 by £60 million. In reply to a question from me, submitted on Wednesday, 30 April, the Minister said that with regard to exempting non-liable persons some £25 million to £40 million could be in respect of these. Would the Minister indicate which figure is correct — the £60 million or the £25 million to £40 million indicated a few weeks later?  Clearly, the Minister has no idea what this will bring in.
Question put: “That the amendments set down by the Minister for Finance to Chapters IV to VIII, inclusive, of Part 1 of the Bill and not disposed of are hereby made to the Bill and that in respect of each of the sections undisposed of in the said Chapters the section or, as appropriate, the section, as amended, is hereby agreed to”.
Birmingham, George Martin.
Conlon, John F.
Cosgrave, Liam T.
Cosgrave, Michael Joe.
Deasy, Martin Austin.
Dowling, Dick. Noonan, Michael.
Durkan, Bernard J.
Enright, Thomas W.
Farrelly, John V.
Flanagan, Oliver J.
Harte, Patrick D.
Nealon, Ted. Ryan, John.
Sheehan, Patrick Joseph.
Burke, Raphael P.
Coughlan, Cathal Seán.
De Rossa, Proinsias.
Fitzgerald, Liam Joseph.
Gallagher, Pat Cope.
Haughey, Charles J.
Mac Giolla, Tomás.
Noonan, Michael J. (Limerick West)
O'Malley, Desmond J.
Wilson, John P.
Question declared carried.
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