Wednesday, 21 May 1986
Seanad Eireann Debate
(ii) throughout the relevant year he or his spouse was, or as on and from some time during the relevant year he or his spouse became, permanently incapacitated by reason of mental or physical infirmity from maintaining himself or herself.
(c) organisations or bodies of persons who satisfy the Revenue Commissioners that they are in nature voluntary and exist solely as nonprofit making bodies established in the public interest for charitable, sporting, philanthropic or humanitarian reasons.
(2) The Revenue Commissioners, where satisfied under subsection (1) of this section, shall issue an appropriate exemption certificate as provided for in section 38 and subject to the conditions of that section to deposit takers identified for the purposes of this section.
(3) Any person to whom this section applies who is aggrieved by the Revenue Commissioners' decision shall have recourse to the Appeal Commissioners as if the non-issue of an exemption certificate was an appeal against an assessment for the purposes of the Tax Acts.”.
Mr. Lanigan: In view of the fact that deposit interest retention tax is going to mean a number of administrative changes within the Revenue Commissioners, how many extra staff are to be deployed to ensure that there will be a speedy return to people, in particular, the elderly, who should not be paying any tax but will have tax deducted from their interest? I have fears that because of the cutbacks in the  numbers of people working in the Revenue Commissioners the extra staff needed in this area will not be provided. We had the peculiar situation at a county council meeting in Kilkenny on Monday where it was suggested by the Minister for the Environment that the county council should cut down on one vacancy within their area of responsibility to pay for census takers. I fear that since this gambit has been tried by the Department of the Environment on county councils that we will have some sort of rearrangement within the Revenue Commissioners which will not allow the deployment of staff which would be needed to ensure a speedy return of tax. What is the actual situation here?
Minister for Finance (Mr. J. Bruton): There is no precise number of staff required for this work. In any event, the people who will be putting in these claims are people who would probably need to be supervised from an income tax point of view anyway. Therefore, no additional work is involved in those cases. There will be some claims made by people who are not within the sight of the Revenue Commissioners. The work will tend in most cases to be relatively simple. I hope there have been discussions as to whether additional staff are necessary. However, no decision has been taken as to whether they are necessary. The representatives of the different grades of staff within the Revenue feel that there is a degree of understaffing. This is not something I necessarily accept. It is a matter which is the subject of continuing discussion.
As Senator Lanigan will appreciate the embargo and its substitute, as contained in the White Paper, Serving the Country Better, is a very necessary part of the Government's endeavour to keep administrative overheads down and to keep taxation from rising. It is fair to say that the embargo has been extremely successful in reducing the numbers of staff involved. Admittedly it can prove to be a crude instrument in certain areas. There are real dangers in getting into exemptions and exceptions because everybody can  make a case, if not a financial case, at least a social case, for being exempted. If one is exempted then all others are likely to be exempted very quickly. That would be a pity because the embargo has been successful.
The Senator mentioned the question of administrative staff of county councils. That has nothing to do with this Bill. It is an area where I would have thought there was considerable room for economy, not perhaps in the service sector — road workers and so on — but in the administrative overheads of the councils. Councillors should be supporting the Minister for the Environment but that is another day's work.
Mr. Kiely: In relation to the DIRT tax on voluntary organisations such as the GAA, the Minister stated last evening he would meet the GAA. I would point out that the GAA requested the Minister to meet him a month ago and they were very disappointed that he did not meet them. As of this morning they were still unaware that the Minister would meet them. Do they know that the Minister is prepared to meet them? I cannot understand the purpose of meeting them now. The Minister should have met the GAA before the vote was taken in the Dáil. It was arrogant of the Minister not to meet the GAA. It was a sad day for Ireland when the Minister did not meet an organisation like the GAA who have done great work for the community. This is evident from the facilities that are provided in every parish in the country. Before the introduction of this DIRT tax the GAA were anxious to meet the political parties. They wrote to the leaders of the main political parties and all parties, with the exception of Fine Gael met them. The GAA were very disturbed that Fine Gael did not meet them. Many members on the other side of the House have spoken of their concern about this and the effect it will have on the GAA. I am surprised, therefore, they did not ensure that their party would meet this great organisation.
Mr. J. Bruton: I have said that I am  prepared to meet the GAA. I said it in the Dáil and I have said it here twice or three times. I have made it quite clear that the tax is not going to be changed. Any meeting predicated on the assumption that people coming into me were going to somehow or other change my mind on that score would be wasting their time. It is not going to be changed. That should have been clear to all Senators throughout this debate. However, I am prepared to meet the GAA to discuss their general problems in this area and any assistance or advice that I can give I will be quite happy to give.
I am not aware that the GAA sought a meeting with me one month ago. The request came to my personal sight half way through Committee Stage debate in the Dáil. In other words, when I was working on the Finance Bill and attending Cabinet meetings and so forth from morning until night without a break. It was not possible to meet the GAA then. In any event it would have been misleading to meet them on the basis, as suggested by Senator Kiely, that somehow or other if I met them before the Bill was put through the Dáil that would have made some difference. It would not have made any difference. Any meeting that was predicated on the basis that if they met before the end of the Committee Stage that I would change the tax would not be validly predicated because there was no possibility of the tax being changed.
Mr. Ferris: I agree with Senator Kiely that the level of debate here often goes unnoticed by the media. That is a problem. As soon as the Minister committed himself publicly last night following discussions I had with him, I communicated that view directly to the member of the GAA who contacted me to assure him that the Minister was prepared to meet him to advise him on levels of investments arising out of yesterday evening's discussions. It was communicated to me that they had requested the Minister to meet them and that he had refused. I learned afterwards, when I discussed it with the Minister, that he had been asked to meet them on a particular day when he was not available, which is quite a different matter.
Mr. J. Bruton: They wanted to meet me that night. They had asked to meet me and I said I was prepared to meet them. Then an urgent request came in which said: “Meet the GAA tonight”. It just was not possible. I cannot be in two places at the one time. I cannot be in the House debating the Bill and somewhere else discussing the Bill with the GAA. I have not achieved bi-location yet.
Mr. Ferris: That is fair enough. All of us wanted to help in this matter. The parliamentary Labour Party agreed unanimously that they would request their Cabinet Ministers to make a change in this. Just in case you think it is a one sided effort, it is not. Mr. O'Kennedy, the Opposition spokesman on Finance put down a resolution in the Dáil in the name of Fianna Fáil and then asked the GAA to get all-party agreement on it. A previous Finance Minister must know that that is not the way you make representations to have a Finance Bill changed. If we are playing the GAA game, let us play it fair. The Minister has offered to meet them. He has offered to advise them on how changes could be made that would be of benefit to them without exempting them from this tax. If they want to use the existing sources of investment which brings them into this tax, then obviously they are looking to pay  it. There are other vehicles available to them. They could be advised in this regard. All of us want to help them. I advised them last night and indeed this morning that the Minister is prepared to meet them. I am sure they will take up that. I am not sure whether it should be done at national level or at west county board level or whatever.
Mr. Smith: I support everything my colleagues have said in relation to trying to get special consideration for the GAA. I want to come back again to the central core of what is involved in the recommendation put forward here.
On the basis of the figures the Minister has given to us, which range between £25 million and £40 million which the Revenue Commissioners estimate will be sucked into the Exchequer coffers arising from this new tax from persons who, in the normal way, would not be eligible for income tax, I estimate that there are at least 40,000 individuals who are going to be hurt by this who are neither old age pensioners nor young people. They are members of the adult population, some of whom have sold their premises, sold their farms, have become ill, who had investments and who depend on these investments to live on a day-to-day basis. By any stretch of imagination to take between £25 million and £40 million from people who are not eligible to pay income tax is a massive assault on their incomes and to my mind is grossly inequitable, unfair and even immoral. To solve taxation problems for any group in society, or to attempt to do so by loading on an unfair imposition of this order on numbers of that order is quite extraordinary. I put it to the Minister again — and we will be pressing this recommendation to a vote unless that he is able to do something for us — that it should be possible for the Revenue Commissioners to exonerate from the imposition of this tax  people who are genuinely poor, have low incomes and depend on their investments for income. To do otherwise would be grossly unfair.
Mr. Daly: I might be oversimplifying it but I think there is a simple solution to the GAA's problems in regard to this tax — that is, that they form an insurance company because insurance companies are not liable to tax. The purpose of this fund of £1 million is to help them to get over their liabilities but they are being charged prohibitive insurance premiums. If they form an insurance company — a GAA insurance company — they will not have to pay any tax. The Minister may correct me on this if I am wrong.
Mr. W. Ryan: Like Senator Daly I feel that the GAA have this in mind but to form an insurance company one must have a substantial amount of money up front. This is exactly what the GAA are trying to do. Because of this tax, it is not going to be as easy as they hoped.
Mr. Fallon: On the broad issue Senator Smith referred to I want to support his theory and his thought. In his speech on Second Stage the Minister said that to eliminate or to take away from those people who are not paying income tax would be far too costly and he could not do it. He is admitting that 60 per cent of those people who pay this tax are people who would not normally pay income tax. Therefore, we are taking tax from people who should not be paying income tax. I agree with the view that this is almost immoral. Certainly, it is a massive injustice so even at this late hour some radical change must take place in this Bill.
Mr. J. Bruton: I have explained fairly often what the problem is. If we were to do what the Senators advocate, we would blow a big hole in the revenue which is required to fund reductions in income tax. Unfortunately, we are caught  between two evils — the evil of income tax which is already too high and the evil of a tax to which there are many objections. Unfortunately that is the situation. I do not want to become involved in telling Senators why we have this problem because it would not contribute to the harmony of the House if I did so. I would not wish to be derogatory in any way.
Mr. Smith: I do not know why the Minister, in a multi-million pound budget, selects the £25 or £40 million yielded by this taxation from people who would not be normally eligible for income tax as the only lever open to him to reduce the burden of income tax which is already too high. Time and again the Minister has selected this strategy of indicating to both Houses that it is only possible to reduce the burden of taxation in a multi-million pound budget by taking tax from people who are not eligible for tax. I would debate that with the Minister anywhere. If that is the strength of his argument and if that is the final chase he is going to put into the introduction of this tax — you can only reduce income tax by imposing new taxation on persons whom he admits freely are not eligible for income tax — then there has to be another course. Even above and beyond that, no matter what burden income tax is, no person will be asked to pay £1 income tax if he has not earned or received it. How do you compare that situation, however burdensome, to a situation where you are expected to pay a tax when you did not have the income?
Mr. Ferris: I understand the point Senator Smith is trying to make and it is a very subtle point. However, can we first decide what is income, what is earned income and what is unearned income? Income tax, as we understand it, applies to a man's earnings out on the ground, working in the field, working either by the sweat of his brow or with his brain. Money earned from deposits in bank accounts is known as unearned income and the person who initiated the Finance Act which introduced income tax  referred always to interest as unearned income. In other words it makes money by depending on other money to make it. The vast majority of it is never used for any kind of productive purpose. That is the tragedy about this kind of money which is sitting around, almost gilt edged, in the banking institutions. Nobody benefits from it. It is debatable whether that is the sole income of any of these people. If it was they would not be leaving it sitting in the bank, making money for banking institutions. If we go down the road of unearned income — which is what this is — there is nothing wrong with taking tax off it at the rate of 35 per cent if it is not being used.
There are people in the PAYE sector who have difficulties in proving their tax allowances. They are taxed on an emergency basis and they pay more tax than they should pay during a period in which they have to prove that they are not eligible to pay income tax. There is a lot of money in this area which the Government can use for the benefit of the community, and to provide services for people whom we all worry about.
For the first time ever in the history of the State we are making an effort to spread the load from the PAYE sector to the capital area so that we can reduce the burden and make some effort towards achieving tax equity and tax reform.
There was a previous attempt made to have a capital gains tax in this area but the Opposition abolished it. It was taking in £10 million at that time. It could now be taking in £30 million and we would not have to be doing this. It was wiped out because there were vested interests at work in the whole area of direct interest related tax.
There are billions of pounds diversified in banks by people under the same names but in different banks and branches to avoid the threshold of £50 to £100, depending on whether you are single or married. That is the reality and we know it. We are trying to address the problem and to use the money productively for PAYE people with families who are hard taxed at the moment. We have put their case forward so often that it is almost  repetitious. Unless we make an effort we will no longer have any credibility. Here we are making an effort. We are exempting people of 65 years or older from this category because some of them would not be in a taxable income situation. We want to be careful that we are not penalising them. Are we now going to put in amendments which will allow children of wealthy people to have money invested tax free at the expense of the taxpayer, in particular, of the PAYE worker? That is what we are talking about. I do not want to be provocative but that is exactly what we are talking about.
Mr. Lanigan: I withdraw it. To suggest that elderly people who have invested money and who need interest to support themselves are trying to evade or avoid tax is ludicrous. To suggest that the billions of pounds which are invested by people trying to diversify their billions throughout a number of accounts to avoid the £100 threshold is again utter nonsense. That is not the way people with billions of pounds work their money. We are talking about the large number of elderly people who will suffer very badly because of this tax. Equally, it is a nonsense to suggest that any person who has had recourse to the banks to borrow for productive or for service purposes would hate to think that moneys invested are being used in a manner which is not likely to produce pay for PAYE workers.
We should get back to what Senator Smith has been talking about, that is, that elderly people will suffer very badly by a reduction in their income, whether for a very short or a very long period, depending on the Revenue Commissioners ability to process repayments. The Minister said it is a very simple process and that there are enough staff because, generally speaking, these people would be dealing  with the tax authorities anyway. We are talking about people who are not dealing with the tax authorities anyway. Within the Revenue Commissioners they will readily admit though the Minister said it is not true, that they are overworked——
Mr. Lanigan: I suggest that if we are to take the situation that pertains in the country where it is constantly said that taxes are not being collected because the staffs are not available, your premise that now we bring in another form of taxation and we do not have to have extra staff to deal with it, is again a fallacy. To get back to the substantive argument made by Senator Smith, we are not talking about the people who have billions of pounds or a small number of people who are spreading moneys around to avoid paying tax. We are talking about people who should not be paying tax at all and who are now going to pay tax but who will be able to reclaim it. That is the argument that we are making. We would not on this side of the House in any way get into the argument in support of people who are trying to spread moneys around in the manner that Senator Ferris has averted to. We are not trying to help those in any way. What we are trying to do is help the elderly who should not be in the tax net, who will not be in the tax net, who under any laws, should not come into the tax net but who now are being brought in by this very unfair and unjust tax. In any circumstances it is a tax that we should not, in this House or in any other House, condone.
Mr. J. Bruton: I am sorry to be repeating myself but Senator Lanigan is making a big thing about the elderly. It is arguable to define anyone over 65 as being  elderly. However, anyone over 65 is eligible to obtain a refund if the deposit interest retention tax collected from him is in excess of what would otherwise be his income tax liability. If the Senators wanted to make a case they would be better to talk about the under 65's and their position. It is also worth recalling that if they are incapacitated and under 65 they have the same rights as those who are over 65 have to get a refund of their tax if it is in excess of what would otherwise be their income tax liability.
There is much reasoning in the points being made. It is a tax we would all prefer not to have to introduce in this form but I have explained why it is necessary. We are a country which has a very heavy burden of income tax. It is difficult to make the cuts in public expenditure that are necessary. We have made considerable progress. The volume of public expenditure in Ireland has never received too much attention but since Building on Reality was published, the balance of public expenditure has been reduced under this Government to below the levels targetted for in that document. We have actually made larger economies than were planned for in Building on Reality.
Even having done that, that does not leave enough money available for the provision of sufficient cuts in income tax to satisfy people who would expect more reductions. That is why this tax is being introduced. There is nothing more I can say about it.
Mr. T. Hussey: I had not intended to discuss this matter. The case has been put forward adequately by my colleagues here on those benches but I was a little surprised at the tone introduced by Senator Ferris in this debate. We are not concerned at all about the children of wealthy parents. That is certainly not the purpose of this recommendation. We are concerned about the old age pensioners and the people over 65, who, at the behest of the Government last year, and in particular of the Minister for Health who went on television and radio to encourage old age pensioners to put their  savings into the banks and into the other institutions where they would be paid interest on them and where their money would be safe, deposited their money in such institutions. Now those people feel very betrayed by the Government who have come along one year later and slapped a 35 per cent tax on the interest on their money in the banks. That is the work of a very uncaring Government. I know the Minister is determined at this stage not to change that particular section of the Bill — but I think he should give it serious consideration.
I can assure him that he has incurred the wrath of all those old age pensioners throughout the country who throughout their lifetime have succeeded in getting a small nest egg together for the end of their days. They now find that the interest on those little savings is being whittled away by a Government who have no concern for old age pensioners.
Mr. J. Bruton: Just to reply to Senator Hussey, I do not know if he was here for the debate yesterday but I dealt with that point, certainly to my own satisfaction — I do not know whether it is to the satisfaction of the Senators — when I pointed out that it still makes sense for people to take money out of the mattress and put it into the bank. You are getting some interest on it if it is in the bank. The substantial interest rates at the moment are well in excess of inflation. Even if 35 per cent is taken off the interest rates, the remaining 65 per cent of the interest that you are keeping is far more than one would get by keeping money in the mattress. Sixty five per cent of something is more than 100 per cent of nothing. That does not make sense. That is not a good argument at all. It still makes sense to take your money out of the mattress and put it into the bank.
Mr. Ferris: On a point of clarification following Senator Hussey's concern about what I said, are there not other institutions in the country available to old people which would not tax them and would make their money quite safe and meet the Government's requirements of  trying to make sure that people were safe and their money was safe? Is the Senator not aware of other methods of saving for old people, apart from the banks? That is all right.
Mr. T. Hussey: Senator Ferris must realise that the bank is the first port of call for most old age pensioners. Does the Minister seriously think that those old age pensioners, even though they are exempt from tax, are going to fill up a claim form and claim that tax back at the end of the year? I do not think they will.
Mr. J. Bruton: I would say that Senator T. Hussey will be assisting some of these people in the vicinity of Glenamaddy in the next few months as to how to fill in these forms. I think we will all be doing it in our own areas.
Mr. J. Bruton: I am not saying that they will have to or that they should necessarily. I just expect that in some cases at least they will. I do not think it is going to be a very onerous task if old age pensioners have any difficulty filling up the forms. There are ample sources of advice available to them, one of which is by way of public representatives. There are, of course, other bodies such as social service councils. Bank managers will probably assist them also. The bank managers will have an interest in ensuring that they do claim all their rights so that they will leave the money in the bank. I would say there will be no shortage of assistance to old age pensioners in filling up these forms. I do not think it is going  to cause the great difficulty that Senators are claiming it will cause.
Mr. Lanigan: Will there be staff available in the income tax offices around the country to deal specifically with people who go in to look for reclaiming of interest because at present it is impossible? There are not enough staff to deal with the current PAYE and VAT and the other taxation problems that people have. There is no point in saying that people should have to go to TD's or Senators or to social welfare officers. If you are going to deal with this matter, it should be dealt with in the Revenue offices around the country. I am asking the Minister, will there be extra staff available in the offices around the country to deal with this?
Mr. T. Hussey: The Minister mentioned the fact that bank managers would be prepared to assist those people in claiming back their tax. Does he think bank managers might assist them in transferring the money out of the country as has happened in the past and is happening at present? Are the managers going to encourage those people who have large amounts of money in the banks to transfer this out of the jurisdiction entirely so as to get away from the Revenue Commissioners?
Mr. J. Bruton: I expect they will but that is a matter to be discussed between the banks and the Revenue. I certainly think it would be very useful if they were. As far as Senator Hussey's point is concerned, it is not possible for people to transfer money out of the country. That would be a breach of exchange control.
Mr. Lynch: I want to remind the Minister and the House once again of the consequences of the imposition of this tax. The GAA are being asked to form an insurance company. Is that not a suggestion of tax avoidance in a sense? We have the question of earned and unearned income. I would dispute the theory that lies behind earned or unearned income. Where people have worked all their lives and have the little nest egg invested at a percentage rate and are dependent upon that interest to sustain them for the rest of their lives, I consider that should be termed “earned income”. They have worked hard all their lives for their investment. They are small business people or small farmers, especially childless couples.
The Minister will frighten the living daylights out of the older sector in this country if he asks them to start filling in tax forms, people who have not been in the tax net and are not been au fait with tax forms. I have a letter in my office from one of my constituents, one of the Minister's. There is an income tax demand with it. This old lady explains in her letter that all she has is her old age pension, her cottage and her garden. She does not have to pay but because she got this demand she wants to know if I could get her into St. Bridget's in Ardee or St. Loman's in Mullingar. I am writing to the Minister for her this very evening——
Mr. Lynch: ——to ask if he will alleviate the problem. This tax will have dire consequences. I am shocked to hear people will have to start filling in forms and filling in water rate demands for the county council who are sending out our refuse demands in my own county to people who have no refuse collection. In many cases they pay them. They are not entitled to pay them.
Mr. J. Bruton: They are the minority. The problem in County Meath is that people will not pay their various charges. They are getting a certain amount of encouragement from certain politicians in that regard. The result is that our roads are being run down because our charges are not——
Mr. Lynch: In areas where there is no refuse collection, you do not have to pay. You only pay where there is a service in the area. Old people are very conscientious and they meet their commitments. If they will have to start filling in these tax forms, that is wrong.
Mr. J. Bruton: I agree that any connection with the tax code tends to be a distressing experience for people who are unfamiliar with it. I am sorry that any person should have received a demand, which has caused distress, for income tax for which she is not liable. I accept fully that Senator Lynch is correct in saying people are put out on getting these. I have no doubt that they received very good advice on the matter from Senator Lynch who would have advised the lady in question that, if that is all her income she is not liable to pay any income tax.
Mr. J. Bruton: That certainly reassured her even more. I am sure that she never realised it was going to be raised in the Seanad though. In any event, given the fact that the banks will be involved in this, the local income tax office and public representatives will be able to assist people. All the various social organisations dealing with the old people will be assisted and helped by the Revenue Commissioners in advising old  people on how to make these claims. I do not think it will actually prove to be a distressing experience. Certainly as far as I am concerned, we will do all we can to  ease the worry for old people who are seeking to make these claims.
de Brún, Séamus.
FitzGerald, Alexis J.G.
Higgins, Michael D.
Hourigan, Richard V.
Quealy, Michael A.
Recommendation declared lost.
Recommendation No. 25 not moved.
Mr. J. Browne: I move recommendation No 26:
In page 50, between lines 40 and 41, to insert a new paragraph as follows:
“(c) at some time during the relevant year the said individual was a widow or widower, as the case may be, who would not otherwise be liable to tax save for the provisions of this Chapter.”
As a member of a caring Government — despite what has been said on the benches opposite — I want to take up this issue. Unlike what the Senator and his colleague from Meath were saying about how sorry they were for people who got bills for which they were not liable, I think it is far better to get a bill for which you are not liable than it is to get an income tax bill for which you are liable but unable to pay or feel you should not pay. I should like to ask about the position of widows. I suppose the word “widower” is used in the recommendation because of the equality agency, but I feel very sorry for people who find themselves widows and who often have to sell their farms. I have a case in mind where a woman sold her farm. She is living on the investment. She has three children and while she has about £90,000, which sounds high for someone who has not very much money, at 10 per cent she is getting £9,000 interest. She is living on that. She has no other income and if she has to start using her capital gradually she will come down along the line; as her capital decreases, so will her interest. While she is at the moment allowed approximately £4,500 before she pays tax — and she is paying her taxes — on this basis she will pay far more tax because  she will pay approximately £3,150 retention tax on the £9,000. That leaves her income at £5,850. If she were allowed £4,500 tax free it means she would have a taxable income of £1,350 which would cost her £385 and she would finish up paying a total of £3,500 tax. Under the normal system I reckon she would be paying tax only on about £4,500 which would cost her £1,500. She is paying about £2,000 more in tax. That may not be accurate, but that is how I see it. Cases have been made for the GAA but where a widow is genuinely living on the interest, keeping her family together she is not coming well out of this retention tax. I would ask the Minister, if my figures are right to do something about that. If she had to use her capital to survive — she is not going to live on £5,000 a year with three children — she will have less and less interest to come. There may be some way out. She is going to pay at least £2,000 more in interest than she should pay.
Mr. Smith: I would like to support Senator Browne but it is a belated conversion. In the previous recommendation we consistently made the point to the Minister, without specifically mentioning widows, about similar circumstances, where people would not have a taxable income but to whom this tax applies. It seems that the Minister is determined to pursue the course he is on. I have great sympathy for Senator Browne and for his belated conversion.
Mr. Browne: I am delighted to have Senator Smith supporting me. How he has come to the conclusion about a belated conversion I am not so sure. It is part of the illogicality of the Opposition at the moment. I sat here last evening and this morning and I listened to the Minister explaining things. I have seen Senators come in and make cases that have been answered. I said at the beginning that there are deserving cases. There was a case made for someone who was in a terrible state because she got a bill for which she was not liable. That is not a very serious case. All kinds of cases were  made for organisations. I supported Senator Honan last evening on her wonderful work of fund raising for the mentally handicapped. I am dealing with a case where an injustice is being done to someone who is depending on the interest for income. This is not a conversion, a lot of people are not depending on interest. I could have money in the bank and earn interest on it. I would not deserve the same sympathy as a widow depending on the income. There are chalk-and-cheese situations. I thank Senator Smith for his support and I know he has my interest at heart.
Mr. J. Bruton: I hate to interrupt this polite discussion. With regard to the widow Senator Browne is referring to, she should look at saving certificates. I realise that she has a lot of her money in the bank at the moment and is worried about having to pay retention tax. As I explained last evening on the Interpretation section, what she should do is put the bulk of her money into saving certificates which she can cash in after a certain period. If she leaves it in for the full period she will get the full interest rate and if she has to cash it in earlier she will get a lesser interest rate but she will still get interest. She should aim to leave it there for the maximum period. At that stage she has £40,000 and she reckons she is going to need £10,000 of that for the next three years. She should leave the £10,000 in the bank and pay the tax on that but she should put the £30,000 into savings certificates. The part of her capital that she expects to continue to be there should be in saving certificates. Once it is left long enough in saving certificates there is no difficulty about the deposit interest retention tax; it does not apply. There is interest at the rate of at least 7 per cent added on to the value of saving certificates. That is what the lady in question should do.
Senator Lynch is not here to hear me describe my experiences but I had a lady in the exact situation Senator Browne is referring to in to see me last Monday. That was the advice I gave her. I do not know if she was entirely happy with the  advice but it was the best advice I could give her in the circumstances. There are options open to people which they should look at. They do not have to go any further than the local post office.
Mr. Browne: If she keeps £10,000 to work on she will only get £1,000 interest. She has used up £10,000 of her capital at the end of the year so, out of the £30,000, if she has to take another £10,000 out of it the following year, in three years she will have no capital left. I do not follow the logic of this.
Mr. J. Bruton: I am saying she should use the £10,000 to live on. She should draw it down, not just interest, but capital as well and live on that.
Mr. Browne: Would it be £40,000 in four years?
Mr. J. Bruton: The amount that is in saving certificates will still be there and the deposit interest retention tax does not apply to that. I slightly misled the House in my illustration. The maximum amount that any individual can put into saving certificates is £25,000. She should put £25,000 into saving certificates and keep £15,000 in the bank and draw it out as she needs it.
Mr. Browne: If she keeps withdrawing her capital she finishes up with nothing.
Mr. J. Bruton: She will finish up with her saving certificates.
Mr. Browne: But it she invests £25,000 and even if she gets 10 per cent — which I am sure she will not — she will get £2,500 at the end of the year.
Mr. J. Bruton: You are presuming that she is only going to live on the interest. I am saying that she should not live exclusively on the interest. In respect of that part of the money that she puts into the bank she should live on it, that should be  the shadow interest she would be getting on the rest. She lives on that and the interest is being added on to the saving certificates and the value of the saving certificates is going up all the time. If you put it into a saving certificate the amount of money you get at the end is greater than the amount you put in because the interest is being added on. Essentially, she makes a rearrangement of her finances to minimise her tax liability. It is possible for people to do this.
Mr. Lanigan: I am not sure I can understand the logic of the argument being made by the Minister. Basically, he is saying that people should run down their capital and live partly on capital and partly on interest. One can see that the age profile of people is getting higher and higher and what the Minister is suggesting will mean that eventually quite a large proportion of these people will have run down their capital and they will have no capital to get interest on. They will then become a total burden on the State. It is completely illogical to go down the road the Minister is suggesting; it makes no sense.
Mr. Howard: It is a useful discussion but one element of confusion has crept into it. Senator Browne said that one of his constituents had £90,000, the Minister talked of £40,000 and then we talked of £25,000 and £15,000. But, if we could concentrate on £90,000, it would be easier to follow. As I understood Senator Browne's point, the interest on £90,000 would be adequate for her to live on and the woman he mentioned would not need to dilute the capital sum in any way. Could we tease out what her options would be and if she could continue to live on the interest of the £90,000, minimise her tax liability and retain her capital?
Mr. J. Bruton: If she has that much money she should be looking at Government gilts and the possibility of putting money into buying National Loan stock to which the deposit interest retention tax does not apply.
Mr. Browne: Can she withdraw at any stage?
Mr. J. Bruton: She cannot have it both ways. One cannot say that it is capital and you will not run it down and then ask if it can be withdrawn at any time. It is either one or the other. If it is capital there are ways of leaving it invested and getting the interest on it which will not be taxable. People should put a certain portion of their capital aside to live on while the rest of it is earning interest, free of deposit interest retention tax. It is simply a transfer of the money. They should rearrange their holdings of money in order to minimise their tax. It is not my job to advise people on this.
Mr. Smith: The Minister already advised everybody last Monday.
Mr. Browne: I am sorry for using the words wrongly; I did not mean could she withdraw her money; I meant was she going to get a regular interest payment on gilts? She has to be getting an income regularly.
Mr. J. Bruton: Twice a year.
Mr. Cassidy: It is a very usual occurrence to have a situation such as where a husband is killed in an accident — my own brother-in-law was killed in a car accident and left five young children aged from three to 12 — and the wife may then be awarded up to £100,000. In most cases such people do not know how to invest that money. In that light the last five minutes of this discussion have been very meaningful particularly for people who are unfortunate enough to lose the head of a family. This might probably be the last occasion on which they would receive any such money apart from their widow's or widower's pensions. So, the interest on the money they receive is very important to subsidise the further education and well-being of the family for the following 15 to 18 years until all the children are educated.
Mr. J. Bruton: I think Senator Cassidy's point is valid. That type of case is very unfortunate. I am not saying that the deposit interest retention tax will have no impact; it will have an impact on it. But, if they can manage the allocation of their resources and get good advice on it, that impact can be very quickly reduced.
Recommendation, by leave, withdrawn.
Section 39 agreed to.
Section 40 agreed to.
Question proposed: “That section 41 stand part of the Bill.”
Mr. Lanigan: I am glad that the Minister has brought in this series of provisos which give capital allowances in certain designated areas for the general restructuring of certain areas, but I would like the Minister to look at the possibility of extending these areas apart from Custom House Docks area and certain designated areas in Dublin, Cork and Limerick. Apart from Dublin, Cork and Limerick and the Custom House Docks area there are in every other city and some urban areas, districts which are run down and in grave need of refurbishment. Is there any possibility that we could extend these capital allowance sections into other areas? It would have a beneficial effect. Initially the cost might be substantial, but the returns could be of enormous benefit, not alone in terms of cash which would accrue from the usage of these buildings to the Revenue Commissioners but it would have a tremendously beneficial effect on the ambience of our towns and cities. On a day when the Minister for the Environment is suggesting that certain counties which are not good housekeepers in terms of litter and looking after their areas will be cut in their allocations of funds, I would suggest that if we had an increased area of designation throughout the country so as to take in  any blighted city or town centre it would have tremendously beneficial effects.
I do not know if I am right in speaking about the tax allowance to be made to owner-occupiers of newly constructed dwellings in the designated areas now, but why is it that it is only in the designated areas that these allowances, which are spread over ten years at 5 per cent per annum, are being granted? Equally, why are they only being granted to owner-occupiers within these designated areas? Obviously, it would be beneficial if we could get our small towns and villages and indeed any urban area refurbished.
An Leas-Chathaoirleach: Senator Lanigan can speak on that on sections 42 and 43. We are on section 41.
Mr. Lanigan: Very well.
Mr. J. Bruton: Obviously, if this tax concession was given to all areas its effect would be reduced. We have selected the most severely blighted city centre areas of large cities throughout the country for immediate attention. If the scheme were extended to all major cities and towns its effect would be diluted. The Minister of State at the Department of the Environment stated in the Dáil on 24 April that there are no proposals for the extension or modification of the designated areas. That is the case.
Mr. Lanigan: There would be a dilution if it were extended but there would be a definite advantage to the Revenue Commissioners and a tremendous advantage from the environmental point of view. Also, there would be benefits from the fact that new buildings would be occupied and people would be working in these areas. All the signs would not be negative if there was an extension to other areas.
Question put and agreed to.
 SECTION 42.
Mr. Smith: I move recommendation No. 27:
In page 51, subsection (1) (b) (i), line 43, after “use” to insert “wholly or partly”.
In general most people welcome what is contained in the general provisions of this section. It is crucially necessary that the maximum incentive is given for development of the inner and neglected parts of our major cities and some good work has already begun. In the context of this amendment we are anxious to broaden the scope of this development and to deal with situations where activities could be undertaken in parts of dwellings which also incorporate domestic dwellings. It is a minor recommendation. I think it has the value of broadening the scope of this otherwise quite beneficial measure.
Mr. J. Bruton: The recommendation proposed by the Senator would extend the capital allowances in section 42 for expenditure on construction of premises located in any of the designated areas to be available in respect of the whole of the premises if part of the premises is in use for the purpose of a trade or profession. Given the wide interpretation of the meaning of commercial premises for the purposes of section 42, the most likely alternative use which will be made of the non-commercial part will be as living accommodation. It is already provided in this chapter that other tax reliefs will be available in respect of living accommodation in the designated areas. To allow further relief would be to give a double allowance in respect of the same work. It would not be wise.
Recommendation, by leave, withdrawn.
An Leas-Chathaoirleach: Recommendations Nos. 28 and 29 may be discussed together.
Mr. Howard: I move recommendation No. 28:
 In page 52 subsection (1), to delete lines 5 and 6 and substitute the following:—
(iii) any building or structure in use as or as part of a dwelling.”
The purpose of recommendation No. 28 is to extend the urban renewal relief to dwellings as well as to commercial premises. We all welcome the decisions in relation to urban renewal and the restoration of the areas that have been referred to. To many people urban renewal involves more than the development of commercial activities within a specified area of any city. The one thing that distinguishes our cities, particularly our capital cities, from other European cities is the drift of the population, the people living within the centre of our principal city, to the suburbs. That drift is not found in other cities on the Continent or, indeed, in Britain. Therefore, this amendment is an attempt to extend the benefit of the urban renewal relief to the erection or the provision of dwellings as well as commercial premises within a specified area.
Mr. Lanigan: I support the recommendation proposed by Senator Howard. It makes sense. The Minister said there would be a duplication of the allowance if this were brought in. It is basically a similar recommendation to the one proposed by Senator Smith. In an era where many people work from home, and are being encouraged to work from home, this recommendation should be looked at in detail. A number of people work computer services from their homes. Very small industries can be run from a small room in a dwelling house. We should encourage that type of small service operation. A person who can run a small business from his or her own home should be encouraged. It gives the opportunity to married women to operate services from their homes and, at the same time, to run the home and family in a proper manner. I am not too sure whether we could devise a system  whereby they need not get the full allowance but a partial allowance would be offered. Under section 44 there will be allowances for owner-occupied dwellings. I wonder if people who get the allowances as owner-occupiers would be precluded from getting these allowances if they were going to operate a business from the premises. I support the recommendation.
Mr. J. Bruton: Section 44 deals with the position of those who are interested in living accommodation. It provides a tax allowance to owner-occupiers in respect——
Mr. Cassidy: I think the amplification is off. I am finding it very difficult to hear.
Mr. J. Bruton: I will raise my voice.
Mr. Cassidy: There is something wrong with the amplification system.
Mr. J. Bruton: Section 44 provides a tax allowance to owner-occupiers in respect of a dwelling newly constructed or refurbished during the period 23 October 1985 to 31 May 1989 in the designated areas. The individual who incurs the expenditure on construction or refurbishment must be the first owner and the first occupier of the dwelling after that expenditure has been incurred.
The allowance may be claimed in each of the first ten years of the life of the dwelling following construction or refurbishment, provided that the dwelling is the sole or main residence of the individual. The annual allowance will be of an amount equal to 5 per cent of the expenditure incurred by the individual, excluding site costs and net of all grants payable to him. That is available under section 44 to those interested in living accommodation. That meets the case Senator Howard and Senator Lanigan are making.
Mr. Lanigan: If people use part of their dwelling house for business purposes, is the Minister saying now they will get  capital allowances or is he saying they will get a tax allowance over the ten year period if they use part of their dwelling as a commercial premises?
Mr. J. Bruton: Yes, it is possible to claim both in respect of the different parts of the buildings as long as they are divisible in some clear way to get the commercial allowance in respect of the commercial part and the one I have just referred to in respect of the dwelling part.
Mr. Lanigan: There is no need for that recommendation at all. What he is saying is that the recommendation as suggested by Senator Howard is already, included. He is accepting the amendment as being an integral part of the Bill.
Mr. J. Bruton: No; there is no need for the recommendation to be accepted or otherwise because I think the basic point is already covered.
Mr. Howard: I have just two queries. What can be obtained from dwelling house as opposed to a premises with commercial activity? What is the difference in value terms?
Mr. J. Bruton: They are different allowances.
Mr. Howard: That is just one query. The second query is — I know we have not come to section——
Mr. J. Bruton: The one for the commercial premises is more generous.
Mr. Howard: That is what I thought. The one for the dwelling is simply 5 per cent.
Mr. J. Bruton: Five per cent annually over ten years which adds up to 50 per cent.
Mr. Howard: We have not reached section 44 although it has been referred to. I do not know what I can do at the  moment until I get this clarified. I understand, having looked quickly at section 44, that there is now a third activity. You have the building and commercial activity, you have the dwelling, and you have a building in which you have a combined dwelling and commercial activity. Therefore, you can have two separate scales of aid applying to the same building, provided part of it is for living purposes and part of it is being used for commercial activities. I want to have that clarified. Then I will decide what to do with my recommendation.
Mr. Cassidy: That is the point I wanted to tease out with the Minister.
Mr. J. Bruton: Essentially, he has to set aside a part of the dwelling which would be used for commercial purposes on a full time basis. obviously he would not be able to claim the commercial allowance if he used his front drawing room once a week to see his clients. That would not make it a commercial part of the building. If it was genuinely being used as a commercial part of the building on a full time basis. Obviously he would come in under the commercial allowances and the rest under the residential.
Mr. Lanigan: Is it the case that a shop or a public house or any service industry will come in under these allowances?
Mr. J. Bruton: Yes.
Recommendation, by leave, withdrawn.
Recommendation No. 29 not moved.
Section 42 agreed to.
Mr. Howard: I move recommendation No. 30:
In page 53, line 41, after “Area”, to insert “or other designated area”.
The purpose of the amendment is to extend the aid or benefits that are available for development in the Dublin  Custom House and dock area to all designated areas in other cities as well. I know there are special aids for Cork, Limerick, Galway and Waterford but the purpose of the amendment is to attempt to extend the aid for development that will apply to the Custom House and dock areas, to other designated areas in other cities.
Mr. J. Bruton: The whole purpose of the section is to give special assistance in regard to the Custom House dock site because we went to get work done on that site for national reasons. To extend the additional incentives to everybody would, of course, be very generous and a fine thing to do if you could do it but it would cost more money and it would make a bigger hole in the tax revenue which we do not want.
Mr. Lanigan: Would the Minister not agree that this hole in the tax revenue would be a very short duration because if you can get the blighted areas in cities refurbished and occupied you will get revenue right throughout the economy. It will come in through PAYE from the workers who are there; it will come in through rates from the premises; it will come in through service charges; it will come in in the form of revenue to the local authorities. The more refurbishment that is done, the bigger the revenue collection which can be got from any area which is now run down and of absolutely no use to anybody.
Mr. J. Bruton: As I indicated already, the rest of the incentives do apply and are quite generous. I think the object the Senator is seeking will be achieved anyway.
Recommendation, by leave, withdrawn.
Section 43 agreed to.
Question proposed: “That section 44 stand part of the Bill.”
Mr. Lanigan: I should like to ask the Minister why the qualifying people in this are owner-occupiers? Why are the allowances not extended to other than owner-occupiers?
Mr. J. Bruton: Essentially, the effect of the Senator's suggestion would be to make the relief more generous. The first reason it is confined is to minimise the tax loss which would arise if one were to go as far as the Senator is suggesting. There is another good reason why this measure is confined to owner-occupiers. The purpose of the whole urban renewal process in which the Government are engaged is to get an established community of owner-occupiers in the inner city areas. Inner city areas have tended to be areas in which rented accommodation and transient populations have been concentrated. If the relief were available to the construction of rented accommodation it would tend to further accentuate the existing trend in those areas. It is not entirely desirable to have an artificially unusually high concentration of rented accommodation and a transient population as a result of the same. What we are trying to do by concentrating on owner-occupiers is to develop an established owner-occupying community in the centre city areas. It is a deliberate policy.
Mr. Lanigan: I can understand what the Minister has said but, in reality, if you are talking about the Custom House dock area and the other inner city areas in Dublin, Cork, and Limerick, these sites will be very expensive. It will be very hard to get single owner-occupiers to purchase sites in these areas because the cost will be extremely high, whereas if you extended the range to allow a building contractor to erect ten houses, the percentage site cost would come down and there would be a chance to get a more orderly direction to the very good ends the Minister is looking for.
What the Minister is aiming at is very worthy, but in effect we are dealing with very expensive centre city sites. He wants owner-occupiers to go in. They have to buy a single site in a very high cost area  in the centre city of Dublin, the Custom House area, or Waterford, Cork or Limerick centre city. These individual sites will be extremely expensive. Therefore, one has to get people with the money to buy the site, to go in and build or refurbish. There are not that many of those around. If the Minister would extend this to a building contractor who could buy a ten site area, the cost per site would come down and there would be a chance of getting ten occupiers into the area rather than going around and begging people to come in and try. I do not think it will work in the way that the Minister would like to have it work. The sites will not be available or they will be available at an extremely high cost.
Mr. J. Bruton: That is assuming that you build one house on one site. This will be available to blocks of flats as well. If people want to get involved in a condominium type of arrangement where a number of people are owner-occupiers of portions of a block of flats. They would be eligible as well. By getting owner-occupiers in you are getting a variation of the existing social mix in the centre city area, which is socially desirable.
Section 23 is still available up to 1987 to existing people to provide rented accommodation. That does not run out until then. It is available in these areas as it is a available everywhere. While that will expire elsewhere these new reliefs will take over from it in the designated areas.
Mr. Lanigan: Does this mean in these designated areas that if a building contractor goes in and builds a block of flats, each individual who buys a flat from him will get the full allowance under this section?
Mr. J. Bruton: Yes.
Question put and agreed to.
Section 45 agreed to.
 SECTION 46.
An Leas-Chathaoirleach: Recommendation No. 31 has been ruled out of order on the grounds of imposing a charge on the Revenue.
Recommendation No. 31 not moved.
Section 46 agreed to.
Section 47 agreed to.
Mr. Howard: I move recommendation No. 32:
In page 61, subsection (1) (b) (i), line 36, to delete “or negligently”.
An Leas-Chathaoirleach: Recommendations Nos. 32 and 33 may be discussed together.
Mr. Howard: This is the section that deals with a surcharge of 10 per cent for the late submission of returns. The purpose of recommendations Nos. 32 and 33 is to remove the penalty where the return is late because of negligence and to retain it where the return is late because of fraudulent intent. We all know, especially where small business operations are concerned, the pressure of complying with so many requirements. There is a growing number of requirements that the State seems to be imposing daily on small business people. The workload that emerges from all that can result in time just not being available. For that reason delays can be unavoidable. Therefore, I would suggest to the Minister that it is not fair that 10 per cent of a surcharge should apply in cases where it is obvious that there is no fraudulent intent on the part of the person making the returns.
I believe there should be a discretion there and where it is clear that pressure of time, the workload and so on, were responsible for the delay in making the return and that there was no fraudulent intent on the part of the person involved the 10 per cent should not apply. It should apply only in cases where there was an obvious fraudulent intent. I believe it is  a penalty that is unnecessary and indeed quite harsh in some cases. I would suggest to the Minister that there is considerable merit in the recommendation.
Mr. Smith: I would like to support Senator Howard on this recommendation. We have, whether we like it or not, succeeded in having quite a complicated and bureaucratic tax system. Each year in the Finance Bill we make it a bit more complicated. I am thinking, particularly in the context of this recommendation, of small businesses. In the past four or five years they have been stretched to the limit to keep themselves on any sort of reasonably sound commercial footing. While I accept that there has been a fair degree of consideration by the Revenue Commissioners in the context of overall tax liability for people who are under this kind of pressure, the last couple of years have, been so difficult that where a person who is not trying to defraud the taxman fails to submit his returns on time, a surcharge of 10 per cent in the context of our economic circumstances and the difficulties that many companies and individuals are in, is a very penal imposition on the part of the Minister. It should be withdrawn except where there is intent to defraud the taxman.
Mr. Lanigan: I would go along with the recommendation. There is no doubt that people, particularly in small businesses today, are so concerned with trying to keep a business together on a day to day basis, that sometimes they fall behind with their returns. It is neither negligence nor fraud. They are just so caught up in the day to day attempt to keep business running, particularly in the case of a small business, where they do not have the back up staff, where the person who is doing the VAT returns and the PRSI returns is also standing behind the counter or is up a ladder stocking shelves, that they fall behind with returns.
Would the Minister give us a guarantee that in cases where there is obviously no negligence involved, but due to the immense pressures on small businesses  the returns do not go in on time, they would be treated in a reasonable manner by the Revenue Commissioners and that there would not be a mandatory 10 per cent surcharge in all cases?
Mr. J. Bruton: This surcharge would only apply when the returns are very late. It would be only where a return was due in April 1986 and had not been provided before December of 1987 that the surcharge would apply. That is a fairly long period. While I agree that people would be up ladders and would be very busy and all that sort of thing, to let things run on that long suggests negligence which is bordering on recklessness.
Fraud is a very difficult thing to prove. If the Revenue had to prove fraud to apply the surcharge, you could throw your hat at the whole idea of the surcharge. It would not work. It is a good example of a proposal that is fine in theory but is not so good in practice. It would just negative the whole thing.
Mr. Howard: To what extent is there discretion in relation to the imposition of the 10 per cent? There are examples given in the section with specified dates. It mentions, first of all, in respect of the year 1986-87, 31 December 1987. I assume that is the year ending at the beginning of April 1987. Otherwise it is the year ending on 31 December, 1987? Again, the small businesses are going to be dependent on the speed with which their accountants and auditors prepare the documents in addition to the time constraints they have. To what extent is there discretion available to the Revenue Commissioners in the imposition or otherwise of this 10 per cent?
Mr. J. Bruton: There really is not discretion. Once the period is up the Revenue must apply it. They are bound by the law. However, I take the Senator's point that accountants sometimes can become ill. I have heard such cases being made. But ultimately it is up to the taxpayer to ensure that his accountant is performing his duties. The accountant is merely the agent of the taxpayer.  Obviously the existence of this surcharge is going to concentrate the minds of accountants because no accountant will want to be in a situation that he can be accused by his client of having allowed the client to get into a surcharge situation. I suggest that one should not do business with an accountant who would allow that to happen. Presumably, if he loses one client he will lose a lot of others also if he gets the name of being somebody who allows things to fall behind like that.
Recommendation, by leave, withdrawn.
Mr. Howard: I move recommendation No. 33:
In page 61, subsection (1) (b) (ii), lines 45 and 46, to delete “so neither fraudulently or negligently” and substitute “not do so fraudulently”.
Recommendation, by leave, withdrawn.
Mr. Howard: I move recommendation No. 34:
In page 62, subsection (2), line 45 to delete “shall” and substitute “may”.
This recommendation means that when a return is late the inspector may impose a surcharge. The Bill says he shall impose a surcharge. The second amendment will allow a decision to apply the surcharge to be appealed. May I deal with recommendations Nos. 34 and 35 together?
An Leas-Chathaoirleach: The Senator may, of course.
Mr. Howard: We are getting back to the situation we were discussing a moment ago where I established from the Minister that the Revenue Commissioners would not have discretion on this matter of the application of the imposition of the 10 per cent surcharge. The purpose of recommendation No. 35, and I shall read it is that:
Any decision by the Revenue Commissioners to impose a surcharge shall  be open to review on appeal by the Appeal Commissioners and the Circuit Court.
Where a mandatory provision is imposed in relation to the initial phase of the situation it is only proper and just that appeals machinery would exist which could give due recognition to special circumstances in any particular case. Therefore, if the Minister, as he has said, is not going to accept the word “may” in a situation where it applies then we have got to safeguard the situation obviously where there may be special circumstances in special cases. An appeals machinery is obviously something which, in justice, is required here. The purpose of recommendation No. 35 is to ensure that the road is open to lodge an appeal to either the Appeals Commissioners or to the Circuit Court.
Mr. J. Bruton: If discretion was to be allowed on the part of the Inspector of Taxes then there would be a situation where he might do it in one case and not in another. Somebody to whom the surcharge was applied might have a grievance if somebody else did not send in his returns either and maybe had a more softhearted inspector who did not apply the surcharge. Then one would have a rich ground for appeals as people would be claiming there was inconsistent treatment and so on. Again, instead of having the appeal about whether people owed the tax there would be appeals about surcharges on returns, a whole new area of litigation which would not be desirable. It is better to have it certain in the sense that it will apply and that will be it. Obviously there is litle point in having an appeal as suggested in recommendation No. 35 in regard to the question of the surcharge. The surcharge would only be applied if there is no return sent in, or if the return is incomplete. There would not be any point in having an appeal to delay the application of a surcharge in regard to whether it was submitted because that is a fact one way or the other. There is no real point in getting involved in an appeal about that.
Mr. Howard: I do not think the situation is quite as simple as the Minister sems to be implying.
In the first phase there is no discretion where the inspector is concerned. If the return is late, irrespective of the circumstances or of the amount of time by which it is late — we could be talking in terms of hours — the inspector has to impose the penalty. He has no option but to impose a surcharge. In a situation where there is a mandatory penalty imposed I would argue with the Minister that in a mandatory situation there must always be some provision to safeguard against the miscarriage of justice. We are all concerned. Earlier this morning we were discussing the different organisations and individuals affected by certain provisions in the Finance Bill. We were concerned to ensure that in so far as their needs could be accommodated they would be. There is always a need. As politicians we are there to stand as a buffer between bureaucracy on one side and the people on the other. Therefore, if there is to be a mandatory penalty imposed — where even house could be the deciding factor — there must be some provision by which that decision and the circumstances that applied to its imposition can be examined.
Mr. J. Bruton: I do not see what is the point in having an appeal about it. It is either late or it is not; whether it is an hour late or a year late, it is late. There has to be a cut-off point. As I illustrated they are going to have a fairly long period anyway within which to make the return before the surcharge will apply. We are talking about trying to change practice in a country which has a very poor record as far as compliance with tax is concerned. Legitimate traders who are making their returns and paying their taxes are suffering quite a lot, as Senator Howard well knows, from the behaviour of the cowboys, so to speak, who are not paying their due taxes, who are failing to make returns and who seem to be able to go along for a long time without being caught up with. This is a measure which will make it easier for the legitimate  trader by making non compliance less profitable than it has been in the past.
I know there will be people who may find themselves relatively innocently caught in this thing. All I can say to them is to be careful from now on and to make sure they are breathing down the neck of their accountants about the matter. However, the main purpose of this measure is to catch people who are being negligent in a very irresponsible way and not to catch the few hard cases that will arise no matter where you draw a line.
Recommendation, by leave, withdrawn.
Mr. Howard: I move recommendation No. 35:
In page 63, between lines 11 and 12, to insert a new subsection as follows:—
“(3) Any decision by the Revenue Commissioners to impose a surcharge shall be open to review on appeal by the Appeal Commissioners and the Circuit Court.”
Recommendation, by leave, withdrawn.
Section 48 agreed to.
Sitting suspended at 12.30 p.m. and resumed at 2 p.m.
Section 49 agreed to.
An Leas-Chathaoirleach: There are two recommendations to the section. Recommendations Nos. 36 and 37 are related and may be discussed together.
Mr. Smith: I move recommendation No. 36:
In page 63, subsection (1) (a), line 38, to delete “£4,000” and substitute “£10,000”.
This section deals with the capital allowances in respect of vehicles. There has been an increase for the first time in  this Finance Bill from £2,500 to £4,000 but we consider that it is totally inadequate. This allowance was introduced in 1974. At that time it was a generous allowance relative to the cost of new cars but with inflation and general costs in motoring it has been virtually eroded. It is in need of a radical increase. We are proposing that the £2,000 be increased to £10,000.
I am thinking of some of the services where motor cars are an integral part of the day to day provision of the service, AI societies and others, where they have massive costs in the provision of cars and services of that nature. Many of them are in difficult financial circumstances at present. The Minister could afford in the light of the length of time that the old allowance is in existence to be more generous.
Mr. J. Bruton: As the Senator very generously acknowledged I am the first Minister for Finance to do anything about this in the past ten years. Perhaps the motor industry will take note of it also. It will make motoring for distribution companies less of a burden than it was in the past. The reason it was done is because a lot of the companies have been in a loss situation but still paying corporation profit tax because they could not claim the full value of what they were providing in terms of motor vehicles for their employees. Distribution companies are a necessary part of our life. Establishing a good distribution mechanism in this country can be the launching pad to distributing overseas. A production unit has got to get its customers at home before it gets to its customers overseas.
We have done something. I note Senator Smith's case. I cannot do any more about it this year, but I would like to. It took us about ten years to fall behind. I reckon it will take about ten years to get back up to a market related allowance. I do not think we can do it any quicker than that because it is extremely expensive. I told the Dáil about this. The cost of the  Senator's amendment would be £1.4 million this year but £21.9 million next year. That is a lot of bread, to mix my metaphors, and is something we cannot contemplate. I suppose previous Ministers for Finance were reluctant to do anything about it was because it is so costly to do anything. It might have been better if I had done nothing about it either because as soon as I raised it to £4,000 the spokespersons for the motoring interests and the marketing society came down on me for not having done enough. If I had done nothing I might not have heard any of these complaints. That is the perversity of politics and none of us is a stranger to it.
Mr. Daly: I thank the Minister for what has been done, which is too little, too late. I would remind him that more than 12 months ago at the IMI conference in Killarney this subject was raised and the Taoiseach admitted that a restriction on the capital allowance for the purchase of a motor vehicle and the consequent restriction on allowable motoring expenses was inequitable and would have to be remedied. While I welcome the increase provided for in this section raising the limit from £3,500 to £4,000 it is a very small step in the right direction and does very little to redress the inequity about which the Taoiseach spoke.
The Minister said that he was the first to do anything about this in ten years and then he spoke about the costs. If the Minister, previous Ministers, previous Governments as well as the present Government had indexed this we would not be in the situation we are in today. In each budget since 1973, when Richie Ryan was Minister for Finance, then Deputies Ray MacSharry, Gene Fitzgergerald, Alan Dukes and now the present Minister, I raised this point and nobody took any notice and yet a man in the audience at the IMI conference in Killarney was able to get the Taoiseach to talk about it.
When the restriction was introduced in 1973 the limit was set at £2,500 which was about twice the cost of the average representative's car at that time. The cost  of a similar car today would be £10,000. If we were to be consistent with the philosophy behind the introduction of the restriction in 1973 the limit today would be £20,000. If we were only to maintain the purchasing power of the original limit we would be talking about a limit of £12,000. The restriction on the capital allowance for the acquisition of the business car is bad enough but the consequential restriction on allowable motoring expenses is absolutely absurd and I am quite sure is unique to this country. Of course a lot of other things are unique to this country too. What other Government would dream of requiring businesses to pay corporation tax on legitimate and reasonable motoring expenses?
Irish industry and Irish business are reminded constantly by the Government of the need to be competitive. How can a business be competitive when it is taxed on legitimate operating expenses? Successive Governments are to blame for not indexing the original amount of £2,500. If they had we would not be in the mess we are in today and the £500 the Minister is giving today would have been worth a lot more. Even at this late stage the Minister should make a greater effort towards increasing the limit and he should also announce his intention to bring the limit within a couple of years to the point where virtually all legitimate motor expenses would be fully deductible for corporation tax purposes.
Mr. Lanigan: I wish to join with Senator Smith and Senator Daly in appealing to the Minister on this. The Minister said that to bring the limit up to £10,000 would cost £29 million.
Mr. J. Bruton: In 1987, 21.9 million and in 1988, £28 million.
Mr. Lanigan: Whether it is £21 million or £29 million the situation is that because of this grave inequity company cars are not being replaced as they should be and people are driving around in cars that are definitely not fit to be on the roads. One of the reasons for this is the lack of proper  capital allowances and proper allowances for running expenses. We have seen the total decimation of the motor industry over the past number of years and this is continuing. One of the main causes for this is the inequity of the allowances which are being increased from £2,500 to £4,000. The Minister's secondhand car that he talked about I am sure would be close to £4,000 in value but would it pass a DOE test?
Mr. J. Bruton: It would have passed a DOE by a competent mechanic who was paying the taxes.
Mr. Lanigan: One of the reasons that-there are so many badly maintained cars on the road is that people cannot afford to maintain them and they are not being replaced as they should be replaced. It is peculiar that the Minister has a hang-up about secondhand cars as did the previous Minister when he explained to us that he bought his car in Europe, brought it back here and got it retaxed and he was quite satisfied that the car he bought on the continent would not be replaced until it fell asunder. There seems to be some sort of a hang-up about new cars purchased by both the previous Minister and this Minister. However, there is no doubt but that there is inequity in the fact that this allowance has not been increased in the past number of years. It is time that it was increased. If it was increased it would not cost a lot because the Government would get new revenue from the sale of new cars. Most of the £21.9 million in 1987 and the £28 million in 1988 could be recouped by the Revenue Commissioners from the revenue on the sale of new cars.
Mr. Smith: The Minister indicated that the allowance was inadequate and that perhaps it should have been adjusted in the past number of years. Would he give a commitment to the House — as there ia s 50 : 50 chance that he will have his hands on the purse strings for at least one more budget — that this is an area which will get progressive treatment in line with what he said in his reply?
Mr. J. Bruton: I will not give a commitment as to what I will propose in 1987. I have said already that I think this allowance has fallen behind and that it should get, to use Senator Smith's phrase, progressive treatment. Whether one can make an adjustment every year and how much of an adjustment I do not know but it certainly should be adjusted gradually. The reason we cannot adjust it other than gradually is that it would cost too much and we are still in severe financial difficulty. We have done a good job in a very difficult budget situation to be able to do what we have done. Some of those who have been complaining might give credit where it is due.
Recommendation, by leave, withdrawn.
Mr. Smith: I move recommendation No. 37:
In page 64, subsection (2), line 8, to delete “£4,000” and substitute “£10,000”.
Recommendation, by leave, withdrawn.
Section 50 agreed to.
Sections 51 and 52 agreed to.
Question proposed: “That section 53 stand part of the Bill”.
Mr. FitzGerald: Could I ask the Minister, in relation to subsection (8) — which I understand came in at Report Stage in the Dáil — which relates to the disallowance of capital allowances on inter-company leasing of plant and machinery whether he has sufficiently considered the position of employment opportunities where commitments have been made, in particular, by bodies such as the IDA, with this section not having arisen until recently? Does he foresee a situation in which areas of employment that might be endangered by this provision could be reviewed by this time next year at least  when we will be entering into a budgetary situation again?
Mr. J. Bruton: These changes were made because of an EC determination that our existing position is discriminatory and contrary to the Treaty of Rome and, as I explained in the Dáil, we have got to do what we are doing. We can consider it as long as we like.
Question put and agreed to.
Section 54 to 56, inclusive, agreed to.
An Leas-Chathaoirleach: Recommendation No. 39 is an alternative to recommendation No. 38.
Recommendation No. 38 not moved.
Mr. Howard: I move recommendation No. 39:
In page 71, subsection (2), lines 45 to 48, to delete paragraph (b).
The effect of the recommendation would be to delete subsection (2) (b) of section 57. This section is designed to reverse a decision of the Supreme Court. That may be a reasonable objective but the proposal to apply it to accounting periods prior to 4 April 1986 is very peculiar. All such periods will be covered unless a claim for relief has been received prior to 4 April 1986. What was the date the Finance Bill was published? What opportunity is there for people, in a period prior to 4 April 1986, to have submitted their claims? Unless the claims were submitted prior to 4 April they are valueless. As it is for the purpose of rectifying a decision of the Supreme Court, perhaps it is reasonable, but the peculiarity is the intent to apply it to accounting periods prior to 4 April 1986. There is also a school of thought that there is a substantial constitutional question raised in relation to this recommendation. I would like, at this stage, to have the Minister's observations.
Mr. J. Bruton: If this recommendation was accepted it would enable certain companies to obtain further benefit in terms of excessive export sales relief as a consequence of the Supreme Court decision which section 57 is being introduced to reverse. The Supreme Court in a judgment given on 28 March 1985 in a case concerning the interaction of export sales relief and group relief reversed the previously understood meaning of the expression “total income brought into charge to corporation profits tax”. That is an integral part of the formula for computing export sales relief and relief under the 10 per cent scheme. The effect of that court decision is that in certain circumstances greater than intended amounts of export sales relief or reflief under the 10 per cent scheme may be due to some companies.
Section 57, by providing for a definition of the expression “total income brought into charge to corporation profits tax” reverses the effect of the Supreme Court decision and ensures that the originally intended meaning of the expression is restored. The Senator's recommendation relates to subsection (2) of the section which provides that the originally understood meaning shall have affect (a) in respect of any accounting period of the company ending on or after 4 April 1986, the date of circulation of the Finance Bill, and (b) in respect of any earlier accounting period in which a claim for export sales relief or relief under the 10 per cent scheme is submitted on or after that date. If claims were submitted before they are not affected.
In effect, not only accounting periods ending on or after the date of circulation of the Finance Bill are affected by the amendment unless paragraph (b) applies, which Senator Howard wants to remove. Paragraph (b) of subsection (2) applies to earlier accounting periods only if a claim for export sales relief or relief under the 10 per cent scheme in respect of the corporation tax for such accounting period is submitted on or after 4 April 1986, the date of circulation of the Finance Bill 1986. Claims for relief submitted before that date have been or will  be allowed on the basis of the Supreme Court interpretation. It is not unreasonable that claims submitted on or after 4 April 1986 should be refused the extra relief arising from the decision of the Supreme Court since that extra relief was not intended to be given on the passing of the Acts providing for export sales relief or the 10 per cent scheme. The Senator's proposal is therefore unnecessarily generous in respect to a fortuitous and unintended additional benefit from schemes which already provide generous relief from tax on profits from exports sales and manufacturing.
While it is impossible to estimate accurately the likely cost to the Exchequer of the recommendation it would cost some millions of pounds. In the year since the decision of the Supreme Court an excess of £3 million of additional relief has been given in respect of claims made in that year for export sales relief and relief under the 10 per cent scheme for various past accounting periods based on the Supreme Court's interpretation. That indicates the amount of money that is at stake here.
To sum all that up what really happened here is that people went into this scheme under a particular understanding as to the benefits they were getting. Now that has been changed. People get the 10 per cent export profits tax relief on the basis of their understanding of what the law meant at the time. Now some smart lawyer has been able to persuade the Supreme Court that it means something else. Senator Howard's recommendation would give all these people what they never expected to get. I do not think there is any great degree of bad faith involved in this. As I have explained it is only in respect of accounting periods forward from publication of the Finance Bill and claims submitted in respect of earlier periods but submitted after the publication of the Finance Bill. The earlier people are getting the relief. I do not know if we should really do what Senator Howard wants.
Mr. Howard: I did not catch the date of the Supreme Court decision.
Mr. J. Bruton: A year ago, March 1985.
Recommendation, by leave, withdrawn.
Section 57 agreed to.
Sections 58 and 59 agreed to.
Question proposed: “That section 60 stand part of the Bill”.
Mr. Smith: I should like to welcome the alteration in the rates of capital gains from 40 per cent down to 35 per cent for assets held between three and six years and to 30 per cent where they are held for more than six years. This is an area where we should continue to the downward spiral if we want to try to improve the equity markets and get the climate right for the operation of risk capital. Capital gains are high compared to those of many of our competitors. While this is a welcome reduction, the Minister should be aiming to reduce it still further.
Mr. J. Bruton: This is an interesting point. There are many people who say that capital gains should be treated as income and taxed the same. There is no doubt that the Commission on Taxation take that view but I do not. Capital gains can justifiably be treated differently from other income on the basis that there is an inherent risk involved in that type of income which is not inherent in other forms of income. I know that other incomes can be very risky in the sense that if one is working in casual employment one does not know from one day to the next whether one will have work or not. That is possibly why the Commission on Taxation argued that capital gains tax and income tax should be taxed more or less the same. It is obvious from the Finance Bill that this is not a point of view I agree with because I have reduced capital gains tax somewhat for reasons such as Senator Smith gave to boost investment, to get people selling and  buying property and reallocating resources within our economy to the most efficient use. I will not give any commitment about future years but getting it down to 30 per cent is reasonable. It is not an onerous taxation. If we could get all our taxes down to 30 per cent we would be doing well.
Mr. Smith: What is involved in terms of total revenue in the change from last year to this year?
Mr. J. Bruton: One and a half million pounds.
Mr. Howard: The table represents an improvement on the situation prevailing up to now. I understand that capital gains from the disposal of agricultural land for development purposes has not been added within these new alterations. At present there are many land owners who have found it necessary, because of their financial situation, to dispose of agricultural land for development or other purposes. They pay 60 per cent capital gains tax on these disposals. When this was being reviewed why was it decided to exclude such disposals in view of the advantage to the person in the capital gains net?
Mr. J. Bruton: Basically because we were aiming to promote new investment and giving tax relief to sales of land would not be promoting new investment. There is only so much land in the country and one is not going to make more of it by giving a tax concession. The real purpose was wealth generation. What the Senator is talking about is giving a relief, which is a slightly different purpose to what we want. The disposal of development land is 60 per cent where the period of ownership of the person disposing the land is not more than one year and 50 per cent in other cases. That is the rate applied.
Question put and agreed to.
Sections 61 and 62 agreed to.
 SECTION 63.
Question proposed: “That section 63 stand part of the Bill”.
Mr. Lanigan: There is a word used by the Revenue Commissioners in this section which should be withdrawn. In 1978 I asked that the word “negrohead”, as a means of collecting customs duties be withdrawn. It is a very derogatory word. A negrohead was the amount of tobacco that could be cut and carried by a negro on a plantation in America and it is a word that is resented by them. It has been taken out of the verbiage in American system and it should not be used here as word on which revenue can be collected. It might seem to be a very minor point but it is a very major point. There were people in America who were exploited in plantations and that word goes back to those times. We were promised in this House many years ago that this word would be taken out of the verbiage of the Revenue Commissioners. I sincerely hope that it will never happen in a Finance Bill or any other area of revenue collection again.
Mr. J. Bruton: I understand this term is used by the trade. I would be reluctant to change it here. I wonder whether it would be possible to say in the definition section in the Finance Bill next year that wherever the term “cavendish” is used it encompasses “negrohead” and that that will be the case in all future Finance Bills. In future Finance Bills the word “cavendish” could be used instead of “negrohead”. Would that satisfy the Senator?
Mr. Lanigan: Just because the trade use that pharse there is no reason why we should use it. The trade in tobacco in America in run by whites. They use that as a derogatory phrase. It should not appear in our language. It is something that should be written out of our language. There is no point in saying that in terms of revenue collection a “cavendish” and a “negrohead,” are the very same. Why not drop out the negrohead and tell the trade that we do not want to  hear it. It is something that should be dropped. Why should we use a word which is used by people who hate blacks. That is the reason it is still used there.
Mr. J. Bruton: If the word is used in general parliaments to explain a particular term, it cannot be ignored. It is a fact, whether that fact is tasteful or distasteful. The suggestion I made which I will be looking at, is simply to provide a definition of cavendish which encompasses negrohead in future years, so that it will not keep recurring in the Finance Bill. It will be used in the 1987 Finance Act but it will not be used again, unless somebody wants to refer back to the definition of “cavendish”. You cannot ignore it altogether because it is actually being used.
Mr. Lanigan: I would be satisfied if the Minister would give us a guarantee that he will look at the situation and try to have this word eliminated. It is racially discriminatory. This is used by the whites in America, in Louisiana and in the southern states, where the general marketing of tobacco is done. It is kept there totally and simply because they hate blacks.
Mr. J. Bruton: I am not going to get into the stigmatisation of language. Words that can initially be used with a perfectly light and inoffensive meaning can acquire this type of meaning through association with attitudes of minds that are unfavourable. It is not the word in itself that is an offence but the attitudes of mind of those using it in certain circumstances which become associated with it generally. Unfortunately, there are terms that are used to describe certain categories of people. Every 30 or 40 years a word has to be changed because the existing one, which started out quite inoffensive, becomes offensive through usage and another has to be substituted for it. This is a problem of social attitudes rather than a problem of language. There are ilustrations I could give, and I am sure the Senator could think of others, that are a lot closer to home than this. I am referring to certain groups within our own  midst in respect of whom a certain terminology was considered to be quite polite some years ago which is no longer so and for which another one has been substituted. It will not be too long before that terminology acquires a pejorative meaning. What we need to do is eliminate the attitudes of mind rather than necessarily change perfectly good words.
Mr. Lanigan: I have no great love for Lord Cavendish and it is his name that is down there.
Question put and agreed to.
Section 64 agreed to.
Question proposed: “That section 65 stand part of the Bill.”
Mr. Smith: I hope the Minister will accept what I am going to say here in the manner in which I want him to. In the debate in the Dáil he seemed to get around the problem of the cost of Irish motoring in a general way by advising everybody to come here whatever the distance, from Kerry or Donegal, in antiquated last century models, a Baby Ford mentality if you like. Somehow or other he will have to accept reality because motoring, for anybody who is involved in it, and he knows this as well as we do, is a very expensive business. It seems to be picked out consistently. This is not just a feature of this Finance Act, it has been a feature of Finance Acts down through the years. The motorist has been picked out consistently for a special kind of fleecing. A car is a necessity. It cannot be treated as a luxury. No matter what the circumstances are, we seem to be able to drain more from the motorist in every budget. Because of the drop in oil prices this year, we should obviously see a transfer downwards in this regard. That has happened to some degree but the advances which were made naturally by the drop in oil prices  have been eroded by increases imposed by the Minister.
Secondly, in relation to the Border counties, the business carried on there by people engaged in the car industry has been virtually decimated. Whether we like it or not we have to try to take account of the fact that there is a land Border and that if easier rates of taxes operate at the other side of that Border, there will be dire consequences for the people on this side of it. There is no need to go into detail as that has already been well hashed here and in the other House over the years.
Thirdly, many jobs have been lost in the past few years in a variety of different industries but the motor car industry has been very severely hit. I know the case is being made here consistently, both by Senator Daly and Senator Lanigan, in relation to the problems that affect that industry. We need to see some change of attitude by the Department of Finance and Ministers for Finance in relation to what is considered to be an inexhaustible supply of additional finance where it has devastating consequences for that industry and for jobs.
The Minister will argue that he needs money, that he has a difficult financial situation and that areas where there is any prospect of getting additional money have to be considered. Would he not agree that this seems to be an industry that has taken more than its share down through the years?
Mr. J. Bruton: We are talking about petrol prices and not about the price of cars. I agree that petrol prices and taxes are too high. I would like to reduce them. I agree also that there is a difficulty along the Border. However, the British, who are a petrol producing nation, have lower levels of excise duty on petrol than is the case here. That is not surprising. Countries who produce a product tend to tax it less than those who import it. We are importers of petrols, they are exporters of it so it is not surprising that their rates of tax should be lower than ours.
As I pointed out in the Dáil we do not have the highest priced petrol in Europe.
 There are three other countries — France, Italy and Portugal, I think — who have higher prices. However, I acknowledge that our prices are too high. Senator Smith answered his own question. The reason I cannot bring down the price is that we need the money. I am sure he would not be urging me to increase income tax in order to reduce the price of petrol. I know it is argued by some people that a self-financing tax cut would be a famous and wonderful concept. I do not think so. The price of petrol has fallen considerably since last June as a result of the energy crisis. Yet, in the first quarter of this year petrol sales are less than they were in the first quarter of last year, notwithstanding the fact that prices are much lower now than they were then. Usage of petrol is not determined so much by the price of petrol as by the need for motoring and the general level of money in people's pockets and so on. One will see petrol consumption going up as the economy and consumer expenditure is more buoyant. That is not as much a function of the price of petrol as it is a function of a general improvement in disposable incomes in the community after a long period in which disposable incomes were reducing. I do not think reductions in petrol prices would be self-financing. The evidence I have quoted tends to bear that out. However, it is not a subject on which I have a closed mind. We will continue to look at price levels and if reductions can be made which will not result in loss of revenue we will make them.
Mr. Lanigan: I want to follow up on what Senator Smith said. Further reductions in petrol prices would be self-financing because if you generate traffic on the roads you are going to have a spin-off effect for the Revenue Commissioners as well as for everybody else in the sense that the more vehicles are used, the more servicing they will require. Therefore, every time a car goes in for service or it has to have a spare part fitted there is a VAT element involved. The more servicing that is carried out and, the more cars  that are on the road, the more employment there will be in the motor industry. Therefore, the PAYE element increases. There will also be the spin-off effect of taking people off the unemployment register.
When people talk about decimation of the motor trade, it is a real decimation. I am in the motor trade — not in the retail motor trade — and I have seen 58 of my customers close down in the past three and a half years. That is within a 32 mile radius of Kilkenny city. These people did not want to go out of business. I had a letter from a customer of mine the other day, whose business started in 1901. The letter stated that due to the current economic circumstances in the motor trade, he was closing his business down. He thanked me for the amount of business we had transacted with each other. He said he would be paying his bills within a certain length of time but he was closing down because he sees no future in the motor industry. The motor industry was one of the biggest employers in the service sector. There was no town, city or area of the country that did not have either a small or a big garage with a high level of apprentices.
If one goes to AnCO today and asks how many apprentices are employed in the motor trade one would find that in many counties, they could be counted on the fingers of one hand. They are not being brought into the motor trade unfortunately, because there are no places for them. The black economy has taken over in many instances. The amount of work being done by people who are in the black economy is enormous. There is no point in anybody thinking otherwise. They are doing much of the business.
The retail motor trade is an indicator of the way an economy is going. Unfortunately, as the Minister said even though oil prices have dropped, they have not dropped sufficiently. The Minister must, at this stage, be getting a huge windfall because the prices that are being charged for petrol are not the prices being quoted on the world market at present. One cannot relate them because the prices being charged at the pumps at present  are for oil that was bought probably three months ago. It was cheaper at that time than it is now. I am certain that the Minister must be getting a big bonus because of this. The Minister said he has not got a closed mind on this. I sincerely hope that in the very near future he would see his way to allowing a larger percentage of the decrease in world oil prices to filter through into the economy. If they filter through into the economy they will have a beneficial effect, not only on the motor industry but also on revenue collecting. There are spin-off effects of increasing the sales of petrol.
We cannot run down the huge economic short-fall in Border areas. There has been a total decimation of the motor industry in Border areas. Many of the garages that closed down and which were converted into furniture emporiums because of the decline in business and in the house building industry over the last number of years are now closing down. Anybody who drives through the country should notice the number of places which were garages that were turned into furniture emporiums and which are now closed. This is an indication of the drop in retail sales in both the motor trade and the furniture trade. In this instance I appeal to the Minister to decrease oil prices as much as possible and to pass on as much as he can to the consumer because he would find there would be a self-financing element in the decreases.
Mr. J. Bruton: Let us recall what we have done for the motor industry.
First, the excise duty on motor vehicle parts and accessories has been cut from 37 per cent in 1982 to 10 per cent at present. It will be reduced to 5 per cent on 1 September and eliminated altogether from 1 January 1987. Second, excise duty on tyres and tubes will be abolished from 1 September 1986. VAT on repairs and maintenance has been reduced from 23 per cent in July 1983 to 10 per cent at which it now stands. The Seanad will acknowledge the capital allowance for cars has also been increased for the first time in ten years.
 All of those are bonuses for the motor industry. They are designed to prolong the life of cars by encouraging people to have them repaired and kept up to date. The repairs and maintenance aspect of the motor industry gives the largest amount of employment in Ireland. That is why, without any apology to anyone, we are concentrating on tax relief in the area of repairs and parts to prolong the life of our car fleet. While Ireland produces some components for cars, we do not have a motor industry of substantial size. We are not a motor car exporter. It behoves us, therefore, to economise to the greatest extent possible by concentrating tax concessions on the repair, maintenance, and life prolongation in a safe way of our motor fleet.
Question put and agreed to.
Question proposed: “That section 66 stand part of the Bill.”
Mr. Howard: I would like to see the tax load on spirits reduced. I am sure the Minister would equally like to see it reduced. No doubt he would be willing to do so if he had scope to do it. From my knowledge on the level of tax on spirits, my belief is that Ireland is at the top of the class in the proportion of taxation on the retail price of spirits. Perhaps the Minister has the appropriate table there that would put on the record where precisely we stand in this league. I will be asking the same question when we come to section 67 in relation to beer.
A very interesting experiment was carried out by the Government in October 1984 when the tax content of spirits was reduced. Part of the reason for that was to cope with the smuggling situation in the Border area. From time to time we hear of self-financing tax cuts. To what extent was the experiment successful? To what extent was that tax cut self-financing? It would be useful to have that information. It would assist those who are talking about self-financing tax cuts in measuring their optimism against the  actual results as measured over that period.
Mr. J. Bruton: I am not sure I have the information the Senator is looking for. I mentioned that subsection (4) of this abolishes, with effect from 1 July, the additional duty on immature spirits and also the additional duty that was charged when the deferment of duty provisions were availed of. These two duties, the first which dates from 1915 and the second from 1970, are being abolished in this Bill.
I find myself in the situation that the Senators are anticipating my arguments and leaving me with very little to say. As Senator Howard correctly points out my main complaint about his case is that I wish I could afford to charge a lower amount. But I cannot. I agree with him that the price of drink is a factor so far as our tourism is concerned. It is also very important, however, that those who are selling drink should recognise that price is an important factor too. There are some establishments where very high prices are charged and they seem to be full. There are others where lower prices are charged and they are relatively less full. One must ask oneself is the price the critical factor? Generally speaking I recognise that duty on spirits is rather high in Ireland. I doubt if a self-financing tax cut at this point could be made. As I said to Senators Lanigan, Smith and Daly in regard to petrol, I have not got a closed mind on this.
Mr. Howard: Would the Minister endeavour to make available to me at some time in the future the results, as interpreted by his Department, of the success or otherwise of the reduction in spirit duty in October 1984, whether or not the volume increase was sufficient to make up the revenue gap?
Mr. J. Bruton: In 1985 there was loss of 25 million in revenue as a result of that measure. It was not self-financing. It was not pretended to be really.
Question put and agreed to.
 Sections 67 to 75, inclusive, agreed to.
Question proposed: “That section 76 stand part of the Bill.”
Mr. Daly: The Minister, in his reply to Senator Smith and Senator Lanigan, spoke about the reduction of excise duty which permitted servicing to be done at a lower cost. He also spoke about the extension of the life of vehicles. First of all, when VAT was reduced originally to 10 per cent, it was reduced, not by virtue of the kindness of the Government or the Minister. It was reduced by virtue of the fact that the motor industry agreed to give to the Revenue Commissioners 4½ percentage points in excise duty and not increase the price of cars. That was the deal that was made at that time. The excise duty was reduced in two stages. That was something that would have been done anyway because the EC would be frowning on that.
The other point I should like to make is about the long life of motor cars. I respect and admire the Minister's intellect, ability and skill and his knowledge of finance but I doubt his expertise in the motor car world and on motor cars. Maybe if he listened a bit more to the people who are experts in that field, as I listened to him because I know that he is an expert in his field, the first thing he would learn is that there is fatigue in metal just as there is fatigue in the human body. If cars were kept and serviced and replaced and reconditioned, they would come to the stage that they would just collapse on the road. Unfortunately, due to factors outside the control of the Irish motor assembly, when they assembled cars here, it was something that really should never have been done because the volume produced did not justify the equipment. There was no dipping of tanks in this country. There was no galvanising of the metals. It resulted in the cars becoming rust boxes and that was through no fault of anybody other than  the conditions at the time. It would not be economical to have done that.
I am sorry to have to disillusion the Minister but I should like him to know that the motor industry feels a very strong sense of outrage at the comments he made when this section of the Bill was debated in the other House, particularly at his dismissive attitude towards the importance of the industry, because he alleged that Irish people contributed little or nothing to the manufacturing process and implied that Irish people would be better off purchasing used cars which in the Minister's view were apparently better value. Of course, the Minister is entitled to his view about buying a secondhand car for himself and one can get secondhand cards at very good value but one can get them the other way also. But if people want to buy new cars they should be allowed to do that.
I can only assume that the Minister made this remark off the cuff at the end of a wearisome debate. I think he overlooked a number of very important factors. Surely he realised that about 8,000 Irish people are now employed in the manufacture of components for the car manufacturers with an export value of £260 million. The vehicle manufacturers in Great Britain, Germany and other countries to whom these components are supplied will scarcely welcome the Minister's observations that the Irish people should not buy their new cars. If people take the Minister's advice that used cars can suffice, where are the used cars to come from? If there is not an adequate sale of new cars, naturally there cannot be secondhand cars unless one waves a magic wand. I know the Minister has a lot to offer but I do not think he has a magic wand.
If the Minister intends to discourage persons from purchasing new cars because of their import content, why not be consistent and recommend the Irish public to buy other used products where the new article has full import content? I could make a few suggestions. Why not promote the purchase of used television sets, when we imported over £26 million  worth in 1985, when we imported well over £10 million radio sets and record players and nearly £15 million worth of video recorders — not counting the ones that came in without being recorded. These should be on the Minister's list too. Senator Cregan referred to television sets also.
Will the Minister now be telling the housewife to purchase used washing machines, used dishwashers and used refrigerators? I am sure the Minister could think of many more items for his list. But I do not think it would work. I have a lot more, but I do not want to bore the Cathaoirleach with details because he is being very patient.
Seriously, however, I question the wisdom of the Minister in promoting this used car mentality. I am being a bit more kind to him now than Senator Lanigan who was talking about the “banger” mentality.
We hear a lot today of the increase in emigration and the brain drain with so many of our skilled technicians and our professional men and women venturing abroad where they are sure to be rewarded with a reasonable level of disposable income. How could we possibly encourage these talented people whose skills we need at home? If we tell them that the acquisition of a new car is nothing more than a status symbol — and those are the Minister's words — and that they should be very happy with used car standards, surely the acquisition of a new car is an understandable, reasonable and a legitimate entitlement for any young person who is prepared to study hard to get his qualifications and work hard to provide himself with a reasonable standard of living? What the Minister should be saying to the young people is: “Yes, we acknowledge that the ownership of a new car is a legitimate aspiration and with your help we will produce the vibrant economy which will enable you to realise your ambition”.
The Minister may find himself in conflict with the free trade policy of the EC by suggesting that we should restrict importation of British and German cars. However, I will leave that to his expertise.
 I have already demonstrated how wide the Minister was of the mark when he suggested that there was no element of jobs for Irish people in the manufacturing process. I should like to remind him that there are almost 15,000 jobs in the motor trade many of which are dependent on a reasonable level of car sales. Indeed, the loss of so many thousand jobs in the motor trade since the start of this decade can largely be attributed to the decline in the volume of new car sales.
The final point I should like to make on this section is that the Minister seems to view the motor car as a personal item, almost in the luxury class. He ignores the vital role which cars play in the business life of this nation and he fails to understand that many businesses have to replace their cars regularly because of the mileage done by their sales representatives and executives.
The high burden of tax on the acquisition of a car is a strain on the competitiveness of Irish business which the country could well do without. We have many cases now where sales representatives cover the Republic from their bases in Northern Ireland and in the UK as their cars cost them so much less and as their companies do not have to suffer the restriction on deductible running expenses. The Minister will see that they have a very clear cost advantage over Irish companies.
Mr. J. Bruton: First of all, I make no apologies to anybody for advocating tax policy which maximises the employment content of this country in the motor industry. That is why I have given the main emphasis to reducing the level of tax applied to car repairs and to spare parts in order to prolong the safe life of cars. I should like also to encourage anybody by means of taxation to rustproof their cars to prolong their life to the maximum extent possible. That can be done privately.
Mr. Daly: That is no longer necessary as the manufacturers now rustproof them.
Mr. J. Bruton: The Senator is contradicting himself because in his contribution he referred to the fact that cars were not rustproofed in the past and he was using that as evidence for his case today. He can hardly fail to allow me to advert to that situation in respect of cars in the past which can be rustproofed. That is my policy.
The Senator will rightly make the case that there are people employed in this country in the manufacture of components for the motor industry. We have attracted quite a number of important industries here producing components for the worldwide motor industry. Donnelly Mirrors in Kildare, for example, are producing mirrors for Mazda cars which are sold all over the world. The number of mirrors which Donnelly Mirrors produced is affected minimally by the level of new car sales of Mazdas in Ireland because the Irish market for Mazda cars is a tiny proportion of total Mazda sales worldwide. Even if we were to halve the excise duty on new cars in Ireland, it would have virtually no effect on those manufacturing components because they are manufacturing components for the worldwide market place. Obviously, if all countries in the world were to reduce their excise duties, it might make a difference but what we do here does not affect the worldwide component market for these large brands of cars which are probably being sold in over 100 countries in the world, the majority of which are substantially larger than this one.
Senators Daly and Lanigan made reference to my believing that “people were not entitled to buy a new car”. I never said any such thing. Of course, they are entitled to buy a new car if they can afford it. What I am saying, however, is that I am entitled to manage the tax policy to the best possible extent to achieve two objectives; first, to get the maximum amount of money which we need badly in this country. All of our income tax goes on the service of debt and so we have to rely on excise duty on motor cars, VAT, excise duty on beer and spirits and a few other taxes to virtually run the entire country, to pay the salaries of  Ministers, Senators, civil servants, and gardaí, and to pay for social welfare, health services and educational services.
It is no wonder those taxes are so high when we ask them to bear a burden that they are not asked to bear in other countries. They have to carry the entire State on their back because income tax has to be used to service debt. I do not, therefore, make any apology for having a tax as high as I can to raise the money necessary to keep this country going.
It is a fact that cars are imported. We do not make new cars in Ireland. We make some of the components that are used on the worldwide market but we are not a motor manufacturer. Yet there is a very strong promotional campaign mounted to get a reduction in the excise duty on new cars, although every single one of them is imported. While I should like to reduce all taxes, I have to say that my first priority is to reduce those taxes that will have the most immediate job creation effect in Ireland.
I recognise that there are jobs in the distribution of new motor cars. But there are also jobs in the repair and maintenance areas. If you take £100 that goes towards buying a new car and £100 that is spent on car repairs, there is no doubt that there are more Irish jobs arising from the £100 that is spent on car repairs than there are from the £100 that goes towards the price of a new car. There are far more jobs in the repairs end of the market.
That is not to say that there are not some jobs in the new car end of the market. It is not a question of greyer and whiter. The fact of the matter is that there is more employment content in the repairs end of the motor trade. That is not an anti-motor trade attitude on my part. It is simply an attitude that says we want to skew the tax on the motor trade to maximise the employment content here in Ireland. This is perfectly reasonable. If you are skewing it in favour of one thing, you are skewing against the other. I do not apologise for leaning more towards repairs, prolonging the life of cars and, perhaps, slightly against new cars. Practically everybody involved in  the sale of new cars is also involved in servicing existing cars and prolonging their lives. We should try to prolong the life of motor cars.
Senator Daly made fun of the suggestion that we promote the idea of keeping secondhand cars. He asked if I was suggesting that we should promote also the sale of secondhand televisions and so on, as if that was a ridiculous notion. I do not think it is a ridiculous notion at all that any asset we have that costs money to buy should be used for as long as possible before we import a replacement from somewhere else. Reference has been made to a discussion about energy policy during which the question arose as to whether we should opt for nuclear, oil or coal. The consensus was that the most important fuel of all is conservation.
There are some countries that have no oil, coal or fuel but they all have the possibility of conserving energy. Likewise, in the areas of capital goods. We should aim to conserve them, use them as long as possible and extend their useful life to the greatest extent possible. Our tax policy should be designed deliberately to encourage conservation of capital assets just as they should be designed to encourage conservation of energy and other non-renewable resources of any kind. I do not think that is an unreasonable course of action for me to adopt. It is not anti-motor trade. It is a question of prioritising our tax within the motor area to achieve the maximum domestic benefit.
Mr. McDonald: Would the Minister encourage that policy by dropping the tax after five years, or reducing it?
Mr. J. Bruton: It is a thought. I would go along with Senators Lanigan and Daly that these cars have got to be safe. I am not urging the use of “bangers” but I presume that “bangers” imply cars that are not safe. I presume that is what the word “banger” is meant to convey when used by Senators. I am not advocating the use of unsafe cars whether they “bang” or not. I am urging the prolongation of the safe use of our national asset which is our  motor car. It is a national asset even though it is privately owned and we should try to use it as wisely as possible, just as we should try to use our national stocks of televisions, washing machines or any assets we have, such as land, for as long as possible rather than going overseas to replace it.
I do not think that anybody — I know Senator Daly does not — outside the House should take any offence at what I have said. I am advocating a rational tax policy in an area that is very important to our economy. The motor trade is important to our economy and it is important that we should have rational attitude towards it. We all recognise that cars are an absolute necessity for many people. Because of the dispersal of our population, being a relatively low density populated country in Europe, we have more usage for motor cars than others. In rural areas people have to have motor cars. I am not denying any of those propositions, which are all true. As far as possible, we should use the motor cars we have for as long as we safely can.
Mr. Daly: The Minister must not have been listening to me.
Mr. Smith: Perhaps I could be of some small assistance to the Minister in how he has got into the attitude of secondhand car mentality. When he was Minister for Finance at the first attempt he crashed after about eight months and now back as a second hand model he seems to see himself improving. There is much merit in what the Minister is saying but, overall, there is a limit to the length of time any car can be used. If one looks at the figures for the downward trend in the purchase of new cars, taking into account the increasing population in the country, the industry has been hit very hard.
Most of us would go for giving the longest life possible to any vehicle of that nature because of their cost. But the end does come. The purchase of new cars has consistently dropped to a little more than half of what it was some years ago. That is going to end up in the situation where the standard of cars will be exceptionally  poor. If one takes into account the standard of our roads, one would want an exceptionally good car to stand up to the pressures placed on it because of the desperate condition of our roads. Anyone who believes it is possible to maintain a business and be consistently on our roads and increase the life span of a car in those circumstances is living in cloud-cuckoo land. The Minister will have to find some way to bridge the gap between where his stance is, which has a lot of merit, and the legitimate needs of the car sales industry. He is tending to go too far.
Mr. Daly: I think the Minister must not have been listening to me or, if he was, he was not heeding me. He said that I was making a joke about his attitude to cars. I was quoting from what the Minister said in the Dáil on 8 May, which is in the official Report. He said that the sale of new cars contributed to few jobs, if any, in the Irish manufacturing industry. That is the first thing.
He talks about prolonging the life of cars. Any car that is five years old is penalised by insurance companies. For some insurance companies one has to get a certificate from the garage to say it is roadworthy. Other companies do not apply it. I have appealed to all the Ministers over the past ten years and to all the successive Governments to bring in a MOT test. There are cars on the road today and a child with an automatic shotgun would be safer going on the roads than some of those cars. If those cars were taken to a garage to be traded in one would not ask for the salesman to value the car, one would ask if the local weighbridge was closed, because that is where you would get the value of the car, by weight. Until such time as the Department of the Environment brings in MOT testing we are not going to have safe cars on Irish roads and we are not going to encourage people to service their cars. We have laws in this country that are brought into disrepute by virtue of the fact that they are not carried out. You could have four bald tyres on your car and you could get a parking ticket for  parking in a public place. You need not have any tax or insurance, but the car is not fit to be on the road and that is ignored.
The Minister spoke about Donnelly mirrors and Mazda cars. I am a Mazda dealer, but he was wrong. Their main export of mirrors is for Mercedes. I have no objection there because I am a Mercedes dealer as well. There are almost 8,000 people engaged in the manufacture of components. I think the figure is about 7,500 to be exact and expected to be 8,000 by the end of the year.
There was a derogation obtained by President Hillery when he was Minister for Foreign Affairs and the Irish assembly industry got ten years to put their house in order and to get ready for the day when motor assembly would finish. The motor manufacturers in their wisdom, which now the Minister does not seem to give them credit for, arranged, when there was about four years to go, to set up alternative industries to take up the employment. I am glad to say that the figure of the number employed today in the assembly of parts and manufacture of parts is greater than when the cars were assembled in Ireland. The Minister is not being fair to them. The components are made for manufacturers outside of Ireland — the parts are going out of Ireland but they are coming back in the cars. I see Semperit tyres, which are made in Ballyfermot, on some cars and there are some small manufacturers in the Minister's own constituency making parts. About 7,600 people are employed in the manufacture of parts. It is unfair to say that the Irish motor industry is contributing nothing to jobs, because if the motor manufacturers and the distributors had not the foresight, the wisdom and courage to invest in alternative employment, many of those assembly workers would be drawing the dole today and we would have a bigger unemployment figure. It is unfair not to highlight that.
Mr. J. Bruton: I do not think it makes much difference to the sale of Donnelly  Mirrors whether there are 500 or 600 Mercedes sold in Ireland in the year. The vast bulk of the sales of Mercedes is in other countries and whatever little change we can make to the sale pattern of Mercedes cars in Ireland by reducing the tax on them would have little or no effect on the market for Donnelly Mirrors which are being sold to the world-wide Mercedes organisation. There is no substantial connection between the volume of sales of new cars in Ireland and the volume of business for the component manufacturers because the component manufacturers in Ireland are selling to the world-wide market and not to the Irish market. I do not know if Senator Daly is an agent for Fords. I do not think he is.
Mr. Daly: I am not.
Mr. J. Bruton: I will quote from what the then managing director of Fords, Mr. Paddy Hayes, said, as reported in the Irish Independent of the day in Paul Drury's motoring column in 1984. Fords were at that time the largest importer of motor vehicles: At a Dublin luncheon Mr. Hayes said:
If I were chairman of the Central Bank or secretary of the Department of Finance I would say, keep those He was referring to motor car taxes. The taxes on.
He was referring to motor car taxes. The report continues:
Every time you buy a car in Ireland you punish the balance of payment. For every car you bring in here you have to export more cows or grain or sheep. Unless we can get exports up, technically we cannot pay for imports, said Mr. Hayes who himself heads the countrys largest (motor) import company). He added that we are being far too extravagant in our use of cars.
Mr. T. Hussey: Where is he today?
Mr. J. Bruton: He is now exporting Waterford glass all over the world. It is one of our leading exports, the success of  which enables us to import a few cars. If we did not have a few successful export products like Waterford glass we could not afford to import cars even at the rate we are importing them. I think those words give a true picture because at that time he was speaking very much against his own economic interests but he could see that our tax policy should, as I am urging, be designed to maximise the number of jobs in Ireland rather than maximise the number of jobs elsewhere. That is why my policy, of which I do not repent, is designed to encourage the motor industry in the repairs area and in the prolongation of the life of our cars rather than bringing in new imported cars. If times get better and there is plenty of money it would be good if we could reduce the excise duty on new cars also but first of all we should encourage the repair and maintenance industry as far as possible. If there is money available I would prefer to have it used to reduce the excise duty on petrol rather than to reduce the excise duty on new cars because whether the car is old or new it needs patrol. It is less discriminatory in that sense and hopefully in a few years time we will have some oil of our own.
Mr. Lanigan: I still feel the Minister is not giving the industry a fair crack of the whip. If, like during the war, we put our motor cars up on blocks, sprayed them and put anti-rust material on them, over the years they would not deteriorate very much. but the fact is that at present over 50 per cent of the cars on the roads are unsafe to drive. There is absolutely no doubt about that. Any driver can tell of meeting cars with only one headlight and cars in front of them with only one tail light. If these people are no replacing their healights or tail light bulbs what must the shock absorbers or steering components be like?
Mr. J. Bruton: They could hardly afford to replace their cars if they cannot aford to replace these bulbs.
Mr. Lanigan: The Minister cannot take  credit for the reduction of imports duty on spare parts.
Mr. J. Bruton: I can because I started the process in 1982.
Mr. Lanigan: The process was started because of an EC regulation.
Mr. J. Bruton: No, it was not; I decided to start it.
Mr. Lanigan: The simple fact is that the motor trade is not getting a fair crack of the whip. In the importation, distribution and repairs sections it was one of the biggest employers in this country. It is still a big employer but unfortunately not enough of the business is going through legitimate garages. I am glad the Minister said that he gets his car repaired by a legitimate garage. At least that is one admission that he has made that I am glad of.
Mr. T. Hussey: How do you specify a legitimate garage?
Mr. Lanigan: If the owner is paying his taxes it is a legitimate garage and I hope that he would be a member of the IMI.
An Cathaoirleach: I cannot see how you could give him any marks for that.
Mr. Lanigan: In the absence of a DOE test I am glad that the Minister is able to say definitely that his car is fit to be on the road. Because of taxation and the lack of incentive to employ people in the motor trade, the motor trade is running down. We have to accept that a lot of business is going to backstreet garages, to people who are not involved in the tax system.
Modern cars need people with high technological skills to repair them and also the machinery used for testing needs to be up to date. The back street unlicensed garages do not have this type of machinery and because of that the motor vehicles are not being kept up to date. I sincerely hope that a DOE test will be brought in shortly. The EC have made a  regulation that it will have to be brought in but unfortunately if we look for a derogation in that area in the same way as we looked for a derogation in other areas it will be a long time before a DOE test becomes compulsory here. The only way we can ensure that the cars on our roads are of a reasonable standard is to ensure that a DOE test becomes compulsory as soon as possible. There is no point in prolonging this argument any longer. The Minister seems to be stating quite categorically that he is not interested in the importation and sale of new cars irrespective of what way he glosses over that by saying that he is trying to help the repair section of the industry. There is no doubt but that the repair section of the industry is in a bad situation. I can see daily how badly-off the trade is. If the motor trade is allowed to run down at the rate that it is running down, I fear that if an upsurge comes in the economy we will not have the skills to repair cars when it comes. We will have to bring people in from Britain and elsewhere because people are not being trained in this area at present. The AnCO centres around the country can tell you that there are very few apprentices accredited to garages because garages cannot afford them. Motor trade courses in AnCO are being filled but the people who avail of them are not being given the guarantee of work afterwards. Most of these people do their training with AnCO and finish as semi-fledged mechanics. They then set up garages in the backs streets because they cannot get jobs in the legitimate motor trade. We are half training people to get into the motor industry in a half-baked way in an area where safety is of paramount importance.
Mr. J. Bruton: What would the Senator do about that?
Mr. Lanigan: There is only one thing I could suggest and that is to ensure a revitilisation of the motor industry and the only way we can do that is by giving concessions. The motor industry made a quid-pro-quo in terms of the £4.5 million  as against the reduction in VAT and it worked but, unfortunately, it was not allowed to continue for long enough. The VAT rate went up again and because the VAT rate went up from 5 per cent to 10 per cent we still have these problems. I would appeal to the Minister to examine the motor industry as an important industry. If the industry is allowed to die it will take a long, long time to revitalise it. As a result you are going to have more and more cars on the road — call them “bangers” or whatever — many accidents are being caused at present on the roads because of lack of maintenance of cars. Even with the best of maintenance once a car goes to a certain stage, it is totally uneconomic to keep repairing it because you are repairing one part and you are creating a situation where another part is not capable of working with the new part that has been fitted. You are getting recurring troubles. Rather than a saving in the economy as the Minister suggested, it is a wasteful use of scarce resources.
Mr. Daly: One thing saddens me and that is that in this country where we cannot manufacture cars or were never able to manufacture cars — although we did have an assembly business the motor car industry is taxed, between VAT and excise duty to the tune of 76 per cent. Yet, our powers-that-be, the Revenue Commissioners and the Minister for Finance, cannot find any way to tax the raw materials, the £800 million worth of food that is coming into the country. We can import potatoes and we can import them ready for chips. We can grow potatoes but we cannot grow motor cars, yet we cannot put any duty or excise on the potatoes. The Minister, among other things, is a farmer and would know far more about this than I would. I am awaiting with interest his reply. The potatoes come from Cyprus and other countries but Donegal was known the world over because they sent the seed to Cyprus in the first instance. The potatoes we are getting from Cyprus would be thirty-first cousins of the Irish potatoes. Now I believe Cyprus are exporting the seed themselves. Potatoes is one item,  together with the other food items that are coming into the country but there seems to be no way of protecting the Irish industries that can produce this product. It is sad to see a man with 40 to 70 acres coming into the local grocer, buying a bottle of milk, buying a head of cabbage that was grown in——
An Cathaoirleach: I think the Senator is getting a bit too far away from the section. It is all right to suggest that we do import potatoes but leave it at that.
Mr. Daly: I will leave it at that. I trust the Minister will respond and educate me on this because it has baffled me.
Mr. J. Bruton: As the Senator knows we do not have VAT on food; therefore it is not possible to apply VAT to imported goods. It would be contrary to EC rules to say that VAT should apply to imported food and not to domestically produced food. You would have to, say, put VAT on oranges but you would not put VAT on apples, on the basis that we can produce apples here but we cannot produce oranges. You would probably run into difficulties with the EC if you did that.
Mr. Daly: Is it not a fact that the EC have no control over what we do in regard to excise duty in our country?
Mr. J. Bruton: If we try to do something that is clearly discriminatory, they might have a go at us.
Mr. Daly: Why not put excise duty on the food?
Mr. J. Bruton: That is a good question. If Senator Smith would agree with it on behalf of Fianna Fáil, we could do it here today.
Mr. Smith: I am quite interested in this debate.
Mr. J. Bruton: There is a problem here if we tried to put VAT on food.
Question put and agreed to.
 SECTION 77.
Question proposed: “That section 77 stand part of the Bill.”
Mr. Daly: I should like to make a number of points on this section. First, I think the Minister was extremely harsh in his treatment of motorists who drive small cars, up to seven horse power. For example, there was an increase of 17.6 per cent in the road tax for a seven horse power car which is well above that justified by inflation. The Minister and previous Governments have asked the people where possible to drive small cars, reduce the size of their cars to help the balance of payments, and reduce the import of fuels, etc. Then when people get small cars, they are taxed in another way. In other words, you cannot win. I know the Minister will argue that it is just as costly for the tax office to administer the registration of a very small car as it is for a larger car, but nevertheless I feel that the increases were unnecessarily harsh and inconsistent with encouraging persons to use cars with a high fuel efficiency. Most of these very small cars are driven by young drivers who are more than crippled by savage insurance premiums. The Minister could have given them better treatment.
Our road tax rates have become extremely high once more. I am sure there is a greater trend on the part of the motoring public towards availing themselves of the facility of renewing their road tax on a quarterly or half-yearly basis. While this facility removes the problem of having to try to find a large sum of money in one lump sum, it means of course that they wind up paying even more road tax for the year. However, a more important aspect is that the work of the local taxation offices is being increased enormously by having to deal with the road tax on a quarterly and half-yearly basis. It is clear that this is putting a great strain on many of the motor taxation offices leading to unreasonably long delays in the issue of tax discs and log books and putting the motoring public to considerable inconvenience. I hope the  Minister will give an assurance that he will mark time now with the road tax and give the motorists a break for a few years. I know he is going to be here for the next two years anyway. That was agreed by Senator O'Toole the other day. If all the money collected by way of road tax was spent on the maintenance and improvement of roads throughout the country, the motorist might find the burden more acceptable. This is really another form of indirect taxation which the motorist has to bear.
Mr. J. Bruton: I think Senator Daly has made a very good case. The distribution we have here has been decided on now. It is fair to say that the minimum charge of £70, which is what applies to small cars, is not very high. It is £1.35p per week. It is not a lot of money really. I suppose that is not an argument against the principles that Senator Daly is advocating. I will bear very much in mind what the Senator has said on this point in future years. Is is a good point.
Question put and agreed to.
Sections 78 to 82, inclusive, agreed to.
Mr. Smith: I move recommendation No. 40:
In page 86, between lines 4 and 5, to insert the following:
“(iii) by the insertion of the following paragraph:
(e) Five per cent of the amount on which tax is chargeable in relation to the supply of the following goods or services:
(i) services consisting of the development of immovable goods, and the maintenance and repair of immovable goods including the installation of fixtures, where the  value of movable goods (if any) provided in pursuance of an agreement in relation to such services does not exceed two-thirds of the total amount on which tax is chargeable in respect of the agreement;
(ii) concrete ready to pour;
(iii) blocks, of concrete, of a kind which comply with the specification contained in the Standard Specification (Concrete Building Blocks) Declaration, 1974 (Irish Standard 20: 1974);”.
I do not think there is any need to bore this House with details in relation to how the building industry has gone generally in recent years. It has been rehashed on a number of occasions. It is fair to say that there has been a drmatic downturn. The more recent figures for new house starts indicate something like a 16 per cent drop even on last year in this area. It is vital area with regard to job opportunities. The bulk of the material required in the building industry is domestically orientated. What we are trying to do here is to reduce the value-added tax on building materials which would give the necessary injection to that industry to start to grow and devleop again. I accept that it is not just in the area of taxation that the building industry has requirements. The area of the capital programme of the Government and the area of encouraging private finance are also crucial areas. We feel that this is one way the Government could undo some of the damage of budgets in previous years. Previous budgets had a detrimental effect on that industry. I am proposing that the Minister adopt these recommendations.
Mr. J. Bruton: I will make a few, quick points on this. The total revenue from VAT on building will be £108 million. That should be set against the amount of the Government's public capital programme expenditure on building, which is £1,214 million, ten times as much. We should put the amount the Government take out of building against  what we are putting in and you will see that we are putting in ten times as much as we are taking out. A total of 72 per cent of all public capital expenditure in 1986 will be on the building industry; that is the largest proportion of the total in the past ten years.
The main reason for the current decline in the building industry is a fall-off in private demand; it is not a fall-off in Government demand. The fall-off in private demand is not because of VAT, it is because of taxation generally which had depressed incomes and purchasing power since the beginning of this decade; 1980 was about the beginning of the decline in take home pay in real terms and that has continued until last year. This year, we will see, for the first time, a substantial increase in purchasing power. That will mean in increase in building. This is also evidenced by the fact that sales of new houses at the moment are exceeding starts. That suggests that there is an incipient growth in the building industry.
Mr. T. Hussey: I should like to support Senator Smith in putting forward those recommendations as they relate to the building industry. I consider the building industry one of the most important areas of economic activity in the country. It is an area where hundreds and perhaps thousands of jobs could be created with one stroke of a pen if the Government gave the proper initiatives. The imposition of a 5 per cent VAT on the industry has had a devastating effect. We have only to look at the decline in house starts in the past 12 months. Private house starts have fallen by 25 per cent. Employment in the industry has fallen by 11 per cent. Cement sales have fallen by an average of 50 per cent for the first three months of this year; in the month of March sales had fallen by 32 per cent.
This shows the building industry is in the doldrums. Many firms — old, established firms — are finding it very difficult to keep going at present and to maintain their staff. We have a situation now where many of our tradesmen who have been trained in this country by AnCO and by other agencies have to emigrate.  they are putting their skills to work in foreign parts. This is a terrible loss to the country. I cannot understand why the Government would not give the building industry the type of injection it needs at present. We can spend millions of pounds in trying to promote industrial employment, in trying to encourage foreign industrialists into the country, in setting up the infrastructure for those industries, yet, here we have a ready-made base. We have the structure set up already. Everything is ready to go but, unfortunately, the Government will not give the proper incentives to the industry. I would beg the Minister to have a hard look at the situation in the building industry at present. If he is not prepared to accept the word of the Senators on this side of the House then he can go to the industrialists themselves and they will tell him what the situation is like in the building industry. It is the one area at present that can help to reduce the frightening unemployment figures we have been bandying about here for some time and on which we all express concern. If we are concerned we should be genuine in our efforts to reduce that figure. Here is an area which allows us to reduce that figure by giving an injection of capital to the building industry and getting those tradesmen, who now have to emigrate to find a job, work here in their own country.
Mr. J. Bruton: I appreciate what Senator Hussey is saying. I know from my own experience that there has been a lot of unemployment in the building industry, it affects my own part of the country at least as much as and perhaps more than County Galway. There are, however, some hopeful signs. Cement sales in April were 40 per cent up on cement sales in March. Last year was not a good year for the building industry. However, I think there are some signs that already there is a considerable upturn this year but it is a bit early yet to be too definitive about that or to start to throw our hats in the air. The evidence is not there yet in any definite form but there are some signs, with cement sales  up so much in April over March, that there is a pick-up.
I think it is related to spending power in the economy and people having the feeling they can commit themselves to a mortgage. Obviously, falling interest rates — Senators will have heard that Allied Irish Banks reduced their interest rates by 1¼ per cent today — will have an effect in increasing the flow of funds for new building.
Mr. Smith: I take the point the Minister makes. I do not think it is legitimate for him to indicate to this House that all of the fault in relation to the downturn in the building industry lies at the door of private sector finance. He, too, would have to accept that there has been a fairly concerted reduction in the capital programme in so far as it affects building. You might give percentages for this year as being bigger than previous years. Nevertheless, in overall terms the Government's commitment to the capital programme has been gradually eroding over the years. While one would expect to see a better response from the private sector — hopefully that will happen — the Minister should acknowledge that the capital programme took a battering also.
Mr. J. Bruton: The public capital programme in general has not increased all that much, but the percentage of the public capital programme devoted to building has increased. In the years 1977 to 1980, inclusive, on average about 65 per cent of the public capital programme went to building. This year 72 per cent of the public capital programme is going to the building industry.
Mr. Smith: And the figure last year?
Mr. J. Bruton: It was 70 per cent. I suppose that could be because of other areas of public capital expenditure being reduced also, relatively speaking. It does show that there is a fairly strong commitment to building on the part of the Government within tight constraints.
Mr. T. Hussey: In relation to the home improvement grants I was hoping that this would give a boost to the building industry. But it certainly does not seem to have taken off up to the present. I think one of the reasons for that is the requirement that contractors have to be registered and that the VAT numbers and so on of the contractors have to be given on the application forms by those who are applying for the grants. That has a stymying effect on the whole scheme. Certainly, I know in my own area there are only two or three contractors who are registered.
There are many excellent tradesmen in the locality who would be prepared to take on those jobs, but because of the requirement that they be registered for tax, they are not in a position to do so. They are drawing dole and they would be happier working. I know what the Minister is getting at, he is trying to make sure that people who work in the industry pay their taxes but the way I see it at the moment it is having a stymying effect on the whole scheme. I was wondering if some other way could be found to get around that.
Mr. J. Bruton: I am afraid not. The purpose of that requirement is to ensure that the benefit of this grant scheme goes to legitimate builders. If Senator Hussey was listening to Senator Lanigan earlier, he was complaining quite bitterly about the damage being done to legitimate traders by people in the black economy. He was talking about motor mechanics. Of course many motor mechanics work during the day for the legitimate economy and then they do black work at night.
Mr. T. Hussey: They are a different breed.
Mr. J. Bruton: This is not quite the case in the building sector. I cannot agree with Senator Hussey.
Mr. T. Hussey: The Minister is putting those people who are registered in a very  privileged position. They can quote whatever prices they want for the jobs.
Mr. J. Bruton: Not if there are enough of them around.
Recommendation, by leave, withdrawn.
Section 83 agreed to.
Sections 84 to 88, inclusive, agreed to.
Mr. Kiely: I move amendment No. 41:
In page 87, between lines 39 and 40, to insert the following:
I was speaking already today about the effects this Finance Bill will have on the GAA. The Minister said that because of the need for revenue he could not accede to my request earlier in the day. My request now is very minimal and there is no reason he could not grant this request. What I am demanding this time would take very little from the Exchequer. That is the removal of VAT from hurleys. Value Added Tax is a form of taxation which was introduced in 1972. From its introduction other sports goods were included in the luxury class at the top rate of VAT. The GAA have not objected to the inclusion of ordinary sports gear, such as jerseys, footballs and luxury items, but hurleys should not be included in this classification. A hurley is not a normal item of playing gear nor is it in the same category as other sticks or items for games. A hurley may be broken within minutes of the start of a game or of purchase for that matter. A player may break three or four hurleys in the course of one match. I know that golf sticks are not broken. Cricket bats are not broken. Tennis racquets depreciate with wear. Hurleys must be treated differently. At a cost of £10 each for adult hurleys and £5 for the smaller ones, this is a major personal financial outlay. Hurling cannot be compared with the elite sports. It is the most ancient and skilful of Irish games. The legislature should play its  part in having it preserved. The abolition of VAT would save £1.87 on an adult hurley or save the average player about £10 in the year.
In recent years the arts, the theatre, furniture manufacturers and the hotel industry have obtained relief from VAT and the GAA feel that a similar exception should be made in the case of hurleys. The amount of money lost to the Exchequer as a result of an exemption of hurleys from VAT would be very small in relation to the total VAT revenue. It would be about £350,000 from an annual sale of 100,000 adult and 150,000 juvenile hurleys. I do not think that is too much to ask the Minister to lose. It would only be a loss of £350,000 which is minimal and is something which the Minister could grant, in order to ensure that our national game of hurling is preserved. It would be a gesture of goodwill towards the association. Who are doing enormous work for the community and providing playing facilities for our youth.
The GAA have a justifiable case and action should be taken on their behalf. It is for the Minister to do that. There are a number of precedents for treating our native games in a special way. I have already given examples — the Finance Act of 1927, the Finance Act of 1932 and the budget of 1980. I am very consistent in raising this matter. I raised it two years ago at the Second Stage. I raised it last year at Second Stage and at Committee Stage I tabled an amendment but I withdrew it. Deputy Dukes, the then Minister for Finance, said in his reply at Committee Stage:
What I did not point out to this House earlier on was the fact that I am already under a certain amount of pressure from the EC in relation to some of our existing zero rates.
I mention to the Minister that I knew the EC Commission would not pressure any Government to put VAT on an item that would benefit cultural promotion. In that I was referring to the Sixth Council Directive of 17 May, 1977 which refers in paragraph (m) pages 145 to 149 to:
 Certain services closely linked to sport or physical education supplied by non-profit making organisations to persons taking part in sport or physical education.
I reminded the then Minister for Finance last year of that Directive. I did not know the actual Directive, but I knew it was there. This year there is much talk about that Directive. In accordance with it the Minister can exempt hurleys from VAT.
There were many suggestions made here today, and many examples given as to how this DIRT tax would affect the workings of the GAA. Some Senators-pointed out the effect it would have on the organisation. In the same breath they advised the GAA how they could overcome this by setting up other funds to prevent the Minister imposing this DIRT tax on voluntary organisations such as the GAA. The GAA do not need any advice. All they want now is action. This is a very small request compared to what we were requesting earlier in the day which was turned down. The Minister can do it. There is nothing to prevent him. It will be no drain. What will £350,000 mean to the Exchequer? It is only a drop in the ocean. I would appeal to the Minister.
Mr. Smith: I never fail to admire the tenacity, the loyalty and the dedication which Senator Kiely displays in relation to the GAA. I will be very brief on this.
I was secretary of a club at one time and one of the biggest outlays in the year, and that is going back a few years now, was on hurleys. It is an inordinate cost for small clubs, particularly those who are trying to maintain hurling and improve it in areas where it is in need of improvement, to meet the annual cost of the provision of hurleys. As Senator Kiely said the number of hurleys that are broken during the year is incredible. The Minister should look at this in two different ways. There are difficulties in removing VAT from hurleys because of the competition from similar types of product perhaps, but surely he should be in a position to refund the value-added  tax paid by the GAA to the Revenue Commissioners in respect of hurleys. That would mean making an annual contribution, which was done in 1980 by way of special grant to the GAA, to defray the costs involved. The GAA could allocate it to the clubs.
Mr. Lanigan: I want to add my voice to the case that has been very well made by Senator Kiely. There are a number of aspects to this that should be taken into account when the Minister is having a look at the situation. Quite a large proportion of hurleys that are made are made for children who are attending schools in deprived areas and the GAA supply these hurleys free of charge to these children at enormous cost to themselves. The VAT element on these hurleys is enormous. As Senator Kiely said the Revenue, by dropping the VAT on hurleys, would not lose very much. There are many cultural activities in this country which get a tax break. Hurling could definitely be considered to be an ethnic cultural activity as well as being a major sporting activity. It is a sport unique to Ireland and if the sport goes down because of financial constraints it will be a tremendous loss to the people. It is well known all over the world as being one of the finest field games there is. If we have something that is unique we should support it to a greater degree than it is being supported by Government at present. In July next the Bolshoi Ballet are coming to Dublin. The Russian circus came to Dublin. Cultural activities of all kinds are totally subsidised by the State in Russia. I am not suggesting that we totally subsidise anybody in this country but the VAT element is extremely high and creating problems for the GAA in promoting the game, in keeping people out of trouble. The number of young people involved in the game of hurling is enormous. It is extremely costly to keep the game of hurling going. It would be a tremendous loss if it declined. I would appeal to the Minister to listen to the case which is being made by Senators on both sides of the House. A loss of £350,000 would not have a major impact on the Government  in their efforts to get us on the straight and narrow. The appeal I make is one from the heart and I would like to join with our colleagues in pressing it.
Mr. Durcan: I do not want to interrupt Senators from Tipperary, Kilkenny and Limerick in relation to the exemption of hurleys. I might add that Mayo are doing particularly well in that particular sport at present.
I would like the Minister to explain the logic behind exempting the services of dental technicians from the imposition of VAT. Why are these services deemed an exempted activity within the meaning of the first schedule of the 1972 VAT Act? I say that as somebody who is a member of a profession which provides services and has to impose 25 per cent VAT on people who are already paying an exorbitant rate of stamp duty and exorbitant land registry fees. That is in relation to the VAT imposed for professional services which solicitors provide.
An Leas-Chathaoirleach: Senator Durcan, we are only dealing with hurleys at the moment.
Mr. Durcan: We are dealing with the VAT Act of 1972.
An Leas-Chathaoirleach: It will come up on the section. We are dealing with Senator Kiely's recommendation.
Mr. T. Hussey: There may be rivalry between the counties of Kilkenny, Tipperary, Limerick and Galway in the hurling field but this is one area where we are all united and this is one amendment we would all support. I would like to add my voice, coming from a county that has played no small part in the promotion of hurling. It is only right that hurling should be granted this recognition and this exemption. If it is only going to cost £350,000, as has been pointed out, it is a very small contribution to our native game. We all know that the purchase of hurleys has become a great drain on the resources of many clubs.
I do not know what the actual figures  are, but I know that we have quite a number of people employed in the manufacture of those hurleys. In my own county we have the Connolly brothers who are giving good employment. They manufacture those hurleys for use by all the clubs throughout the country. I would certainly add my voice to this and I hope the Minister will concede on this particular issue, even though his county of Meath may not have any——
Mr. Smith: It is coming on now.
Mr. T. Hussey: It is improving I believe all right. Maybe if they can get this VAT abolished from the hurleys it might encourage more of them to come into the hurling game.
Mr. Howard: I have a certain amount of common ground with what is being said here. But there are a few distinctions that I would like to make. First, I have had a long association with the GAA in my lifetime. I played a GAA game. It was not hurling because there was no hurling played in the part of the county in which I grew up. But my sons today are playing hurling quite usefully. The message I get from all that is that while it is an art, it is an art and a game which, unless played at a very young stage, will never be acquired.
Senator Lanigan mentioned the desirability of encouraging young people to do something useful and of getting them involved in sport and in games. There are other games and sporting activities that they could get into also. If they have an instinct for hurling and if they can master it they will stay with it. It is wonderful for them. If they do not they drift in to other games. Squash is a game into which many young people and those not so young have drifted. Having an involvement in that, I know that the breakage of squash racquets is nearly on a par with the breakage of hurleys. If one does this in relation to hurleys one is doing it just for that group who have the opportunity of playing the game in the areas where it is played. What does one say to those who are not in areas where it is being  played or who utilise other equipment to play other sporting games?
What I would like to see happening is the playing of games such as hurling, or where hurling is not available, the next best — it being encouraged, supported and subsidised at school level and at under age level. I am at present a trustee of a GAA club. I want to make a distinction. Senator Kiely says that the purchase of hurleys and the distribution of them can be a very expensive operation for GAA clubs. Admittedly, but there is a distinction between GAA clubs. For some of them it is a burden. There are others in recent times who are showing a wonderful capacity to come into the commercial field and who can avail of State grants and local authority grants to build clubhouses which are glorified lounge bars and who compete with the likes of me and other people in the trade who have to fork up every shilling that we invest in our particular business. We are subject to taxes; we are subject to full rates.
Mr. W. Ryan: They are, too.
Mr. Kiely: I do not know how that is relevant to the VAT on hurleys.
Mr. Howard: It touches a sore spot and that is why it is relevant.
Mr. Smith: He is playing it dirty.
An Leas-Chathaoirleach: I hope it does not appear in the Clare Champion.
Mr. Howard: I would not be too worried now.
An Leas-Chathaoirleach: And I know why.
Mr. Howard: There are only a few clubs in that situation but, nonetheless, it is important to put on the record that they are no slouches when it comes to operating in the commercial field and making the most of what is there.
The equipment used by young people  for playing hurling or any other game should be free of VAT or the equipment should be subsidised in some way.
Mr. J. Bruton: I have a problem with this because, as Senator Howard has pointed out, there are other sports where there is a high incidence of breakages. He mentioned squash; hockey is another. I know that if VAT was removed from hurley sticks there would be an immediate demand in respect of hockey sticks. The case can be made that hurling is a game which originated in Ireland. On the other hand, many games cross boundaries and it is quite possible that two games derive from the same root anyway. We should certainly be very proud of the GAA and I would not wish anything I am saying to be seen in any other light. They have made a big contribution to the country as a whole. I regret that I cannot accede to the case that has been made. However, I will keep the matter under review.
Mr. Kiely: I regret the Minister's statement that he cannot accede to the request. I know examples have been given about breakages with regard to equipment used in other sports. I think squash racquets deteriorate from play. They do not clash like the clash of the ash where hurleys often break. The situations are as different as chalk is from cheese.
I am slightly disappointed with the likes of Senators Howard and Daly who last night were explaining the serious effect of the DIRT tax and today advising the GAA as to what they could do to build up this fund etc. It is a window dressing exercise. The reference to the GAA building pavilions in each county — I think there are only one or two in each county and they are in urban areas — has nothing at all to do with the breaking of hurleys or the VAT on hurleys. What I am concerned about is the preservation and promotion of our greatest national game. No Government should penalise our national game. VAT should be removed from hurleys. It is a penal tax on our national game and on the people who are promoting it. These people are providing  the youth with something to do other than get involved in vandalism. The great work done by the association in promoting this game should be recognised. This is a poor man's game and many parents would like to see their children playing it. It means a mere £350,000 to the Exchequer. Those involved in the promotion of other games are not looking for the removal of VAT. It is only the GAA who are doing that. I do not think other organisations would mind if the Minister acceded to this request.
Mr. W. Ryan: The Minister said that one of the reasons he could not remove VAT from hurleys was because it would not be fair to people involved in other sports. I think the Minister should remove VAT from all sporting organisations. The VAT yield from hockey clubs and tennis clubs is nothing compared with that coming from the GAA. With luck, a racquet or hockey stick could last a lifetime but a hurley stick, which costs about £10 now, can be broken at the first puck of the ball. I doubt if any hurley survives two matches. That is why the GAA are so concerned because whatever is being collected in VAT on this is being collected from them. This matter was raised last year and many promises to look into it were made but the situation remains the same. A sum of £10 for a hurley stick that may be broken in one minute is a lot of money. VAT added to that does not help. I would like to see VAT removed from all voluntary sporting bodies.
Mr. Lanigan: I would like to ask the Minister again to accede to this request. We are not making a comparison between the sports here. The root of the game of hurling is in Ireland and the root of the hurley is the ash which grows here. It is a sport unique to Ireland. There is no other sporting organisation in the world which creates as much enjoyment for so many people. As far as extending the VAT concession to sports equipment used by other bodies is concerned, I would say that if hockey sticks, squash racquets, cricket bats, or tennis racquets  were made in Ireland there would definitely be a case for exempting Irish made sporting equipment from VAT. So far as I know there are no company in Ireland making any of this equipment.
Therefore, I would suggest that there is a uniqueness about the case for the removal of VAT from hurleys. It is extremely hard for sporting bodies run on a voluntary basis in amateur sport to keep going at all. As has been said, hurleys are a major cost item and the cost would be a deterrent particularly in poorer areas, were it not for the fact that the GAA provide hurleys free of charge. It is an enormous and growing cost as VAT rates are so high. I would again appeal on the basis of the uniqueness of the situation, the root of the game and the fact that it is a totally Irish sport.
Mr. J. Bruton: I am sorry. I have said that I cannot do it at this point for the reasons I have given. Nobody has said anything that has not been said a few times already on the subject. The Department of Education gave grants of £53,000 to the GAA of which £29,000 was for juvenile hurling. There are a number of other items in the 25 per cent rate which people would seek to have exempted as well and brought down to a lower rate if we were to do it for hurleys. I cannot accede to that.
Mr. Smith: We recognise that there may be difficulties in relation to competing goods for similar treatment. Would the Minister not give direct grants as in the Department of Education's contribution to Bord na nÓg?
Mr. J. Bruton: I have already referred to the fact that direct grants are being given.
Mr. Smith: They are not significant.
Mr. J. Bruton: They all come out of the taxpayer's pocket. You would be giving grants to the people you would be taking taxes off.
Mr. Kiely: The Minister said that at  this point he cannot do anything. When can something be done? It would not mean a lot to the Exchequer. These hurleys are Irish manufactured. Senator Hussey mentioned the Connolly brothers who gave great enjoyment to many hurling followers in the held of play. They have their hurley factory in County  Galway employing local people. In County Limerick there is a hurley factory operated by D. J. Daly employing local people. They are benefitting the community and the economy. It would mean very little to the Exchequer.
The Committee divided: Tá, 15; Níl, 25.
|de Brún, Séamus.
Cregan, Denis (Dino).
FitzGerald, Alexis J. G.
|Higgins, Michael D.
Hourigan, Richard V.
Quealy, Michael A.
Tellers: Tá, Senators W. Ryan and Séamus de Brún; Níl, Senators Belton and Harte.
Recommendation declared lost.
Question proposed: “That section 89 stand part of the Bill”.
Mr. Durcan: I have a question on the logic behind section 89. Why should dental technician services be exempt from VAT?
Mr. J. Bruton: Under EC rules the health sector generally is exempt from VAT. We had a derogation which enabled us to continue to apply VAT but we could not continue it forever because it was a derogation.
Mr. Lanigan: Dentists are VAT free as well.
Question put and agreed to.
Section 90 agreed to.
Question proposed: “That section 91 stand part of the Bill.”
Mr. Daly: I should like to deal with subsection (c) which reduced VAT from 25 per cent to 10 per cent on the repair or maintenance of moveable goods, which includes, of course motor vehicles. I would remind the Minister that when VAT on the repair and maintenance of motor vehicles was reduced to 5 per cent and the motor trade put on the same level as the construction industry, the then  Minister insisted that the motor industry make this arrangement self-financing by agreeing to an increase of about 9 per cent in the excise duty on motor cars. When he subsequently increased the low rate of VAT from 5 per cent to 10 per cent he compensated the motor trade to a small extent by the reduction in the excise duty on motor vehicle parts which was really gratuitous as this excise duty was clearly on the way out in any event.
The Minister said earlier that he brought that about and that it would not have come through the EC. I am grateful to him for that. Accepting that, the Minister's reduction of VAT on spare parts only cost £4 million but our reduction cost £10 million so he was still £6 million on the right side, roughly speaking. Now the Minister is reducing the rate of VAT on the repair of all moveable goods to 10 per cent without insisting on any self-financing arrangement from the industries and trades concerned. I suggest that the Government would be shortchanging the motor industry if they do not agree to dismantle the self-financing arrangement to which that trade were forced to agree in order to obtain the lower rate of VAT. It would be most reprehensible on the part of the Government to deny this legitimate claim of the motor industry for equal treatment with other industries and trades involved in the repair and maintenance of moveable goods. The motor industry felt badly enough about the increase in the rate of VAT from 5 per cent to 10 per cent on garage repairs so soon after they had paid a heavy price for the 5 per cent rate. I hope the Minister will make a specific reference to this matter when he responds to the debate on the section.
Mr. Howard: Would the Minister outline briefly what section 91 is aimed at achieving?
Mr. J. Bruton: This section provides for a number of amendments to the Sixth Schedule to the VAT Act in broad confirmation of the financial resolution of 29 January. It reduces to 10 per cent the rate applying to a range of goods and  services. It applies the 10 per cent rate to certain hot take-away foods and drinks. These changes in rate will take effect from I July 1986. This section applies also to the 10 per cent rate to fortnightly newspapers and inserts a new definition of newspapers qualifying for that rate.
The following will now be reduced as a result from 25 per cent to 10 per cent: fortnightly newspapers, hotel and restaurant meals and catering services, generally, cinema admissions, theatrical and musical entertainments of the cabaret show type excluding dances, certain entertainments provided by travelling showmen, certain services consisting of repair and maintenance of moveable goods and alteration of secondhand moveable goods, certain work on removeable goods not already liable to the 10 per cent rate, certain services consisting of the care of the human body excluding medical services which are already exempt such as hairdressing and so on.
That is the list of the services. They are all labour intensive type services, employment generating services which have been reduced in VAT. This should mean that the Irish service sector will gain from the consumer boom which hopefully will follow from the increases in the living standards of our people following on the fall in energy prices. This is a general provision I have illustrated. The reference which Senator Daly made was to specific arrangements in respect of the motor trade, which is one part of the list of things that are being affected by this reduction. I do not think we could be prevented from making a general reduction because of an agreement given to the motor trade in regard to their position. I am not sure what Senator Daly would like me to do about this.
Mr. Daly: Give us back about 4 per cent on the reduced excise duty.
Mr. J. Bruton: On what?
Mr. Daly: On new cars.
Mr. J. Bruton: I have exhausted my wind talking about that. I have run out  of arguments to deploy. I have a sinking feeling that I am not going to persuade Senator Daly to agree with me despite all my efforts.
Mr. Daly: Shakespeare said that if you convince a woman against her will she is of the same opinion still. That could be applied to the Minister also.
Mr. J. Bruton: Well said. I have noted what Senator Daly has said. I will consider this matter in the context of the 1987 budget.
Mr. Lanigan: We have been fairly critical of the Minister all day. For people in the,repair end of the motor industry it is good to see that from now on the repair of moveable goods will come down from the 25 per cent rate to 10 per cent. It was ridiculous up to now that if somebody brought in a tractor to have it repaired the parts which were fitted were at 10 per cent, but if he got the part repaired and took it away it was at 25 per cent. There was an anomalous situation there that if the moveable part arrived in somebody's hand it was charged a 25 per cent rate whereas if it was being fitted to a vehicle it was charged at the 10 per cent rate. The Minister is to be complimented for changing that.
The Minister said that tyres were being exempted from import duty. Why is the repair of tyres not allowed to have the lower rate of duty? The provision of repair maintenance of tyres is excluded. What is the rationale behind that decision? Why is the maintenance of batteries not exempted? There are very few battery manufacturing plants in Ireland at present. The major ones have been eliminated — Dagenite, Exide, Lucas have all gone out of the country. There is very few small battery manufacturing plants. The people who repair batteries should have the same concessions. I do not see why they do not have the same concessions as are being given in other areas of the motor trade.
Mr. J. Bruton: There is a slight misunderstanding here. The position is that in the course of an overall repair job to a new car, if the tyre has to be replaced, there is VAT on the new tyre. On the other hand, if the existing tyre is repaired there is a lower rate of 10 per cent.
Mr. Lanigan: Is it the repair to the tyres?
Mr. J. Bruton: The repair is at the lower rate. It is only if in the course of a general servicing that an existing tyre is replaced with a new tyre that the new tyre is taxed in the normal course as a new tyre.
Mr. Ferris: Does the Minister intend to exempt tyres and tubes from that altogether?
Mr. J. Bruton: From the excise duty.
Mr. Lanigan: We are excluding the provision in the course of any such repair maintenance or alteration service in tyres and so on. We are talking about repairs here. It is suggested there that batteries, accessories, attachments, tyres, tyre cases and so on will not be subject to the lower rate of VAT.
Mr. J. Bruton: It is as I said. What is excluded is the provision in the course of repair of accessories, attachments or batteries, tyres, tyre cases and so on which are new items. If, on the other hand, an accessory is being repaired, a tyre or a battery is being repaired the lower rate of VAT would apply to the repairs. The higher rate only applies to the new item.
Mr. Lanigan: The wording is not quite clear.
Question put and agreed to.
Section 92 agreed to.
 SECTION 93.
Recommendation No. 42 not moved.
Section 93 agreed to.
Sections 94 to 100, inclusive, agreed to.
Recommendations Nos. 43 and 44 not moved.
Section 101 agreed to.
Sections 102 to 114, inclusive, agreed to.
An Leas-Chathaoirleach: Recommendation No. 46 is consequential on recommendation No. 45 and the two may be discussed together.
Mr. E. Ryan: I move recommendation No. 45:
In page 106, subsection (1), line 48, after “Where” to insert “a company has gone into receivership or is to be wound up and”.
Sitting suspended at 5 p.m. and resumed at 6 p.m.
Mr. E. Ryan: This section is an innocuous one. It was not discussed on either Committee Stage or Report Stage in the Dáil because the guillotine fell before it could be discussed. It was slipped in at the last moment in the dying Stages of the Bill. Sometimes small technicalities are slipped in in this way. So far as this section is concerned, it is far from a technical one. It is a very important one and is likely to have a devastating effect on the business community.
Many companies obtain credit from banks for running expenses using book debts as a security. This is particularly  true in the case of companies without substantial fixed assets. The effect of this section is that book debts used as a security will no longer be acceptable by banks because they will be faced with the possibility that the amounts recovered from the company will have to be handed over to the Revenue Commissioners. It is not the banks that will suffer in the long run but the big and small companies, particularly the small companies because they are under extreme pressure and difficulty in this day and age. The position is that banks will not lend money in the future on this kind of security. Many companies will have little or other security. It is no exaggeration to say that many of them will go out of business as a result of this provision.
I understand fully why the amendment proposed in this section was included. It is of great convenience for the Revenue Commissioners. It is letting the banks do the work for them but those concerned will pay a heavy price for the Revenue Commissioners' convenience. In the long run the Revenue Commissioners will suffer also if certain companies go out of business as a result.
A distinction should be made in regard to income tax and Value Added Tax, both of which are covered by the section as it now stands. Income tax is not assessed for some considerable time, certainly not until after the end of the year and the Revenue Commissioners may not be aware for a considerable time of the amount due. In the circumstances there is some justification for this. In the case of VAT, which is payable at the end of short periods and should be collected regularly, there is not the same necessity to take this kind of action.
There is no time limit on the period for which the taxes due can be recovered. In somewhat similar circumstances under sections 98 and 285 of the Companies Act, 1963, the amount which can be recovered is limited to one year's assessment. There is no such limitation in this section. It is a loosely drafted one, possibly because it was rushed in at the last moment. As in all Bills of this kind any  ambiguity or looseness in it is unlikely to be to the detriment of the Revenue Commissioners. It is much more likely to be to the detriment of the taxpayer.
I am not sure whether this section is to apply only where a company have gone into receivership or are to be wound up or whether it would apply at any given time. Perhaps the Minister would deal with that point. The way in which it is drafted and the context in which one would read it suggests that it is to apply only in a situation where a company has gone into receivership and has to be wound up. Perhaps it is capable of being used in a wider sense than that.
This is a section which is very seriously to the detriment of business. if it is to be there at all it should be limited to situations where a company are going into receivership or being wound up. That, at least, would contain the position to some small extent.
Mr. J. Bruton: The purpose of this recommendation is to overcome the adverse effects which the recent Supreme Court decision had on the collection of tax. Corporation profits tax or the tax of the individual, owner of the company are not affected. The taxes affected are PAYE and Value Added Tax which, essentially, is tax collected by the company on behalf of the Revenue which never belongs to the company at any time. Therefore, one is not talking about the company's money in that sense.
The court ruling in the matter of the Keenan Brothers liquidation was to the effect that a charge on a book debt may be a fixed charge. Previously, floating charges were the order of the day and they are not affected by this section. As such, the fixed charge holder, usually a bank, takes a super-preferential position in a liquidation in relation to all other creditors, including the Revenue, contrary to the order which obtained hitherto by reason of section 285 of the Companies Act. It is acknowledged that the restoration of Revenue preference might, more appropriately, be dealt with in the Companies Bill but time did not permit us the  luxury of waiting for the Companies Bill to come forth. It may be another year before that Bill has been processed through the Houses. There is, as the Seanad will be aware, a large Companies Bill with 150 sections being drafted.
Although the section will improve the Revenue's position in relation to the fixed charge, but not that of other creditors, these creditors are not being put in a worse position than they would have been had the section not been introduced. The beneficiaries of the fixed charge were the banks, not the other creditors. The principal objection to a fixed charge in book debts is that it enables the holder — in this case the bank — to assume total control over the cash flow and, effectively, the financial affairs of the company and to dictate as to who should or should not be paid sums owing to them by the company. In the Keenan Brothers' case the company made an arrangement for the payment of arrears in current tax with the Collector General and issued postdated cheques accordingly. All of these were then rejected by the bank who refused payment to the Revenue. Holding the fixed charge thus enables the holder to take all that is realised in the assets of a liquidation leaving nothing for other creditors.
In a recent Dublin case concerning Gilbert Leon White, an auctioneering firm, the company ceased trading — there was no liquidation in this case, a point raised by Senator Ryan — leaving £70,000 in book debts and £3,000 in other assets. All of this went to the fixed charge holder, a bank. The Revenue Commissioners received nothing in respect of a debt of nearly £70,000, nor indeed did the trade creditors get any of the debts owing to them of £20,000.
The section is regarded as being in the nature of a deterrent so as to prevent banks from seeking this super-preferential status on the back of a recent court decision. It is essentially restoring the pre-existing position. It is not, therefore, a radical or, to use Senator Ryan's word, “devastating” measure.
In the five years ended 31 December 1985 the Revenue Commissioners  obtained almost £40 million from liquidations. It could be expected that if the creation of fixed charges on book debts were allowed to continue unchecked under the new dispensation, their incidence would grow and the Revenue would obtain little or nothing from future liquidations. A political point, which I am sure the Senators will appreciate, is that the effect of this, if it goes ahead, is that the Revenue Commisioners would have to take the initiative to close companies to a much greater extent than has hitherto been the case. Under the system obtaining prior to this in cases where there was a fixed charge and there was any deviation from payment schedules, the Revenue had to take action to close the company because if they did not they ran the risk of getting nothing.
We all live in the real world. I would not like to be in a situation of being Minister for Finance when the Revenue Commissioners — who have been perceived by the public to be acting on my behalf — were closing businesses down all over the country because if they did not they would be likely to lose their preferential status and not get the money which was owing to them. I do not think any Minister for Finance would like that. Truthfully, there is very little the Minister for Finance could do because the Revenue Commissioners are autonomous in these matters. The Minister can make representations to them, but so can anybody else. In the public mind the Revenue Commissioners will be seen to be acting on behalf of the Government.
A case that I have had in mind since becoming Minister for Finance is that of a very important company in the northern part of the country which was closing down. The Revenue Commissioners were about to close the company because one of the banks had a fixed charge on the book debts. It refused to release this and refused to come to any accommodation with the Revenue Commissioners to keep the company going and restructure it. The Revenue Commissioners were going to have to pull the plug. Luckily enough, following interventions by the local Deputies, myself and others, we  got all the parties around the table and worked things out. The bank backed off, accommodation was reached and the company are still operating. It would have been a tragedy if they had closed. This illustrates the danger that could arise if the Revenue Commissioners do not maintain their preference. I know there will be criticism made on two points, that the Revenue Commissioners are sometimes a bit slow to move on companies who are falling behind because they sit on their preference. That is a view that has a certain currency in business circles. There may be some truth in it. To return to a point made earlier, the Revenue Commissioners could certainly claim that they do not have as many staff as they would like and they cannot act as quickly as they would like on all of these cases. How long the Revenue's preference might last is a matter which can be looked at in the context of the Companies Bill. Would they have to take action within a certain time with certain deviations occurring to retain their preference?
Another area where a case might be made by some banks that I would not be averse to considering either would be asking the Revenue Commissioners to advise banks, in certain circumstances, of the position that obtains in regard to a particular company so that there would be some sharing of information where exposure exists. This could be also looked at. Naturally enough if the banks want to discuss this, it is something that I would not be averse to doing if it were proper. More accurately, I would not be averse to having the Revenue agree to do it if it were proper to have some sharing of information about the situation.
The measure we have taken is a very necessary one. There has been a certain amount of criticism also from the banks at the lateness in the way this was introduced on Report Stage. I suppose they feel it was slipped in on them and that they did not get a chance to make the normal representations. That was not deliberate. When the Finance Bill was first considered by the Cabinet I raised the possibility of doing this. The Cabinet, quite frankly, had to get the Bill passed  that day for reasons of the constitutional requirements in regard to the dates of circulation. The Cabinet said they would consider the matter later and possibly consider it as an amendment. They considered it at a later stage and decided to go ahead. The delay was because the Government was considering the matter rather more carefully to make sure it was doing the right thing, and not because we were trying to slip something across on the legislature, the banks or on anybody else.
I hope that explanation is helpful and will indicate to people that what we are trying to do is to protect Revenue preferences, to protect the status quo, and not to create new difficulties for anyone. I do not think it will have the devastating effects that Senator Ryan fears it will have. It will mean, of course, that a bank will have to be quite serious in its assessment of risk in lending to companies, as it should be anyway. It will not be able to relax on the basis of having a preferential position over all other creditors, including the Revenue Commissioners.
It is relevant that this Finance Bill contains an unprecedented large amount of incentives for businesses to look for equity rather than borrowing. By providing alternative means of financing, hopefully the pressure on businesses to go to banks for money and the pressure on banks in turn to look for assurances for their money will be relieved as a result of this Bill and other sources of funds, maybe equity, will open up to a greater degree for the business community.
Mr. E. Ryan: It is an idea to which many companies would aspire to, but whether they will succeed or not is another matter.
The section is very widely drawn in the sense that it does not merely say that if the Revenue Commissioners fail to collect certain money that the lender will have to make up the shortfall. It means the Revenue Commissioners can sit back and let the bank do all the work and,  almost literally, make no effort themselves to collect it. It would be acceptable, to some extent, if the Revenue Commissioners had done everything possible and ended up by finding that there was a shortfall and ask the lender to hand over the amount concerned. The section states:
the company fails to pay any relavent amount for which it is liable, then the said person shall, on being notified accordingly in writing by the Revenue Commissioners, become liable to pay such relevant amount on due demand
It depends on how the Revenue Commissioners approach this. It does seem to allow them to sit back and wait for the bank to collect. Then they just serve the notice and ask for the cheque. This seems to be passing over much of their own work and obligation onto the lender.
Mr. Daly: I have representations from a bank and they say:
We were most concerned to learn of the last minute amendment to the Finance Bill, 1986, passed in the Dáil last Tuesday May 13th, making the holder of a fixed charge on book debts responsible for all outstanding PAYE and VAT arrears of the company giving the charge. We understand that this amendment is being tabled in the Senate today, May 20.
The above amendment means that companies which may otherwise have been able to borrow monies against the security of book debts to finance their business, will no longer be able to do so if this amendment is carried in the Senate. The result of this could be that trading companies will find it more difficult to finance their business and in certain cases could precipitate receivership or liquidation with consequent loss of jobs.
This amendment was introduced without any advance notice and no apparent debate or input from interested parties, such as the banks. The  consequences do not appear therefore to have been recognised.
I would like the Minister to respond to this.
Mr. J. Bruton: I responded to it already. I pointed out the reason why it was introduced the way it was. I have also explained that it does not have the drastic effects that that letter claims it will have. The banks would say what they are saying anyway. The banks have got a very good weapon in their hands as long as the section is not passed to ensure that they have preference over everyone, including the Revenue Commissioners. It is not surprising that they would be rather perturbed at losing this, even though it is a relatively recent acquisition courtesy of the Supreme Court. They would say that, would they not, is my reaction to the letter that Senator Daly read out?
Mr. Daly: Does it not mean that with this sword hanging over business peoples' heads, no bank is going to allow them any money from now on? If they do not get that money it may drive them out of business.
Mr. J. Bruton: I do not believe that for one moment. The banks were lending money to businesses long before the Keenan case was ever decided on the basis of floating charges. The Keenan case opened up a new possibility of fixed charges, which previously had not been available. If what Senator Daly is saying were to be true then there would have been no lending to businesses prior to the Keenan case. All we are doing is restoring the pre-Keenan case position.
Mr. E. Ryan: It is not quite true to say that the position is merely being put back to where it was before the court decision because at least there was a kind of a grey area before then and banks were lending on the assumption that their security was fairly good. However, this section makes it quite clear that it is not. That might not be entirely the fault of the Minister, it may be partly due to the fact that the  whole position was pinpointed by the court decision. The Minister may say it has been rectified by this section but it certainly has ended up with companies finding it impossible to get a loan on the security of book debts. It is bound to have a serious effect on business. To try to measure that is impossible, but there is no doubt that it will have a serious effect. Did I understand the Minister to say that this will apply even in cases where the company has not gone into receivership; that it can apply at any time? That is why I am pressing the Minister to accept my amendment.
Mr. J. Bruton: My problem with the Senator's amendment is that a company could as in the case I quoted, the Gilbert Leon White case, just cease to trade. If the Senator's amendment was in place the protection of this section would not apply.
Mr. E. Ryan: It would be very unusual to find such a situation.
Mr. J. Bruton: It is unusual but I have illustrated how the Revenue Commissioners found themselves in that case at a loss of £70,000. The law, I suppose, has to foresee the unusual as well as the usual. Essentially, what a fixed charge in the book debts does is to take away the company's right to manage its own financial affairs by assuming the absolute right over all the company's receipts and payments. That is what happens. The money is paid into an account which the bank controls. Once the bank controls the company's affairs, they deny the Revenue Commissioners all possibility of collecting from the company. It is only reasonable then that the bank should be made responsible for the payment of the company's tax debts. If they are taking control of the company they should also take responsibility for the debts.
The section requires that for the bank to become liable they must have been notified in writing by the Revenue Commissioners. I am advised that the section will not operate retrospectively in the sense that it will only be the failure to  pay on a due date that triggers the issue of notification and any subsequent failures that would fall to be paid by the holder of the fixed charge. Historical debts to the Revenue Commissioners that go back prior to that instance will not be the responsibility of the holder of the fixed charge, only essentially the dues arising.
Mr. E. Ryan: Subsequent to the notice?
Mr. J. Bruton: Yes. I am sorry. I was incorrect in what I was saying. The Revenue preference will only be restored in respect of amounts paid under the fixed charge to the bank after the issue of notice. In other words, previous payments to the bank under the fixed charge will not be recouped but any subsequent payments to the bank, whether they relate to previous debts or upcoming debts to the Revenue, can be diverted to the Revenue.
Recommendation, by leave, withdrawn.
Recommendation No. 46 not moved.
Mr. E. Ryan: I move Recommendation No. 47:
In page 107, subsection (1), line 12, after “person” to insert “:provided that for the avoidence of doubt this paragraph shall apply only to receipts arising from book debts over which a fixed charge has been created.”.
This section appears to give the Revenue Commissioners the capacity to recover from the proceeds of realisations of fixed assets, as opposed to book debts, sums of taxes to which reference is made irrespective of whether any sums are realised from the liquidation of the book debts to which a fixed charge may also be held. In other words, it seems that because the lender has a fixed charge on book debts then he becomes liable to pay amounts due to the Revenue Commissioners even though he recovers money from the company as a result of the realisation of fixed  assets. It does not seem to limit it to recovery from book debts.
Mr. J. Bruton: The Senator is correct. Any amounts paid over, including those that do not arise directly from the fixed charge on the book debts, would be liable to the extent of the Revenue debt if they are being paid over to a fixed charge holder. Essentially, this is the status quo ante anyway, and it was the effective Revenue preference in the past.
Mr. E. Ryan: The section seems to be misleading. It refers to liability to tax and so on of holder of fixed charge on book debts. Having started by providing for that it is worded in such a way that it is not merely a fixed charge in book debts; it is money recoverable from any source. The lender starts by getting a fixed charge and ends up by being much worse than he was. He starts by having a fixed charge on book debts and, because of this, he is now liable to pay the Revenue Commissioners out of money he realises from any source from the company concerned.
Mr. J. Bruton: As I understand it, a fixed charge in the book debts gives the bank control over all of the company's financial affairs including its other disposals of assets and so forth, not merely those arising directly in the book debts situation. As the bank controls any funds arising to the company from any source, including the sales of assets, it is appropriate that as they control that the Revenue should be able to restore its preference in regard to the wider situation.
Mr. E. Ryan: There is no point in pressing the recommendation but, to a certain extent I am heartened by what the Minister has said, although this would have been more appropriately dealt with in the Companies Act. Perhaps it will be incorporated in the forthcoming companies Bill. If that happens and if it is taken out of the Finance Bill and put into the Companies Act it might be drawn in a way which is more acceptable. I understood the Minister to say that perhaps it would be incorporated in a future  Companies Act rather than in a Finance Act.
Mr. J. Bruton: It is possible. There will be a Companies Act coming forward which will be dealing with the range of market including either a complete reaffirmation or a modification of the existing preference position of the Revenue. That has yet to be decided. But, clearly, this is an issue that could be looked at in that context. I have already said in my first intervention that there are some areas where the Revenue might consider some modification of its arrangements vis-à-vis the banks in regard to notification of information and also, possibly, the duration for which Revenue preference would continue in the absence of certain actions being taken by the Revenue. I am not in a position to say what decision will be taken on either of those points. I am indicating some openness to points made.
Recommendation, by leave, withdrawn.
An Cathaoirleach: Recommendation No. 48?
Mr. W. Ryan: I have already dealt with that. I have given my view about that. Possibly this will be looked at also in future legislation. I am not pressing that.
Recommendation No. 48 not moved.
Section 115 agreed to.
An Cathaoirleach: Recommendations Nos. 49 and 50 are similar and may be discussed together.
Mr. Howard: I move Recommendation 49:
In page 107, line 26, after “may” to insert “with the approval of the Minister for Finance.”
It would appear that section 116 represents a new departure in the sense that  the Revenue Commissioners are now being given sole authority and power to appoint inspectors of taxes, and it says: “and all such inspectors and all other officers or persons employed in the execution of this Act shall observe and follow the orders, instructions and directions of the Revenue Commissioners. Recommendation No. 49 would insert after the word “may” in line 26 “with the approval of the Minister for Finance”.
The purpose of the Recommendations is to restrict the power of the Revenue Commissioners to appoint their own staff. Previously, I understand, these appointments were made by the Minister. Section 116 proposes that the Minister should divest himself of that power and hand over the appointment of the officers referred to solely and entirely to the Revenue Commissioners. The Recommendations, if accepted, will restrict this new power and would force the Commissioners to seek the approval of the Minister for their proposed appointment or appointees. It seems to be a new development and, certainly, I should like to have the reasons explained as to why the Minister has felt at this point in time in relation to these particular officers that he should divest himself of the power he has held up to now and confer the power solely on the Revenue Commissioners.
Mr. J. Bruton: Up to now, customs and excise officers have been appointed in this way, in other words, by the Revenue Commissioners. As the Senator will be aware, the White Paper, Serving the Country Better provides for a new system of accountable management wherein the executive agencies such as the Revenue Commissioners will take responsibility for their own staff and own arrangements. It is a purely theoretical notion anyway that the Minister should have to appoint inspectors of taxes. I do not recollect having any long hours of agonisation about whether I was going to have to appoint A or B. This is purely a formality. The appointments are done by the Revenue themselves in practice. The  section is merely making the law conform to what is actual practice already.
Mr. Howard: If this provision is taking the initial steps in carrying out certain decisions that emanate from the White Paper the Minister referred to to what extent then is this new departure to be continued in the Public Service? Is this the beginning of a trend we are going to witness? Is it the first step in fulfilling a commitment. Are we witnessing a transference of power or a divesting of power which represented a certain safeguard?
Mr. J. Bruton: In practice, take the example of executive officers coming into the Civil Service.
They are not appointed by the Minister. They are appointed by the Civil Service Commission. Once they are in the Department, the Minister is involved in their promotion to some degree, although at the top level and certain senior grades appointments are made by the Commission. The Minister is presented with a name to which he can agree or not. Essentially, this is consistent with the general move we are making. The present position whereby the Minister for Finance appoints the inspectors of taxes is a bit of an anachronism. I would not know the qualities of various people. I have to rely on the Revenue's advice one way or the other.
Mr. Howard: From time to time we receive and debate a number of Bills dealing with the commercial semi-State sector. Invariably, there are sections in these Bills which deal with certain appointments by the Minister concerned but with the approval of the Minister for Finance.
Mr. J. Bruton: That is the board.
Mr. Howard: Not board members. I am talking about other appointments.
Mr. J. Bruton: Ministers do not get  involved other than in board appointments as far as I know, sometimes with the chief executives.
Mr. Howard: I am referring to the chief executives.
Mr. Bruton: A minority of them.
Mr. Howard: Yes. Can I take it from that that this trend will manifest itself in the appointment of chief executives? Is it the beginning of a trend?
Mr. J. Bruton: There are not that many Government activity that are susceptible to or, indeed, require that degree of autonomy and delegation of function by the Minister as applies in the case of the Revenue Commissioners. But, presumably, as executive agencies are set up within various Departments, it is likely that recruitment will also be delegated from the Minister. As I pointed out, as it is, the recruitment grade is appointed by the Civil Service Commission anyway. However, I should not like to magnify the idea that this is a trend on a very wide scale yet.
Mr. Howard: It must have been found a necessary provision to include in legislation at some point in the history of the State. No doubt it has been preserved for many years and now we have arrived at the point where it is being discarded, as it were. I hope that events will prove the wisdom of the present decision as against the wisdom that prevailed down the years.
Mr. J. Bruton: I do not think it will make much difference one way or another.
Recommendation, by leave, withdrawn.
Recommendation No. 50 not moved.
Mr. Howard: I move recommendation No. 51:
 In page 107, between lines 32 and 33, to insert the following:
“(3) The Minister for Finance may fix such salaries and allowances for the remuneration of inspectors and all other officers or persons employed in the execution of this Act as the Minister for Finance thinks fit, and may discharge such incidental charges and expenses in connection therewith as the Minister for Finance may think reasonable.
(4) An Inspector who
(a) knowingly or wilfully undercharges or omits to charge any person, or
(b) is guilty of any faudulent, corrupt, or illegal practices in the execution of his office,
shall be guilty of an offence and on conviction shall be discharged from his office and be liable to repay any tax not collected due to such undercharge, omission, fraud, corruption, or illegal practice.”.
This recommendation proposes to add two new subsections to the Bill. It is the reverse of the proposal to take away from the Minister the power to fix salaries and allowances for the staff of the Revenue Commissioners. The second part of the recommendation proposes to reinstate with additional penalty the disqualification of inspectors who deliberately undercharge taxpayers. It proposes to give the Minister for Finance the power to fix salaries and allowances for the remuneration of inspectors and all other officers or persons employed in the execution of this Act as the Minister for Finance thinks fit, and may discharge such incidental charges and expenses in connection therewith as the Minister for Finance may think reasonable. It is a reasonable recommendation and I should like to hear the Minister's comments on it.
Mr. J. Bruton: The recommendation proposes that remuneration of inspectors of taxes and other officers employed in the execution of the Income Tax Act will  be a matter for the Minister for Finance. The proposed provision is, however, exactly the same as subsection 2 of section 161 of the Income Tax Act, 1967. Section 116 of the Bill provides for the dropping of that subsection from section 161 because it is, in fact, spent, in other words, not effective since the Public Service Transfer of Departmental, Administration and Ministerial Functions Order, 1973, which transferred from the Minister for Finance to the Minister for the Public Service the responsibility for terms and conditions of service of civil servants generally, including the staff of the Revenue Commissioners. It would, therefore, be inappropriate to make the Minister for Finance the responsible authority for the purpose of setting the remuneration of inspectors of taxes and other tax officials as this is now a function of another member of the Government under a 1973 transfer of functions order. The function still remains with the Government but in this case with the Minister for the Public Service.
The recommendation also proposes that an inspector who deliberately undercharges or omits to charge a person or is guilty of any fraudulent, corrupt or illegal practices in the execution of his office will be guilty of an offence and, on conviction, will be discharged from office and will be liable to repay any tax not collected by reason of his offence. Again, the proposed provision is somewhat on the lines of subsection (3), of the existing section 161 of the 1967 Act. Section 116 of the Bill provides for the dropping of this subsection also because it is considered that an inspector who commits the offences outlined therein can, as is the case with civil servants generally who commit offences, be adequately dealt with under the disciplinary measures provided for in the Civil Service Regulation Act, 1956. Furthermore, if the offence is fraudulent in nature, the inspector can be dealt with under criminal law provisions. It is also considered that it would not be appropriate to make the inspector liable to repay any tax not collected by reason of his offence. The taxpayer involved will still be liable to remit that tax anyway. For  these reasons the recommendation is not recommended.
Recommendation, by leave, withdrawn.
Section 116 agreed to.
Sections 117 and 118 agreed to.
First Schedule agreed to.
Second Schedule agreed to.
Third Schedule agreed to.
Mr. Conway: I move recommendation No. 52:
In page 119, Part IV, line 38, after “point” to add “:provided that notwithstanding the boundaries mentioned herein the seventeen acres in the area known as the Watercourse Industrial Estate Ltd. at Watercourse Road, Blackpool shall be included and treated for the purposes of this Schedule as if it were within the said boundaries.”
This recommendation deals with the urban area and, in particular, the Watercourse Industrial Estate which comprises 17 acres of industrial development land on which there are old, derelict buildings. Some of these old buildings have been refurbished and have been let to a total of 40 tenants involved in manufacturing and various other activities. From a position in 1980 where the former premises of Irish Distillers were totally derelict and vacant and offered no employment, there are now 40 companies employing in excess of 500 people in this organisation. In order to achieve this, some £1 million has been spent by the developers so far. However, it was found that the return on the investment and the cost of refurbishing the old buildings has become more and more uneconomical, especially in view of the extreme recession being experienced in Cork. The remaining buildings are in such bad condition that it  would be totally uneconomic for the developers to rebuild without the advantage of the new urban renewal scheme. However, with the benefit of this scheme, they could set out immediately to refurbish or rebuild at a cost of £500,000 over the next two years and a further £1,500,000 could be expended on the adjoining vacant land.
With these improvements it is expected that the units in the Watercourse Industrial Estate could be employing treble the present number or 1,500 people making it the biggest employment centre in the Blackpool area. Senators can imagine the benefits this would bring to Cork city and the development areas especially in view of the situation in Cork at present.
Up to now this company has never looked for any grants or assistance from the Government or the local authority nor are they looking for a grant now. They are simply asking that this area be included in the urban renewal plan. They are confident that these old buildings would be refurbished and employment would be achieved if this were done. The employment achieved in the Watercourse Industrial Estate is mainly in the area of manufacturing and production and is, therefore, much more beneficial than the area of employment offered by the new shopping centre which could offer only service type jobs and these only transfers from the city centre. If it is the purpose of the Urban Renewal Plan to correct the deterioration in buildings in Cork City and to create new building jobs and other productive employment, there is no excuse for not including the Watercourse Industrial Estate which has become the cradle of 40 new businesses and enterprises incorporated in the scheme. I am asking that this area which has been refurbished and has good employment potential, be included if the Minister would accept it.
Mr. J. Bruton: The position is that already there is more designated area in Cork under the Bill than there is in any of the other cities. Per 10,000 of population 7.3 acres in Cork are designated as against 6.4 acres in Limerick, 3.6 in  Waterford and Dublin and 3.3 acres in Galway. There are none in Kilkenny or in Navan for that matter.
Cork is more than well provided for in this regard. If there are industrial buildings, to which Senator Conway is referring, they will qualify for the normal industrial buildings allowances which are quite generous. We have stated earlier that we are not going to add to the area and we should not start departing from this as you would have no end to people on the margin. I know there are some in Dublin who have sites on the margin. If you include this area you will have other people with buildings which are perhaps going to attract some of the people who would now be attracted to the Watercourse Road area and they would have complaints that they were losing custom. So you get into an area where no matter what extension you make it discommodes someone else. It is better to leave it as it is.
Mr. Conway: Finally, I will make a plea to the Minister to examine the possibility. The estate has provided 500 jobs at present and this development could provide 1,500 jobs. He could take that into consideration. If there is a definite plan there to produce these jobs I cannot see why the Minister should not do this.
Recommenation, by leave, withdrawn.
Fourth Schedule agreed to.
Fifth Schedule agreed to.
Sixth Schedule agreed to.
Seventh Schedule agreed to.
Eighth Schedule agreed to.
Title agreed to.
Bill reported without recommendation and received for final consideration.
 Question proposed: “That the Bill do now pass.”
Mr. Ferris: I should like to thank the Minister and all the Members who participated in the discussion on the Finance Bill. It was a good debate and also a good-humoured one. The Minister was always forthcoming with his answers if not with concessions on the recommendations.
Minister for Finance (Mr. J. Bruton): Perhaps I might reciprocate those very kind remarks and say that this has been a very good debate from the point of view of actually examining the sections in the Bill in some respects in contrast to the debate in the other House. I should like also to avail of the opportunity to express a word of thanks to the very large number of Revenue officials who have assisted me in the course of the debate. We have had quite a number of people working under great pressure to have the Bill prepared. They had to deal with two separate Ministers for Finance in the course of the preparation of it which is a daunting prospect in any administration and they did so with the same good humour that typified the debate here in the House. I am putting on record my appreciation of their work.
Question put and agreed to.
Ordered that the Bill be returned to the Dáil.
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