Private Members' Business. - Finance Bill, 1990: Report Stage (Resumed).

Wednesday, 23 May 1990

Dáil Éireann Debate
Vol. 399 No. 1

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Mr. Garland: Information on Roger T. Garland  Zoom on Roger T. Garland  I move amendment No. 26:

In page 19, between lines 18 and 19, to insert the following:

“12.—An individual who makes, in the manner prescribed by the Income Tax Act, 1967 a claim in that behalf and makes a return in the prescribed form of his total income shall, for the purposes of ascertaining the amount of his assessable income for the purposes of income tax, be allowed a deduction from the amount of his earned income as estimated in accordance with this Act of a sum equal to one-fourth of that income, but not exceeding, in the case of any individual, the sum of £1,500.”.

In introducting this amendment I am seeking to put back on the Statute Book earned income relief which was abolished about 15 years ago as part of the so-called tax reform. The words “tax reform” are used very loosely in the House when often what is meant is tax reduction or tax changes. The implication that there is any new thinking involved in this so-called reform is a joke. This tax was introduced supposedly to simplify the income tax code. To an extent, it certainly did simplify the income tax code in that it reduced a very simple and easily calculated relief which was given on earned income — that is income from salaries, wages, business profits, professional earnings and so on. It was a very simple relief to calculate and it differentiated between earned income on the one hand and unearned income on the other. For the life of me, I could never see the logic of this being abolished. Surely we should be differentiating in favour of earned income and discriminating against unearned income from rent, interest and so on. The difficulty with this amendment is that it must be taken in conjunction with the rest of my amendments but that cannot be because it must stand on its own. For example, I was proposing the abolition of the PAYE and PRSI allowances. If these allowances were eliminated this would go a very long way towards paying the cost of the earned income relief.

The great advantage of the earned income relief is that it removes the differentiation between wages and salaries on the one hand and business profits and professional earnings on the other. We have had an adequate debate on this matter already. In view of the current year basis of assessment there is no longer any reason for differentiation between these two types of income. I listened to the Minister's explanation for his reasons for keeping up this differentiation but I was not impressed with the reasons he put forward. It is obviously too late to do anything in this budget but I would ask the Minister to look again at this whole question of the PAYE allowance, the PRSI allowance and the earned income relief. We would move on to a much better system if this amendment were adopted.

Minister for Finance (Mr. A. Reynolds): Information on Albert Reynolds  Zoom on Albert Reynolds  This amendment by Deputy Garland proposes the introduction of a deduction equal to one-quarter of earned income subject to a maximum deduction of £1,500. Earned income relief formerly existed in the income tax code and was provided for by section 134 of the Income Tax Act, 1967. Broadly, it consisted of a deduction in respect of one-quarter of [249] earned income subject to a maximum deduction of £500.

The distinction between earned and unearned income was abolished in the Finance Act, 1974 which introduced a new, unified system of personal income taxation and abolished surtax. Earned income relief in consequence disappeared under the new scheme. To compensate taxpayers for the abolition of the relief, substantial increases in personal allowances were granted. For example, the allowance for a married person went up from £474 in 1973-74, the last year of the old system, to £800 in 1974-75. These allowances have, of course, been greatly increased in the intervening years, so that now, for example, the married personal allowance is £4,100.

Given that earned income relief as a concept no longer exists and its removal was compensated for by increased personal allowances as I have just outlined, the introduction of relief based on that concept would, in our view, be totally inappropriate at this stage.

Deputy Garland asked me to look at the question of allowances in the preparation for next year. I am quite prepared to do that but I cannot accept this amendment.

An Ceann Comhairle: Information on Seán Treacy  Zoom on Seán Treacy  What is the position with regard to the amendment?

Mr. Garland: Information on Roger T. Garland  Zoom on Roger T. Garland  I would like to reply briefly to the Minister. I agree that the allowances need to be looked at and, of course, he is quite right in saying that at the time earned income relief was abolished there were substantial increases in personal allowances. However, I still seek a problem there and I ask him to look at it. I withdraw the amendment.

Amendment, by leave, withdrawn.

Mr. Garland: Information on Roger T. Garland  Zoom on Roger T. Garland  I move amendment No. 27:

In page 19, between lines 18 and 19, to insert the following:

“12.—Sections 13 to 21 inclusive of [250] the Finance Act, 1987 are hereby repealed.”.

The sections sought to be repealed deal with withholding tax on professional fees and other sums paid by the Government to professional people. This was ill-conceived legislation brought in partly as a way of doing something to reduce the substantial budget deficit the Government had to face in 1987. This tax has always been very unfair. It impinges particularly on doctors who are involved in the medical card scheme. Many of these doctors practice in an area where most of their income is derived from medical card holders. One of the great defects of the scheme is that it is based on gross earnings rather than net earnings.

I am sure all Deputies here will appreciate that, particularly in a rural practice, a doctor's expenses are very considerable. Apart from his surgery expenses he has substantial travel expenses. All in all, this was a very badly thought out scheme. A number of spurious arguments were brought out at the time it was introduced. It was said doctors were over-paid. That may be, but if they are over-paid the answer is to deal with that in a direct fashion, not to get at them indirectly through draconian and unjust sections in a Finance Bill. It is said also that doctors evade tax. I am sure some doctors evade tax, but the vast majority of doctors do not. If doctors are evading tax there are laws and collection methods to deal with that. An unfair measure like this should not be introduced as an excuse because some doctors evade their tax.

Whatever vestige of reason there was for this legislation it has now disappeared because of our adopting the current year basis of assessment. Doctors, like everybody else, will now have to pay their tax on 1 November on their current year's earnings. This is another differentiation. We are introducing another category of people. We have employees and wage earners on one hand, business people on another and now we have a third category who are discriminated against more than anybody else, that is people who earn the bulk of their money from payments from [251] Government Departments. I do not know what possible excuse the Minister can have for keeping this provision. I hope, even at this late stage, he will consider accepting this amendment.

Mr. Noonan: Information on Michael Noonan  Zoom on Michael Noonan  (Limerick East): I do not know what the cost of Deputy Garland's amendment would be, but I presume the Minister will inform us of that. Withholding tax operates very unfairly in a number of respects. If the Minister is not in a position to do it tonight, I would like him in advance of next year's Finance Bill to take a couple of items on board. At present for doctors who employ a receptionist, or a locum, or a nurse, when their expenses are being rebated to them, withholding tax is deducted from the expenses. Therefore, where the doctor pays a receptionist he deducts PAYE and PRSI and that is advanced to the Revenue Commissioners and he is getting the cheque to rebate him for the expenses. Withholding tax is deducted. That is extraordinarily unfair and I would like the Minister to move to amend that.

I have an amendment down to section 24 which deals with withholding tax also. I agree with Deputy Garland. Now that all Schedule D taxpayers are going to be taxed on a current year basis, the Minister should also agree that the credit for withholding tax should be on a current year basis. Under the scheme at present the tax is deducted at the standard rate when the fee is paid and it is set off as a credit against the individual's tax liability. Under the preceding year basis of assessment which existed until this year the credit was in the year of assessment in which the fees were assessed, that is the following year, and the credit was for the withholding tax deducted in the basis period. In section 24 the Minister is changing the concept of the basis period to a credit period and, even though tax will be deducted on a current year basis, the offset can only take place as a year in retrospect. That was very unfair. If Class 2 Schedule D people are still to be taxed on a withholding tax basis this concept of the credit period being introduced in [252] section 24, which means they will have to wait 12 months before they can put their credit up, is blatantly unfair.

Mr. A. Reynolds: Information on Albert Reynolds  Zoom on Albert Reynolds  The immediate effect of this amendment, if passed, would be to freeze all withholding tax now in hands for all time; credit could not be given for withholding tax deducted last year nor could interim refunds be made from now on. I am sure this is not what the Deputy had in mind when drafting this amendment.

However, even if the amendment was remedied to cure this defect by allowing credit and interim refunds in respect of tax deducted up to now, it would have a very critical effect on the budget arithmetic. It would reduce the tax yield for the year 1990 by £23 million. It is easy for anybody to write out amendments: one would cost £23 million and the one before this, would cost £475 million. Let us not run away with ourselves in relation to where all this money is to be found. Furthermore, the anti-evasion element in the withholding tax scheme would be damaged. It is well recognised, and in fact it has been advocated by the Commission on Taxation, that withholding tax schemes are a very effective means of curbing evasion of tax through the non-declaration of receipts. In those circumstances I must reject the amendment.

Regarding the operation of the existing withholding tax scheme, interim refunds are paid when the amount of withholding tax deducted exceeds the tax liability on the income of the previous accounting period. In calculating the amount of any interim refund an amount of withholding tax equal to this liability is retained and any excess over that amount is repaid. Thus the tax actually retained for credit later against income tax liability of the year of assessment is determined by reference to the taxable income rather than the turnover. Taxable income would, of course, reflect all allowable deductions in respect of trading expenses, not just payments made to a secretary, locum or receptionist but also travelling expenses, heating, lighting, etc., as well as general tax reliefs, such as personal allowances, [253] retirement annuities, life assurance, etc. The existing procedure takes into account the items mentioned and I am not convinced of the necessity for this amendment.

It would not be possible to confine the amendment to medical practitioners since other professionals would in equity have to be covered. While it is impossible to be precise, it would reduce the withholding tax yield. From an administrative point of view I would also point out that the level of expenses incurred by individuals within a particular profession and among the professions generally varies so much that to determine some artificial standard would not result in greater equity. The differences which exist are best resolved by applying the withholding tax to the full amount of all payments and where necessary making interim refunds by reference to actual tax liabilities and therefore to incomes net of expenses in individual cases.

The movement to current year basis does not really change anything as far as the withholding tax on professional people is concerned. It provides that the various elements of the withholding tax system will impact on the taxpayer in precisely the same way as heretofore. Tax will continue to be deducted at the standard rate and interim refunds will continue as before, with the same qualifying conditions and without any change in the timing of these refunds. Credit for tax not refunded as an interim refund is given as heretofore against the liability for the year of assessment or in the accounting period in which the deductions were made. Special commencement and cessation arrangements continue to apply. The hardship safety net applies as before.

Mr. Garland: Information on Roger T. Garland  Zoom on Roger T. Garland  I am amazed at the Minister's reply. I accept that there could be transitional problems if we wanted to abolish this tax. That is a technical matter which could easily be put right.

Mr. A. Reynolds: Information on Albert Reynolds  Zoom on Albert Reynolds  It is a very important matter which could not easily be put right.

[254]Mr. Garland: Information on Roger T. Garland  Zoom on Roger T. Garland  The Minister has plenty of staff to deal with these things. I have not the staff to deal with them. It is quite an admission by the Minister that it would cost something like £34 million.

Mr. A. Reynolds: Information on Albert Reynolds  Zoom on Albert Reynolds  All these millions add up.

Mr. Garland: Information on Roger T. Garland  Zoom on Roger T. Garland  The Minister is saying that on a current year tax basis all taxpayers are paying in the current year, including those in receipt of income subject to withholding tax. He is saying that it would cost the taxpayer £34 million. These people are not only paying tax on a current year basis but are probably paying about one year in advance. They are paying now in respect of next year's earnings. That is obviously the case. If doctors and other professional people are now paying on a current year basis they will be paying approximately what they will be paying with the withholding tax. Obviously the Minister is collecting next year's withholding tax this year. That is outrageous.

Regarding tax evasion, what the Minister says is a total non sequitur. A withholding tax is one way of dealing with tax evasion but if the Government Departments who pay money to doctors or other professional people make a return to the Revenue Commissioners of the amount payable to these professionals, that would be just as good from a tax evasion viewpoint. If doctor A in Donegal is in receipt of £35,000 from the Department of Health in a particular tax year, it is quite irrelevant from the point of view of evasion whether that money is deducted at source as at present or whether the Revenue Commissioners are advised by the Department of Health that that sum of money has been paid to a particular doctor. The real reason is that the Government were strapped for cash in 1987 and they picked a soft target to milk for money.

Amendment, by leave, withdrawn.

Mr. Ferris: Information on Michael Ferris  Zoom on Michael Ferris  I move amendment No. 28:

[255] In page 20, line 13, after “effect.” to insert “Spouses and children of persons, including farmers, whose basis of assessment has been changed by the provisions of this section and where they are employed by such persons, may claim a personal tax free allowance of £800 and PRSI allowance of £286, where they pay the full rate of PRSI applicable to case I and II Schedule D taxpayers.”.

We discussed on Committee Stage the possibility of dealing with some of the anomolies. This amendment is to clarify the Labour Party attempt to bring equity into allowances for PAYE and PRSI payers. There is discrimination against spouses and children, sons or daughters of employers in respect of tax free allowances. It is anti-family to have a provision in the taxation code which discriminates against family employment. If the spouse or children were literally to walk across the road and work for somebody else they would be given these allowances if they paid income tax and PRSI. It is beyond comprehension that up to now these people have been excluded from the proper rate of tax free allowance. On a farm a husband and wife will each have a £2,000 tax free allowance but they will not have the benefit of the additional PAYE allowance. We are suggesting that where there is genuine employment of either the spouse or children they should have the tax free allowance and the PRSI allowance. We see no reason for excluding them. The Minister might explain why family employment is discriminated against in this regard. It is almost an incentive to the children of the employer to emigrate or to work for somebody else. It discriminates against the possibility of continuing a family business. The benefit would be less than £300 per annum. Perhaps the Minister can tell us the number of spouses or children of employers who are without this allowance at the moment, the cost of treating them the same as everybody else and why they were excluded in the past.

[256] The ICMSA submission dealt specifically with this unfair aspect of the taxation system as it applies to this category. In particular, we were worried about the need to treat spouses and children equally, as the Constitution says we should treat them. However, this category is totally discriminated against in the area of taxation. I hope other Members will support our amendment and that the Minister will accept it. Not alone would we be grateful for this but many family employers would also be grateful.

Mr. A. Reynolds: Information on Albert Reynolds  Zoom on Albert Reynolds  The purpose of this amendment is to extend the PAYE allowance and PRSI allowance to the spouses and children of self-employed taxpayers, who are now being placed on the current year basis, where the taxpayers employ those spouses or children. Deputy Noonan had a similar amendment down earlier today. I do not want to labour the arguments but I will repeat them for the benefit of Deputy Ferris.

The amendment, in so far as it relates to the PAYE allowance, is similar although narrower in focus to the amendment put down by Deputy Noonan on Committee Stage. The arguments I used in relation to that amendment are equally applicable here. This has been the position for the past ten years. This question has been raised on many occasions and the situation has been more or less the same.

As I have said, the PAYE allowance is and always has been viewed as an allowance for ordinary employed taxpayers. The primary reason for its introduction was to improve the tax progression for these ordinary PAYE taxpayers. Spouses of the self-employed are excluded from the PAYE allowance to avoid repetition of the abuses of the working wife's allowance.

When that allowance existed, self-employed taxpayers frequently set up nominal employments for their wives, adequate to attract the full measure of the allowance without incurring any extra tax. It was very difficult for the Revenue Commissioners to question a wife's entitlement to this allowance because the [257] husband invariably produced evidence to prove that she was entitled to it.

Children of the self-employed are excluded from the PAYE allowance because over the years the experience has been that if a tax advantage can be gained by creating artificial income or employment for children then that opportunity will be taken. Moreover, the wages of many people who carry out duties in their parents' business or, indeed, their spouse's business are often not subject to the proper operation of PAYE. In such cases, there would appear to be no justification for granting the PAYE allowance.

The cost of extending the PAYE allowance on the basis proposed in the amendment would be about £17 million in 1990 and about £24 million in a full year. Deputy Taylor's amendment also proposes that the PRSI allowance be extended to the spouses and children of self-employed taxpayers in certain circumstances. Among these circumstances is the condition that the spouses or children be employed by the taxpayers concerned. I would point out that where the employment involved is insurable employment and the employees pay PRSI contributions at the appropriate rates for which the PRSI allowance is due under the existing legislation, they would qualify for the allowance. In such instances, the proposal to grant the PRSI allowance is unnecessary. Consequently, I will be opposing the amendment. The number of spouses and children of self-employed people is 84,000.

Mr. Garland: Information on Roger T. Garland  Zoom on Roger T. Garland  This debate is becoming a bit fragmented. It is a pity we did not take amendments Nos. 21 and 28 together. This would have saved a bit of bother as we are only rehashing the arguments we have already made.

I did not put down any amendment to this section because I would prefer to go down the road of unearned income relief, to which I have already referred. This relief would be a substitute for PAYE and PRSI allowances. However, as we have not gone down that road, we have [258] to go down the correct road of extending to all self-employed people, whether farmers, professionals or business people, the benefit of the PAYE and PRSI allowance. I hope Deputy Taylor will press his amendment.

Mr. Ferris: Information on Michael Ferris  Zoom on Michael Ferris  I was disappointed at the Minister's response. The Minister had a problem about extending this tax facility to this category and he referred to ordinary taxpayers. Our amendment was absolutely specific; we regard the spouses and children of self-employed taxpayers to be ordinary taxpayers in the tax net and naturally we want them to be treated the same as all other taxpayers. It was for that very reason our amendment was so specific.

This amendment is not exactly the same as similarly worded amendments because this amendment is confined specifically to people who are employed and paying tax and PRSI. Our amendment does not propose extending those rights to employers who are already self-assessed or included in this year's assessment. They are not in any way included in this amendment. Perhaps the Minister's earlier response identified this anomaly and said why it would be impractical to extend the PAYE type allowances to an employer — the Minister put forward some valid points — but this amendment specifically deals with employed people, be they the spouses or children of an employer and I do not understand why they should be treated separately.

These people are being discriminated against and I was surprised at the inference that this type of allowance could in some way lead to falsification of tax returns or that people could use them to gain benefits. A person is either working for somebody, gainfully employed, in the tax code and registered with a PRSI number or they are not. Our amendment specifically states that people must be in that category, so there would be no question of any abuse of the system. We will have to push our amendment because there will be inequity in the tax system if [259] some categories of taxpayers are treated differently to others, particularly those [260] who work and are prepared to pay PRSI and PAYE.

Amendment put.

Ahearn, Therese.
Allen, Bernard.
Barrett, Seán.
Bell, Michael.
Belton, Louis J.
Boylan, Andrew.
Browne, John (Carlow-Kilkenny).
Bruton, John.
Bruton, Richard.
Connaughton, Paul.
Connor, John.
Cosgrave, Michael Joe.
Cotter, Bill.
Creed, Michael.
Currie, Austin.
D'Arcy, Michael.
Deasy, Austin.
Deenihan, Jimmy.
Doyle, Joe.
Durkan, Bernard.
Farrelly, John V.
Fennell, Nuala.
Ferris, Michael.
Finucane, Michael.
Flanagan, Charles.
Garland, Roger.
Harte, Paddy.
Higgins, Jim.
Higgins, Michael D.
Hogan, Philip.
Kavanagh, Liam.
Kemmy, Jim.
Kenny, Enda.
Lee, Pat.
Lowry, Michael.
McGahon, Brendan.
McGinley, Dinny.
McGrath, Paul.
Mitchell, Gay.
Mitchell, Jim.
Nealon, Ted.
Noonan, Michael.
(Limerick East).
O'Brien, Fergus.
O'Shea, Brian.
O'Sullivan, Gerry.
O'Sullivan, Toddy.
Owen, Nora.
Pattison, Séamus.
Reynolds, Albert.
Ryan, Seán.
Sheehan, Patrick J.
Spring, Dick.
Stagg, Emmet.
Taylor, Mervyn.
Timmins, Godfrey.
Yates, Ivan.

Ahern, Bertie.
Ahern, Dermot.
Ahern, Michael.
Andrews, David.
Aylward, Liam.
Barrett, Michael.
Brady, Gerard.
Brady, Vincent.
Brennan, Mattie.
Browne, John (Wexford).
Burke, Raphael P.
Calleary, Seán.
Callely, Ivor.
Clohessy, Peadar.
Connolly, Ger.
Coughlan, Mary Theresa.
Cowen, Brian.
Cullimore, Séamus.
Daly, Brendan.
Davern, Noel.
Dempsey, Noel.
Dennehy, John.
de Valera, Síle.
Ellis, John. [261]Morley, P.J.
Nolan, M.J.
O'Connell, John.
O'Dea, Willie.
O'Donoghue, John.
O'Keeffe, Ned.
O'Leary, John.
O'Rourke, Mary.
O'Toole, Martin Joe.
Power, Seán.
Quill, Máirín.
Fahey, Jackie.
Fitzgerald, Liam Joseph.
Fitzpatrick, Dermot.
Flood, Chris.
Gallagher, Pat the Cope.
Geoghegan-Quinn, Máire.
Harney, Mary.
Hillery, Brian.
Hilliard, Colm.
Hyland, Liam.
Jacob, Joe.
Kelly, Laurence.
Kenneally, Brendan.
Kirk, Séamus.
Kitt, Michael P.
Kitt, Tom.
Lawlor, Liam.
Leonard, Jimmy.
Lyons, Denis.
Martin, Micheál.
McCreevy, Charlie.
McDaid, Jim.
McEllistrim, Tom.
Molloy, Robert. [262]Reynolds, Albert.
Smith, Michael.
Stafford, John.
Treacy, Noel.
Tunney, Jim.
Wallace, Dan.
Wallace, Mary.
Walsh, Joe.
Wilson, John P.
Woods, Michael.
Wyse, Pearse.

Tellers: Tá, Deputies Ferris and J. Higgins; Níl, Deputies V. Brady and Clohessy.

Amendment declared lost.

Mr. A. Reynolds: Information on Albert Reynolds  Zoom on Albert Reynolds  I move amendment No. 29:

In page 21, to delete lines 1 to 35, and substitute the following:

“14.—(1) In this section—

`basis period for the year 1990-91' means the period on the profits or gains of which income tax for the year 1990-91 falls to be finally computed for the purposes of Case I and Case II of Schedule D;

`corresponding period' means the period of 12 months immediately preceding the basis period for the year 1990-91.

(2) Subject to subsections (4) and (5), the provisions of subsection (3) shall apply, in determining for the year 1990-91 the full amount of the profits or gains of a trade or profession where the trade or profession was set up and commenced before the 6th day of April, 1989.

(3) Where this subsection applies, the assessment which, by virtue of section 58 of the Income Tax Act, 1967 (as amended by section 12), falls to be made for the year 1990-91, shall be reduced by the excess of the amount of the profits or gains of the basis period for the year 1990-91 over one-half of the aggregate of the profits or gains of that basis period and of the profits or gains, if any, of the corresponding period:

Provided that the assessment for the year 1990-91 shall not be reduced under the provisions of this section to an amount which is less than the amount determined by the formula—

125

A × —

100

where A is the amount of the profits or gains of the corresponding period.

(4) Where an individual is charged to income tax for the year 1990-91 on the full amount of the profits or gains from farming determined in accordance with the provisions of subsection (2) of section 20B of the Finance Act, 1974 (as amended by section 18), the provisions of subsection (3) shall have effect as if—

(a) the reference to the amount of the profits or gains of the basis period for the year 1990-91 were a reference to the full amount of the profits or gains from farming of the individual determined without regard to the other provisions of this section but in accordance with the provisions of subsection (2) of the said section 20B (as so amended) for the year 1990-91,

(b) the reference to the amount of the profits or gains of the corresponding period were a reference to the full amount of the profits or gains determined upon a fair and just average of the profits or gains from farming of the individual in each of the three years ending on the date 12 months immediately before the end of the basis period for the year 1990-91, and

[263] (c) the reference in subsection (3) to section 58 of the Income Tax Act, 1967, were a reference to subsection (2) of the said section 20B (as so amended).

(5) Where, under the provisions of section 58 (5) (a) (ii) of the Income Tax Act, 1967 (as amended by section 12), profits or gains of the year ending on the 5th day of April, 1991, are to be computed or the assessment for the year 1990-91 is to be amended, then those profits or gains shall be computed without reference to the provisions of this section and the said assessment shall be amended accordingly.”

This amendment substitutes a new section 14 for section 14 as introduced to extend the transitional relief available in respect of trades or professions to those persons whose profits for 1990-91 exceed the profits for 1989-90 — the period which “drops-out”— by 25 per cent or more, instead of 50 per cent or more as was the case in the section when introduced.

The effect of the redrafted section is to allow to relief as before to the 50 per cent cases but to provide a reducing relief to those persons whose profits in 1990-91 are between 25 per cent and 50 per cent higher than their 1989-90 profits. For example, where there is an excess of 50 per cent the reduction will be 17 per cent approximately; where there is an excess of 40 per cent the reduction will be 11 per cent approximately; where there is an excess of 30 per cent the reduction will be 4 per cent approximately and where there is an excess of 25 per cent there is no reduction.

The amendment also makes some technical adjustments to section 14 as introduced to clarify the interaction between the relief under this provision and the farmers' averaging provisions in section 20B of the Finance Act, 1974.

The anomaly to which this amendment is directed was mentioned on Committee Stage debate by Deputy McCreevy and was also brought to my attention by Deputy Micheal Ahern in correspondence.

[264] Amendment agreed to.

Mr. Noonan: Information on Michael Noonan  Zoom on Michael Noonan  (Limerick East): I move amendment No. 30:

In page 35, to delete lines 31 to 50, in page 36, to delete lines 1 to 50 and in page 37, to delete lines 1 to 18.

This is an amendment to delete a section which brings about a situation that the credit for withholding tax would still apply in the following year even though those liable for withholding tax will be taxed on a current year basis. It is unfair when they move to a current year basis that the tax withheld in the current year will only be credited in the following year.

I know that simply removing the section may have wider implications — I am aware of certain implications that might follow from removing the section completely — but my intention is to have withholding tax credited on a current year basis for the professions who will now be paying tax on a current year basis. That is the nub of the amendment. Deputy Garland already gave me an opportunity to mention the points about expenses legitimately incurred by doctors and other professions where tax is withheld.

Mr. A. Reynolds: Information on Albert Reynolds  Zoom on Albert Reynolds  The purpose of this amendment is to secure, in effect, that withholding tax deducted during an accounting period will be credited against the tax liability for the year of assessment for which the accounting period is the basis period. As the basis period for a year of assessment is now, under the current year basis proposals, an accounting period ending in the year of assessment itself, the amendment would mean that withholding tax deducted would be credited in the year of assessment itself.

Under the existing withholding tax legislation, an individual taxpayer's accounting period or basis period — during which withholding tax is deducted — and the following year of assessment — in which credit for the withholding tax deducted to given — are linked together. This is achieved by referring in the withholding tax legislation to the connection [265] that exists between the two periods for assessing purposes. The accounting period is a basis period for the following year's assessment, the profits taxed for the year of assessment are not the profits of the basis period. The profits of the basis period are only used as a measure of the profits for the year of assessment. The profits being taxed for the year of assessment are, in law, the actual profits of the year of assessment itself.

The current year basis provides a new measure of the profits of the year of assessment — the profits of an accounting period ending in the year of assessment rather than that ending in the proceding year of assessment. Therefore, the length between the period in which withholding tax is deducted and the tax basis for the following year of assessment, which was introduced in the 1987 Finance Act, is broken.

The purpose of section 24, which Deputy Noonan wishes to have deleted, is to sustain the relationship between the deduction period and the credit year in the new circumstances, that is to retain the arrangement whereby withholding tax deducted in one period is credited against the liability for the following year of assessment.

The proposals in section 24 do not alter the basic operation of the withholding tax system. The various elements of that tax system will impact on the taxpayer in precisely the same way as heretofore. I have already read out the ways in which this has been done up to now. I will not waste the time of the House repeating it. I should say it will cost £46 million——

Mr. Noonan: Information on Michael Noonan  Zoom on Michael Noonan  (Limerick East): I do not see how the cost could be £46 million——

Mr. A. Reynolds: Information on Albert Reynolds  Zoom on Albert Reynolds  The tax credit dropping out could be added to the tax credit for 1990-91 and that would cost £46 million.

Mr. Noonan: Information on Michael Noonan  Zoom on Michael Noonan  (Limerick East): Yes, and I supppose if one drops out the 1989-1990 tax year for Schedule D taxpayers there [266] might be a windfall claim for one year; is that where the cost arises?

Mr. A. Reynolds: Information on Albert Reynolds  Zoom on Albert Reynolds  Yes, that is where it would come in.

Mr. Noonan: Information on Michael Noonan  Zoom on Michael Noonan  (Limerick East): I see the implication of that but I still think the net point is correct — that after the passage of this Bill, when professionals move, as they will, to a current year basis, when withholding tax is deducted on a current year basis, as it always was, the credit should apply to the current year as well rather than to the following year. It is an artificial mechanism being put in place to maintain a system which, from a collection point of view, is working well. Even though it was effective it is now anomalous — when we move to a current year basis — to be using it all the time.

I have heard the Minister's arguments advanced already to Deputy Garland. I should like us to have a couple of minutes on amendment No. 33 with regard to manufacturing relief. Therefore I will withdraw my amendment. Deputy Taylor might give us a few minutes to get on to the next one as he goes through his amendment.

Amendment, by leave, withdrawn.

Mr. Taylor: Information on Mervyn Taylor  Zoom on Mervyn Taylor  I move amendment No. 31:

In page 37, between lines 37 and 38, to insert the following:

“26.—In this section—

`agency' means a charitable body providing development aid or emergency relief in developing countries and designated by the Minister for Foreign Affairs by order made under this section;

`tax' means income tax or corporation tax, as the case may be.

(2) This section applies to a gift of money which, on or after the 6th day of April, 1990, is made to an agency and is not deductible in computing for the purposes of tax the profits or gains [267] of a trade or profession or is not income to which the provisions of section 439 of the Income Tax Act, 1967, apply.

(3) The Revenue Commissioners may consult with an agency in relation to any question which may arise in connection with subsection (2).

(4) Where a person proves he has made a gift to which this section applies and claims relief from tax by reference thereto, the provisions of subsection (5) or, as the case may be, subsection (6) shall apply:

Provided that in determining the net amount of the gift for the purposes of those subsections, the amount or value of any consideration received by the said person as a result of making the gift, whether received directly or indirectly from an agency or any other person, shall be deducted from the amount of the gift.

(5) For the purposes of income tax for the year of assessment in which a person makes a gift to which this section applies, the net amount thereof shall, subject to subsection (6), be deducted from or set off against any income of the person chargeable to income tax for that year and tax shall, where necessary, be discharged or repaid accordingly; and the total income of the person or, where the person is a wife whose husband is assessed to income tax in accordance with the provisions of section 194 (inserted by the Finance Act, 1980) of the Income Tax Act, 1967, the total income of the husband shall be calculated accordingly:

Provided that relief under this Act shall not be given to a person for a year of assessment if the gift (or the aggregate of the net amounts of gifts) made by him in that year, being a gift or gifts, as the case may be, to which this section applies, does not exceed £100.

[268] (6) Where a gift to which this section applies is made by a company—

(a) the net amount thereof shall, for the purposes of corporation tax, be deemed to be a loss incurred by the company in a separate trade in the accounting period of the company in which the gift is made, and

(b) the references in subsection (5) to a year of assessment shall be construed as references to an accounting period of the company.”.

The purpose of this amendment is to allow tax relief to any person, whether an individual, company or other person in respect of a gift of money made to an overseas development agency. The object here is to provide some compensation for the reduction in the overseas development budget provided by the State for the charitable agencies that provide developmental aid and emergency relief in developing countries. It is a fact, albeit a regrettable one, that the amount of aid granted by this State to developing countries has fallen.

My purpose here is an endeavour to redress, that, in some measure, by providing that gifts made by a person or company to a recognised and certified agency — approved and designated as such by the Minister for Foreign Affairs — where the gift exceeds £100 would be chargeable against tax. That is proposed in the hope that it would redress the shortfall. Many people feel it reasonable and appropriate that this country provide emergency relief for developing countries abroad.

Mr. A. Reynolds: Information on Albert Reynolds  Zoom on Albert Reynolds  Deputy Taylor's amendment proposes tax relief on donations to charities which provide development aid or emergency relief in developing countries.

I am sure all Deputies will join me in paying tribute to the tremendous work done by such charities. As Deputies will be aware, the income of those charities, whether from donations or otherwise, is exempt from taxation in their hands as [269] long as that income is applied for charitable purposes.

However, to go further, as Deputy Taylor suggests, and allow relief to persons who make donations to such charities would mean that the Exchequer would find itself funding, at anything up to 53 per cent, organisations which currently operate on voluntary and unrelieved contributions. This cost, which could be substantial, depending on the extent to which use was made of the relief by both existing and new subscribers, would be additional to the State's contribution to development assistance which is over £34 million.

The cost of implementing the proposal in the amendment could not be afforded within the present budgetary constraints and, if conceded, would have to be made up from elsewhere. Everybody will agree that our current levels of tax are too high. Therefore, I am very reluctant to seek more revenue from any source to make up such deficiency.

In all the circumstances I am sure the House will appreciate that I am not in a position to concede the tax reliefs sought by Deputy Taylor.

An Leas-Cheann Comhairle: Information on James C. Tunney  Zoom on James C. Tunney  Is Deputy Taylor happy?

Mr. Taylor: Information on Mervyn Taylor  Zoom on Mervyn Taylor  No, I am not happy. I do not know whether the Minister has an approximate figure of what this would cost.

Mr. A. Reynolds: Information on Albert Reynolds  Zoom on Albert Reynolds  I do not because it would be impossible to calculate.

Mr. Taylor: Information on Mervyn Taylor  Zoom on Mervyn Taylor  I agree that it might be difficult to ascertain what the figure would be. However, I would hazard a guess that it might be relatively small, that the amount of money that firms and individuals might be induced to donate, even if they were allowable for taxation purposes, would not make up the recommended percentage figure for each country — Ireland in particular — by the United Nations who control such things. We are very poor in our contributions to [270] Third World countries for these purposes, countries where people are literally starving, where famines occur, where much work needs to be done, in many cases it being literally a matter of life and death. Our record in that respect is not something of which we can be overproud. There is a lot of room for improvement there. I am not saying that we have not done anything. Nonetheless, having regard to the very serious circumstances prevailing in many Third World countries and their needs, we could do just a little more.

If the State is not so minded, or feels it cannot provide such contribution directly from the Exchequer, then, in effect, my amendment would provide a partnership contribution, partly from people and companies and partly from the State. It is true, as the Minister said, that in some cases it would be a question of the Exchequer funding anything up to 53 per cent but, more often than not, its contribution might amount to 10 per cent only. Be that as it may, it would induce, pull in, funds from private sources so that, every £ sent, would cost the State, at most, 53 pence rather than a direct grant out of Exchequer funds when every £ sent would cost the State an equivalent amount. There are firms who would be induced to give money, to make contributions, if they were allowed to charge the amount against their tax liability. I felt the amendment was reasonable and I still think so.

Mr. Rabbitte: Information on Pat Rabbitte  Zoom on Pat Rabbitte  This is a very worthy amendment. I do not agree with the Minister that our record, especially in recent years, in development aid is anything to be proud of. Having regard to the dimensions of the problems involved, I contend we are slipping behind. Indeed we are a long way short of the minimum target set by the United Nations.

I should have thought that this amendment constituted a relatively painless way of helping to make up something of that gap. It may not induce all that amount of funds. As Deputy Taylor said, it is not intended to constitute an alternative method of making our nation's [271] contribution by way of development aid. Nonetheless it might induce some funds that would otherwise not be available.

Mr. Noonan: Information on Michael Noonan  Zoom on Michael Noonan  (Limerick East): A Leas-Cheann Comhairle, is this a case——

An Leas-Cheann Comhairle: Information on James C. Tunney  Zoom on James C. Tunney  Earlier on we had a situation in which a person in whose name an amendment had been made had spoken for a second time and we subsequently called somebody else. The same has occurred now, Deputy Rabbitte, so I would ask you to take it that Deputy Taylor has already replied. He or the Minister cannot say anything further so if the Deputy is anticipating any replies to his comments, they will not be made.

Mr. Rabbitte: Information on Pat Rabbitte  Zoom on Pat Rabbitte  If I had known that, I would have sat down before now.

An Leas-Cheann Comhairle: Information on James C. Tunney  Zoom on James C. Tunney  If Deputy Noonan had not drawn my attention to the fact that you were not entirely in order I would not have interrupted you.

Amendment No. 32 not moved.

Amendment, by leave, withdrawn.

An Leas-Cheann Comhairle: Information on James C. Tunney  Zoom on James C. Tunney  We now come to amendment No. 32a. I call on Deputy Noonan to move the amendment.

Mr. Noonan: Information on Michael Noonan  Zoom on Michael Noonan  (Limerick East): Would it be possible to take amendments Nos. 33, 34, 35 and 36 with amendment No. 32a as we only have 20 minutes left and they all deal with the same issue?

An Leas-Cheann Comhairle: Information on James C. Tunney  Zoom on James C. Tunney  Is that agreed? Agreed.

Mr. Noonan: Information on Michael Noonan  Zoom on Michael Noonan  (Limerick East): I move amendment No. 32a:

In page 49, line 22, to delete “computer”.

During the Committee Stage debate on the restrictions on manufacturing relief, imposed by section 33 of the Bill as circulated, we asked a number of questions [272] which in my view were not adequately answered. I do not know what the scope of the restrictions on manufacturing relief will be, despite the fact that the Bill will pass all Stages in 20 minutes' time. I know what the Minister's intention is but it should be borne in mind that the scope of this relief has been extended beyond what those who established the policy had intended. This was done by recourse to the courts and the appeals commissioners drawing on the precedents created by the courts.

We are aware that it is the intention of the Minister that activities such as banana ripening, the grading and bagging of coal, the breaking down of bulk, the bottling of gas and a variety of other activities will no longer qualify for the 10 per cent rate of tax. However, I do not know where we stand now. The Minister has indicated that a statement of practice will be issued in due course, that any genuine manufacturer has nothing to fear and that the Revenue Commissioners will be reasonable in their interpretation of the sections, but this leaves us in a state of uncertainty.

Subsequent to our initial discussion, the Minister circulated an amendment to make it clear that the remanufacture and servicing of computers would qualify for the 10 per cent rate of tax. If we include remanufacturing and servicing, we will have to amend the Bill further. The amendment in my name and that of Deputy Barrett would do this, with the result that any activity involving remanufacture and repair would qualify. I am thinking here of cases which have been brought to my attention. As the Minister is aware, tool making is a key skill in industry. I am not thinking here in terms of those who sharpen chisels or hedge-clippers but rather about those who put together and instal assembly lines where the tooling is automated. When an assembly line has to be taken down effectively it has to be remanufactured and repaired at the same time. In those circumstances that activity should qualify as should all sub-assembly work.

We are not stating that it should be remanufacture or repair but rather that [273] the process should involve both activities. If there is a remanufacturing element the amendment should be extended beyond covering just the computer industry. I would be surprised if the IDA and the Department of Industry and Commerce are not arguing in favour of this.

The next amendment in my name relates to the grain industry. Serious concern is being expressed that the drying of grain will no longer qualify and that tax on profit from this activity will be charged at a rate of 40 per cent rather than 10 per cent. The Minister was asked specifically to state if the drying of grain is either in or out. We are entitled to certainty when legislating. If the Minister tells me that it will still qualify, fair enough, but if he tells me it will no longer qualify I will have to press the amendment. However, the Minister is not answering this straight question. Amendments Nos. 34 and 35 are consequential.

Mr. Taylor: Information on Mervyn Taylor  Zoom on Mervyn Taylor  It is the courts who will interpret the section and not the Minister who may give his view.

Mr. Noonan: Information on Michael Noonan  Zoom on Michael Noonan  (Limerick East): I do not think Deputy Taylor is right with respect.

Mr. Taylor: Information on Mervyn Taylor  Zoom on Mervyn Taylor  I am.

Mr. Noonan: Information on Michael Noonan  Zoom on Michael Noonan  (Limerick East): I do not think the Deputy is right.

Mr. Taylor: Information on Mervyn Taylor  Zoom on Mervyn Taylor  If the court comes to interpret the issue they will not even look to see what the Minister said in the course of a Dáil debate. They will look at what is in the Act.

Mr. Noonan: Information on Michael Noonan  Zoom on Michael Noonan  (Limerick East): Absolutely, and that is where the difficulty arises because any normal interpretation of the wording of the Bill goes far beyond the assurances given by the Minister. There is a contradiction between the assurances given by the Minister in the House and a normal interpretation of the wording of the section. In my view the question of food processing arises. I asked the Minister to tell us if activities involving the breaking down of bulk are [274] excluded but I have not been given a straight answer. The section seems to say that they are. I have asked the Minister a specific question, if in his view the bottling of water——

Mr. A. Reynolds: Information on Albert Reynolds  Zoom on Albert Reynolds  The interpreters will decide. My view may give the Deputy some comfort but it will not stand up later.

Mr. Noonan: Information on Michael Noonan  Zoom on Michael Noonan  (Limerick East): The Minister is proposing to alter a policy which has been around for a while. Therefore, there is a responsibility on him to state what the scope of the change is.

Mr. A. Reynolds: Information on Albert Reynolds  Zoom on Albert Reynolds  What difference will that make to the interpreters?

Mr. Noonan: Information on Michael Noonan  Zoom on Michael Noonan  (Limerick East): It would make a big difference because I would argue that the scope is far wider than the Minister is saying or being advised — and there are many people in the accountancy profession who would agree — I do not think the Minister is addressing the issue.

Mr. A. Reynolds: Information on Albert Reynolds  Zoom on Albert Reynolds  I have not met them.

Mr. Noonan: Information on Michael Noonan  Zoom on Michael Noonan  (Limerick East): Perhaps the Minister has not met them but they have requested meetings with him.

Mr. A. Reynolds: Information on Albert Reynolds  Zoom on Albert Reynolds  I am not in a hideout. I attended a function this morning at which a number of them were present but not one of them opened their mouths.

Mr. J. Mitchell: Information on Jim Mitchell  Zoom on Jim Mitchell  Normally the Minister is more approachable.

Mr. A. Reynolds: Information on Albert Reynolds  Zoom on Albert Reynolds  Perhaps the Deputy is more approachable.

Mr. Noonan: Information on Michael Noonan  Zoom on Michael Noonan  (Limerick East): Did the grain and feed associations send the Minister letters? They sent copies of their submissions to the Minister to me.

An Leas-Cheann Comhairle: Information on James C. Tunney  Zoom on James C. Tunney  I would remind the Minister that if he intervenes [275] once he will not be able to intervene a second time.

Mr. A. Reynolds: Information on Albert Reynolds  Zoom on Albert Reynolds  I will intervene no more.

An Leas-Cheann Comhairle: Information on James C. Tunney  Zoom on James C. Tunney  The Deputy should not encourage the Minister to be out of order.

Mr. Rabbitte: Information on Pat Rabbitte  Zoom on Pat Rabbitte  Perhaps Deputy Noonan will allow us to sift through the grain also.

Mr. J. Mitchell: Information on Jim Mitchell  Zoom on Jim Mitchell  There is a grain of truth in that.

Mr. Noonan: Information on Michael Noonan  Zoom on Michael Noonan  (Limerick East): Perhaps we could have fewer puns. Bottling water, for example, is a recognised manufacturing activity and bottling water plants have been set up with grants from the IDA and SFADCo, and the understanding was that this activity would qualify for the 10 per cent rate of tax. If someone extracts water from a spring and puts it in bottles and markets it, according to the defintion this would represent the breaking down of bulk and nothing else. It seems to me that they are caught, yet the Minister seems to imply that they are not.

It seems that the fellow who buys trees in a wood, takes them to a sawmill and saws them up into planks is caught too, because that is also breaking down of bulk. What about the person who is buying sugar in bulk and packaging it? What about the person who is buying flour in bulk and packaging it? Where is the cut-off point? Then there is the whole food processing industry where the words are “maturation” and “preservation”. What is the Minister's intention here? He has not explained. He was asked a couple of times in the House about people in the sand and gravel business. Are those who go on to make it into readymix, concrete and concrete blocks, to be taxed at 10 per cent and those who collect gravel and sand and sell it in smaller quantities to be taxed at 40 per cent because they are simply breaking down bulk and selling [276] in smaller quantities? I am not saying I disagree with what the Minister is doing. I believe the Minister is not sure of what he is doing. Certainly if he is sure of what he is doing he is not telling the rest of us. My amendments Nos. 6 and 36 are framed to give greater clarity to the section so that the Revenue Commissioners would have greater guidance when they adjudicate on these issues.

Mr. S. Barrett: Information on Seán Barrett  Zoom on Seán Barrett  There is an amendment in my name in relation to the deletion of the word “computer”. What I am endeavouring to do here is to get all firms and subsidiaries currently involved in the repair or the refurbishment of own products recognised as qualifying for the 10 per cent rate. It is extraordinary that we are making exceptions for computer companies which, broadly speaking, are all overseas companies yet we are denying this relief to other manufacturers of engineering products. I would ask the Minister to accept this amendment and make it quite clear that somebody involved in the repair and refurbishment of old, manufactured equipment in a highly skilled, labour intensive activity would be eligible for the 10 per cent rate and that it would also apply to other engineering companies.

I am conscious that other people want to speak but I just want to say to the Minister that in relation to the film industry I cannot see why a distinction should be made between a feature film and a commercial since the process is exactly the same. There is the same pool of technicians, the same film studios and the same equipment being used by all film producers, yet we have a situation here that if a company is involved in the making of commercials, such as the one promoting the Irish language, the Telecom Éireann commercials, the Smithwicks and Harp commercials, it will now be taxed at 40 per cent but a company making feature films will be taxed at 10 per cent. What we will do here is drive the making of commercials out of the country because we will not be competitive. It will be quite ludicrous to see a British made commercial promoting the [277] Irish language. This is the sort of situation in which we are now finding ourselves. I would ask the Minister to clarify that point also. I believe that commercial films and feature films should have the same tax relief applied to them. My understanding is that under this Bill as it stands that is not the case. My two points, therefore, are related to engineering enterprise and the film industry.

An Leas-Cheann Comhairle: Information on James C. Tunney  Zoom on James C. Tunney  Deputy Rabbitte will appreciate that his contribution will have to be a nugget. I note that Deputies Taylor and Yates have offered and the Minister has not yet spoken.

Mr. Rabbitte: Information on Pat Rabbitte  Zoom on Pat Rabbitte  I think it highlights the absurdity of the situation we are in when, having come to a critical areas like this, we are expected to deal with it in two minutes. It is not possible to do that and one has to fall back on Deputy Taylor's view at this stage which is that getting the view of the Minister really does not assist the situation a great deal and interpretation will be a matter for the courts.

Since we have only a couple of minutes left and my colleagues want to get in, let me just say that there is a real problem when we have spent the course of this Finance Bill talking about broadening the tax base and about certain areas not making a fair contribution and talking about the absurd situation created by the banana ripening case where certain companies were enabled to claim the 10 per cent advantage rate where manifestly they could not, by the wildest stretch of the imagination, be described as manufacturing. There is a dilemma in holding that position. Yet, when presented with hard proposals to broaden the tax base and to try to get a better yield from some areas, we are beginning to backtrack when, in broad terms, up to the time when we were presented with a hard proposal we were all in favour of it. Deputy Noonan listed a whole series of areas, I listed six areas and Deputy Barrett added two or three more. It seems that if we did have time to tease it all out we probably would conclude that we should leave the [278] situation as it is. I cannot go along with that. I think it is a false option, anyway. I do not believe that there are companies of any significance paying the 40 per cent rate and if we had a real situation of 10 per cent on the manufacturing sector and an effective 20 per cent rate on the rest it might be more meaningful. The first criterion is that these companies must be making a profit before the matter applies at all. Otherwise it does not apply, so, to some extent, we are posing false alternatives. I very much regret that we have to cut if off at this point.

An Leas-Cheann Comhairle: Information on James C. Tunney  Zoom on James C. Tunney  The Deputy must confine himself in a manner which he knows the time left requires.

Mr. Taylor: Information on Mervyn Taylor  Zoom on Mervyn Taylor  In so far as the section in its original form cuts back on these ridiculous outs that were thrown up in the previous legislation by the courts, I support the Minister. My complaint would be that he does not go far enough and that the whole issue of 10 per cent tax rates has gone altogether too far. It has gone completely out of hand as Deputy Rabbitte said, and I agree with him.

We are talking about poverty traps and relatively small amounts of money that would make an enormous difference to families in poor circumstances and, on the other hand we are shifting around here trying to extend these super-advantageous tax rates. It does not bear thinking about. I would not be prepared to support Deputy Noonan's amendment on these issues. I find it remarkable that the Minister brings in a provision to say that dividing, cutting, sub-dividing food products and so on, is not entitled to the 10 per cent manufacturing rate except for meat. Meat is a special category. What is so special about meat that it has to be given the super-advantageous terms in contrast to any other product that is produced in the country? One may suspect the reason but it is just not good enough. We tried to deal with it on Committee Stage.

[279]Mr. A. Reynolds: Information on Albert Reynolds  Zoom on Albert Reynolds  The Deputy's suspicion is not correct.

Mr. Taylor: Information on Mervyn Taylor  Zoom on Mervyn Taylor  There is no smoke without fire. One wonders about it. Every other food, bar meat, is excluded. Meat warrants a very special section of its own just to make doubly sure that it benefits from the 10 per cent rate. The Minister said that the basic principle of taxation ought to be that if a company makes profit it pays tax and if it does not it does not pay tax. If they make very big profits so what? Let them pay the 40 per cent, it would not be the end of the world and the money could be used to alleviate poverty and get some numbers of families with children out of the poverty trap they are in.

An Leas-Cheann Comhairle: Information on James C. Tunney  Zoom on James C. Tunney  I do not want to seem unfair to Deputy Yates so perhaps the House would agree that Deputy Yates would have his two minutes before I call on the Minister.

Mr. Yates: Information on Ivan Yates  Zoom on Ivan Yates  I would like to support amendment No. 33. The Wexford constituency that I come from is the most substantial grain growing constituency. We have evolved a new product of malt and barley which is substantially exported, and the process of grain drying adds considerable value and is therefore a genuine manufacturing process. The retained profits are vital for the development of this sector and increasing exports. For those reasons, because of the difficulties in relation to farm incomes, the need to get new export products such as malt and barley, I would ask the Minister to give specific recognition to amendment No. 33.

Mr. A. Reynolds: Information on Albert Reynolds  Zoom on Albert Reynolds  I shall have to be very brief. It is not possible, and I am sure the Deputies will appreciate this, to give specific yes or no answers to all the questions that have been raised by Members on the far side. However, I will be as helpful and as forthcoming as I possible can.

I have been asked about the provision for film commercials made here and it was alleged that these were excluded. In fact [280] they are not. I had received representations from the film industry — a labour intensive industry — and to my knowledge they are quite happy with what has been done on Committee Stage. Everybody knows in general terms what we set out to do — we set out to eliminate abuses of the tax code which were very clear to everybody.

A Deputy asked whether repairs were automatically excluded from this tax concession. Repairs are not automatically out if there is a change in character in the process — I want to stress that it is the process that is important, and nothing else. The Revenue Commissioners will examine the process and I am not doing anything in this legislation to exclude anything specifically but I am trying to correct the abuses that existed.

Some people used emotive language to suggest that our approach to section 33 was to create doubts. However, as the accountancy practices and the Confederation of Irish Industry began to realise what we were doing they realised that there was not the level of uncertainty they feared. In fact our whole approach is to minimise uncertainty.

Deputy Taylor asked about meat processing. Meat processing was specifically included in the section to allay any fears that it might be treated as a produce acquired in bulk and divided and packaged to prepare it for sale. The term “meat processing” has a very wide meaning and therefore it is not that easy to answer yes or no to the questions Deputies raised. Meat processing includes a wide range of activities and some of these may constitute manufacture, while others may not. I think most Deputies recognise what I am trying to do — certain restaurants were availing of the 10 per cent rate by manufacturing in the back kitchen and selling the produce and that is the type of thing we are trying to target. It is clear that activities carried out in a full industrial building approved under regulations constitutes manufacture. In other cases, the normal tests have to be applied. The process will have to be of a sufficient degree to qualify for the scheme. We want to be as clear as we [281] can in trying to advise the House and businesses as to what will be covered by the term manufacture. To be disqualified from the 10 per cent rate, a company must fall primarily within one of the excluded categories. With regard to the sector we have just spoken about, the meat processing industry, the processes carried out by companies within the food processing industry do not fall primarily into one of those excluded categories and do not involve simply the breaking down of bulk produce or simply the preservation of foodstuffs, generally they involve complex processes and this does not fall into one of the excluded categories as generally the process results in a new product. Unless they fall primarily into one of the excluded categories they will continue to qualify for the 10 per cent rate, and that applies across the board.

I heard similar emotive language being used last year when we were trying to introduce the anti-avoidance measures and certain sectors of the accountancy profession use it all the time. I am not worried about it. The anti-avoidance profession is always there. A genuine manufacturer who has a process that changes the character of a product had nothing to fear. Every sector of industry has the opportunity to go to the appeals section in the Revenue Commissioners and to go through the normal appeals procedures.

We have set out to stop the abuse of the concession and the erosion of the tax base. In fact more and more companies [282] were lining up each month to avoid taxation.

Mr. S. Barrett: Information on Seán Barrett  Zoom on Seán Barrett  The section in relation to computers was quite specific.

Mr. A. Reynolds: Information on Albert Reynolds  Zoom on Albert Reynolds  I have not yet dealt with computers and all the other sections the Deputy raised. I do not think that anybody in this House would disagree that computers and part of the process in electronics and telecommunications is installation. Part of their process is installation. For instance, after you manufacture a telephone exchange part of the process is installing it and part may be what may be loosely termed repair, but it is not exactly that as it is part of the process of manufacturing. The same will apply in those other areas. I do not see why the Deputy wishes to exclude computers because if you take out computers you could include a whole range of areas across the board that were never intended to be included and should not be included, for example, ordinary repairs——

An Leas-Cheann Comhairle: Information on James C. Tunney  Zoom on James C. Tunney  In accordance with the resolution of this House of 15 May, 1990 I am required to put the following question: “That the amendments set down by the Minister for Finance and not disposed of are hereby made to the Bill, that the Fourth Stage is hereby completed and that the Bill is hereby passed.”

Ahern, Bertie.
Ahern, Dermot.
Ahern, Michael.
Andrews, David.
Aylward, Liam.
Barrett, Michael.
Brady, Gerard.
Brady, Vincent.
Brennan, Mattie.
Browne, John (Wexford).
Burke, Raphael P.
Calleary, Seán.
Clohessy, Peadar.
Connolly, Ger.
Coughlan, Mary Theresa. [283]Hilliard, Colm.
Howlin, Brendan.
Hyland, Liam.
Jacob, Joe.
Kelly, Laurence.
Kenneally, Brendan.
Kirk, Séamus.
Kitt, Michael P.
Kitt, Tom.
Lawlor, Liam.
Leonard, Jimmy.
Lyons, Denis.
Martin, Micheál.
McCreevy, Charlie.
McDaid, Jim.
McEllistrim, Tom.
Molloy, Robert.
Morley, P.J.
Nolan, M.J.
Noonan, Michael J. (Limerick West).
Cullimore, Séamus.
Daly, Brendan.
Davern, Noel.
Dempsey, Noel.
Dennehy, John.
de Valera, Síle.
Ellis, John.
Fahey, Jackie.
Fitzgerald, Liam Joseph.
Fitzpatrick, Dermot.
Flood, Chris.
Gallagher, Pat the Cope.
Geoghegan-Quinn, Máire.
Harney, Mary.
Hillery, Brian. [284]O'Connell, John.
O'Dea, Willie.
O'Donoghue, John.
O'Keeffe, Ned.
O'Leary, John.
O'Rourke, Mary.
O'Toole, Martin Joe.
Power, Seán.
Quill, Máirín.
Reynolds, Albert.
Smith, Michael.
Stafford, John.
Treacy, Noel.
Tunney, Jim.
Wallace, Dan.
Wallace, Mary.
Walsh, Joe.
Wilson, John P.
Woods, Michael.
Wyse, Pearse.

Ahearn, Therese.
Allen, Bernard.
Barrett, Seán.
Bell, Michael.
Belton, Louis J.
Boylan, Andrew.
Browne, John (Carlow-Kilkenny).
Bruton, John.
Bruton, Richard.
Byrne, Eric.
Connaughton, Paul.
Connor, John.
Cosgrave, Michael Joe.
Cotter, Bill.
Creed, Michael.
Currie, Austin.

D'Arcy, Michael.
Deasy, Austin.
Deenihan, Jimmy.
De Rossa, Proinsias.
Doyle, Joe.
Durkan, Bernard.
Farrelly, John V.
Fennell, Nuala.
Ferris, Michael.
Finucane, Michael.
Flanagan, Charles.
Garland, Roger.
Gilmore, Eamon.
Gregory, Tony.
Harte, Paddy.
Higgins, Jim.
Higgins, Michael D.
Kavanagh, Liam.
Kemmy, Jim.
Kenny, Enda.
Lee, Pat.
Lowry, Michael.
McCartan, Pat.
McCormack, Pádraic.
McGinley, Dinny.
Mac Giolla, Tomás.
McGrath, Paul.
Mitchell, Gay.
Mitchell, Jim.
Nealon, Ted.
Noonan, Michael.
(Limerick East).
O'Brien, Fergus.
O'Shea, Brian.
O'Sullivan, Gerry.
O'Sullivan, Toddy.
Owen, Nora.
Pattison, Séamus.
Rabbitte, Pat.
Reynolds, Gerry.
Ryan, Seán.
Sheehan, Patrick J.
Sherlock, Joe.
Stagg, Emmet.
Taylor, Mervyn.
Timmins, Godfrey.
Yates, Ivan.

Question declared carried.


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