Wednesday, 19 July 1961
Seanad Eireann Debate
Professor Hayes: Ba mhaith liom cúpla focal a rá ar an Alt seo. Section  5, I understand, is the section under which a dependent child who would be entitled to an allowance of £120 under the income tax code is given that allowance on an income which used to be £60 and is made £80 by this section. I think that is correct.
Professor Hayes: The British figure is £100, but apart from that, there is this difference also. I understand that here if a child's income goes over £80, the whole of the allowance is lost. I am thinking particularly of the case of a widow who has three or four children. She is allowed to count £120 for each child in making up her income tax form. If the child has an income of £80, the widow still gets an allowance of £120, but, if the income, instead of being £80, is £82 or £84, then I am told the allowance of £120 disappears and the net loss, therefore, is something in the region of £40 because the income tax on the allowance of £120 is something less than one-third, or 6/4d. in the £. That seems to be rather inequitable and it also, of course, creates considerable difficulties, particularly in the case of orphans whom someone wants to benefit. The benefit must be made so that it will never exceed £80 or a certain loss will ensue.
In Britain, I am told the position is that if the income of the child goes over £100, instead of the whole allowance being lost, only a proportion is lost. I must confess that I am not an expert on income tax law, and I am not certain how it is done, but I am told the British position is much more favourable than ours. I wonder would the Minister look into that?
Dr. Ryan: The Senator has stated the position correctly so far as the facts go. I am not sure if there is a sliding scale in England in similar cases. Anyway, the way this has always been looked at is: It stood at £40 for a long time and if you take income tax as being a third, 6/8d. in the £, then £40 was as good as £120.
Dr. Ryan: That is how strictly we should look at it, anyway. Actually, if one widow is left with children with no money fixed on them and this particular widow is left with children with money fixed on them, that is a complete addition to her income. It could be looked at as being worth three times the income tax for income tax purposes.
Professor Hayes: I am afraid the Minister is an optimist if he thinks he will put that across me. It is rather fallacious. That £40 becomes £80—it becomes £100 in Britain—and surely the British do not look at it as the Minister does, that if the money were £100, they are giving her the equivalent of £300 in tax allowances. Anyway, it is considered desirable where there are children they should be allowed to have an income up to £80. I am not arguing now whether it should be £80 or £100—I think it should be £100 —but surely it should be fixed in such a way that the person who wanted to give them a benefit would have a free hand? If he is to give them a benefit in such a way that it must never exceed a particular figure, he is very hampered. He could not buy equity shares, for example—at the moment, I understand they are going down but that is not the question. If a dividend went up unexpectedly, the whole of the tax relief would be lost and that would not seem right. If it is to be done at all, one would imagine that it should be done on the basis of allowing an income up to £80 while still getting tax allowance and if it is more than £80, there should be a scale by which £120 comes down in proportion as the income goes up. It seems to me that that would be a reasonable way of doing it.
Dr. Ryan: That particular point which Senator Hayes has put about the sliding scale—I am not saying whether it should be £80 or £100—has never been put to me, I must say, and therefore I never gave it my consideration but I would believe that all these things should be roughly the same as they are in Britain.
Professor Hayes: I want to raise a point about death duties for wives and children and I am not clear on what section I should raise it but I take it it will arise on any occasion—the acknowledgment of children with regard to death duties. I think it would be Section 22.
Professor Hayes: On this section which sets out new rates of death duties, I should like to put to the Minister that the whole income tax code recognises the existence of marriage and gives relief for a wife and for children, but death duties, estate duty in particular, do not take any account of that. Under the ordinary income tax code, a married man gets a certain allowance for his wife and an allowance for one child, two children, up to any number of children. That applies also recently to surtax. The figure for surtax incidence has been raised and you can now add to that figure, can you not, an allowance for wife and children? Is that not so? With regard to death duties, that is not so at all. For example, death duties begin at £5,000 and if they begin at all, if the estate amounts to £6,000 or £7,000, duty is paid from the first pound. Five thousand pounds used to be a very substantial figure. If 40 or 50 years ago, my father had left me £5,000, it would have been a very considerable addition to me, but £5,000 now is a very small estate. So indeed is £10,000 if the people left after a deceased person are a widow and children.
 It seems to me when a deceased person leaves a widow and children that there should be an allowance for the widow and each of the children before the estate duties are levied because there is an immense difference between the case of a man of 60 or 70 who dies leaving an estate to be divided between adult children and the case of a young man of 30 or 40 who by his profession or any other way has something more than £5,000—it is not difficult to leave more if you have a house, an insurance policy and one or two other things—and who as well as leaving that money, leaves a wife and two, three, four or five young children. It does seem to be unfair that the same estate duty should be levied on them as would be levied on the adults who have made their way in the world and to whom the money would in the normal way be a windfall.
It seems to me they are quite different cases and in that case it would be simple to amend the law so that a widow, before the estate duty began to fall on her, would get, say, £3,000 and each child £2,000 or, say, £2,000 and £1,000. But there should be a difference in respect of the estate duty payable in the case of the widow and dependent children, and I use the word dependent in the legal sense, that is, where they are under 16 years of age and are pursuing a full-time course of education at school or in the university, and that payable in the other cases and the estate duty code should make allowances for that difference.
Mr. Louis Walsh: There is considerable merit in the case put up by Senator Hayes but there is one point which he overlooks. When the estate is under £15,000, there is no liability for legacy or residual duty in the case of a widow and a family so that the legacy duty in the case of a person of the first or second degree would be have per cent. and in the case of an outsider it is ten per cent. So that, in actual fact, a considerable saving is effected when there is a widow with a family. The rate of estate duty begins at one per cent. over £5,000 and goes up to two per cent., but then if the estate is over £5,000, there is this additional five per cent. in the case of a near  relative and ten per cent. in the case of a person——
Professor Hayes: The case I mentioned, the case I have in mind, is the common case. There are no legacies. It is the case of the man who dies between the ages of 30 and 40, or 30 and 45 and leaves young children. Presumably, he leaves whatever he has to his widow for the benefit of the children.
Mr. Louis Walsh: The Senator does not seem to appreciate that, irrespective of whether or not there is a will, there is duty payable when the estate is over £5,000, so that this question of an actual legacy or residual duty still amounts to the five per cent. and the ten per cent.
Dr. Ryan: It is very difficult to express an opinion on a point like this. One is certainly very sympathetic to the case raised by Senator Hayes in regard to these estate duties. First of all, there is a levy on the total amount left, no matter to whom it is left, and then there is the difference in succession and estate and legacy duties, according to the relationship of the person to whom it is left. Senator Walsh has pointed out that there is of course a good advantage to the widow on that side, if not on the other. Whether it is sufficient or not, I do not know. It is very hard to defend a lot of these things but they are there.
Professor Hayes: I should like the Minister to look into that point. As he says, it is a point with which anybody will sympathise. Since I became interested in it I have looked at various cases. I know of a case of two brothers and a sister sharing a business. One brother is married with quite a number of children and the other brother is not married. Assuming they have the same amount of money, surely the death of the married man with the children would leave his wife and children worse off? The death would be much more  grievous in his case than in the case of the single man.
I would ask the Minister to look at that point because that type of thing could be dealt with very easily and would not cost very much. It would cost very little and what it would cost the State would be very little as compared with the relief it would give to widows and orphans. The existence of a wife and children is recognised all through the income tax code and should be recognised in this as well.
Dr. Ryan: Of course, as I pointed out, the position of a wife and children is provided for in the succession and legacy duties. I should mention one other point. As referred to elsewhere in the Bill, a person can leave £5,000 settled and £5,000 unsettled and they are treated as two separate cases for estate duties and therefore might be free. There is a third possibility, that is, that a man may settle an insurance on his wife of £5,000 which would be free of estate duty.
Professor Hayes: The Minister will realise that the kind of people who know all about that are old people with plenty of money but very rarely does it happen that the youngish man in a profession or business, in the Civil Service or anywhere else, has got on to all these devices and stratagems whereby he can defeat the various kinds of duty. That unfortunately is better known to the very rich or older people rather than to the young husband and father. For that reason, I would ask the Minister to consider this matter.
Professor Stanford: I should like to raise a point in connection with stamp duty, not the point which I raised on Second Reading. In Section 13 of the Finance Act, No. 2 of 1947, an alteration was made in stamp duties imposed on conveyances and so on. The stamp  duty was increased to the sum of £25 per £100, except to three specific types of people. The first was an Irish citizen; the second was a person who is ordinarily resident in the State and who had so been for three years prior to 15th October, 1947; and the third was a body incorporated in the State on or before 15th October, 1947. A good many people, as is well known, took advantage of the third of these exceptions and acquired land in the country by means of what is called a holding company. Many of them, or some of them at least, bought estates and houses which might have become derelict and fallen into ruin, unless rich people from outside this country took them over. Some of those people, I think, have done our State a service by repairing those buildings, putting them in good condition and employing a great many people on the land around them. Now a difficulty arises under this section of the Bill.
Supposing one of those people who came into Ireland and bought property by means of a holding company now wants to acquire some land, to get some fields which would improve the agricultural value of the land, to round off a corner; in other words, suppose he wants to improve his property, not necessarily to any great extent. That person, who may be doing the State some service, finds that one most important provision is left out of this Bill, important from his point of view. In other words, there is no allowance under Section 33 for prior continuous residence.
In 1947, if a person had been living in the country for three years continuously before the operative date, he could buy the land. But, in this section, there is, unless I am mistaken, no such provision. Suppose a man came into this country 10 years ago. He has bought the land. He has been living continuously in the country for 10 years. To put it crudely, he gets no credit for that under the Bill. If he wants to extend his land by a couple of acres, he will have to pay the 25 per cent. stamp duty. Perhaps I am wrong about that and if so, the Minister ought to tell me so at once. I do  not think I am. It does seem to me to be something of a hardship. Why was that previous continuous residence clause left out here when it was written into the 1947 Act? It may be said that the clause would give too much loophole to these people, that they would buy up vast tracts of land, and so on, at the lower rate. I do not think that is likely. I do not think it is the intention. I think that in some cases this imposes hardship.
I should just like to refer once again to a matter I raised on Second Reading, that is, where somebody has entered into a contract to pay for land, perhaps a year ago, but has not been able to complete the contract and whether he could not be exempted from the very greatly increased stamp duty. I argued that at some length on Second Stage. I raise it again now frankly because none of us has received the printed report of the debate of last Wednesday and unfortunately I was not able to hear what the Minister said in reply to the debate last Wednesday. I should be very grateful for his comments on both matters now.
Dr. Ryan: If I understand the Senator correctly, he has in mind the case of, say, a person who was more than three years resident here before 1947, but at the same time an alien and who did get land under the 1947 Act and would now like to extend it. I do not think it would be in keeping with the spirit of what we are doing here, if we allowed that because we do not know where that might stop. That type of person, having got that leeway, as it were, might buy any amount of land all around. He might become a very big land owner to the detriment of smallholders around who would need the land for their own living.
A few changes have been made in this. There is one change made in this where the Land Commission notify the Minister for Finance that they see no objection to such and such a holding being bought by an alien. In that event, the Minister for Finance may exempt him from the duty. There would be no objection to the type of person whom the Senator has in mind  applying to the Land Commission for that. The Land Commission might perhaps come to the conclusion—as they could, I think, under this section —that here is a person who is doing his duty as far as the land is concerned and there are another 25 acres, let us say, going beside him which would make a great difference to him and help him in his agricultural pursuits and they might say: “Yes, we will allow this.”
Generally speaking, though, that was not the reason we gave this power to the Land Commission. We found it so hard to define the types of lands that should be exempted that we thought the best way was to say to the Land Commission: “If you have no objection, we will allow this.” What we had in mind there was the big house with some poor land attached. The Land Commission might say: “We think, on the whole, that might be allowed to go. Here is a man prepared to spend money on this and certainly it is not a proposition for any Irish farmer to take on a house like this with poor land and therefore we would be prepared to say it can be done.”
The point raised by the Senator the last night, and to which he referred today again, was that a company might have been in the process of acquiring land before the Budget was introduced this year and that they might not have found it possible to complete the deal by some date in April. That was argued out very acutely indeed in the Dáil on both Committee and Report Stages. The reason I had to oppose it was that I could not find any safeguard that would give me an assurance that some fraudulent action could not be taken under any amendment of that kind that might be inserted.
It is true, of course, as the Senator pointed out here the last day, that it is entirely at the discretion of the Revenue Commissioners. We could hardly plead that there would be fraud, but, then, it is hardly a fair burden, if you like, to put on the Revenue Commissioners. They would have to have something to guide them as to the things they should allow and  the things they should not allow. I think it would be unfair to ask them to use discretion in such cases. I do not think there can be many cases.
As I pointed out in the Dáil, in many Revenue proposals, the same thing happens. Every time we put on a tariff, a person may have, as often happens, a cargo on its way or even at the docks. However, it cannot be helped. He must pay up. Once the axe falls in the form of a revenue duty, he must then pay up. I know that in the 1947 Act provision of some kind was made but, as I pointed out to the Dáil, it was an entirely new proposal in 1947. Nobody expected anything of the kind to come along. Some time was given to those who had commenced proceedings to complete them. I do not think anybody could claim that he was unfairly treated in this case.
There was a great deal of controversy going on before the Budget. There was a great deal of speculation even in the newspapers as to what measures would be taken in the Budget to stop this traffic, as referred to, of foreigners buying land here. Anybody engaged in the purchase of land for a foreign buyer must have been well aware that some measures would be taken in the Budget. It was certainly up to him to be careful about any steps he might take. I do not think we could accept any amendment of the law of the kind suggested.
Professor Stanford: I am grateful to the Minister for what he said. With regard to the first question I raised, can I take it that the Land Commission have discretion to exempt a landowner from the increased stamp duty, if the Land Commission agree that the amount of land to be purchased is in the public interest, so to speak?
Professor Stanford: I was not aware of that. I think that is a very reasonable provision and I think the case I had in my mind will be met by it. I entirely agree with the Minister in believing that legislation should be very firm in opposing any tendency on the part of people from outside the country to buy up large tracts of land.
With regard to the second question, there is just one thing I should like to say again. I do know of one case in which a contract was entered into on 11th June, 1960, nearly a year ago. It could not be completed for various legal reasons. That person would not have heard any rumours about changes nine months away from the Budget. As I said on Second Reading, I do not believe there is any injustice here, nor do I think that this is unfair. The Minister made it quite clear that in matters of this kind, you have to bring the hatchet down short and quick, no matter what argosy of cargoes comes into the port of Dublin. But here is a case where a man has to pay the best part of £2,000, owing to legal complications which it would be impossible for him to avoid. Perhaps there are other cases of that kind in the country, too, but if the Minister is certain that no really legal safeguard would prevent a risk of evasion or something of that kind under any provision here, I am satisfied, but I should like him to think once again because this man could not have heard rumours about changes nine months away from the Budget. Certainly, we have here a clear case of hardship.
Mr. J.D. Sheridan: I should like to support the point of view of Senator Stanford in regard to this matter of the 25 per cent. on the purchase of land by foreigners. I think that duty was a very wise one when it was imposed because it served as a restriction on foreigners buying up land in the country.
There is one angle to which I thought Senator Stanford might have adverted, that is, in regard to holding companies being exempt from this 25 per cent. duty. I think that is subject to abuse. I know cases where holding companies were bought up. As a matter of fact, if you take up the Irish Independent or the Irish Times, almost daily you will see an advertisement for a holding company with ability to acquire land. After all, 25 per cent. on every £100 comes to a considerable sum.
I wonder if the Government are alert enough in watching out for the purchase of these holding companies? It is generally known—and the Minister possibly knows—that that has been done. Some kind of regulation should be made to ensure that such a practice will be illegal so that any man purchasing a holding company for the purpose of defrauding the Government of their lawful revenue would be prosecuted.
Dr. Ryan: I want to tell Senator Sheridan something of which he may not be aware. The holding company was exempt in the 1957 Act. At that time, as Senator Stanford pointed out an Irish citizen could buy land in this country without paying the extra duty, or a person who was resident here for more than three years, an alien. Thirdly, an incorporated company could buy land. That has gone now. We are striking that out and no longer exempting the incorporated company. That has gone since 20th April. They have no right to buy land, for this purpose, anyway. They can buy land for other purposes.
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