Thursday, 10 June 1993
Seanad Éireann Debate
“1.—No arrangement, compromise or settlement in repect of any liability for income tax or income levy, shall be made, where such arrangement, compromise or settlement would amount to an arbitrary or invidious discrimination between the taxpayer or class of taxpayer and taxpayers or classes of taxpayers who have complied with their obligations in respect of such taxes.”.
Precedents in respect of tax amnesties have been set but none of them went as far as the proposed amnesty. The income tax amnesty introduced by the then Minister for Finance Ray MacSharry in 1988, which had to be complied with by September 1989, at least made those who were liable for tax pay the sum due. There were concessions in respect of penalties and interest charges. It is unacceptable to allow people to pay only 15 per cent of the tax due on money held outside the jurisdiction. It gives a bad signal to the PAYE taxpayer. It is an invitation to people to evade tax and not to fulfil their obligations to the State as, in a few years time, they will be absolved of their sin. That is not acceptable.
The taxpayer is already overburdened. The Cathaoirleach has ruled other recommendations out of order but it is relevant to this recommendation to mention that we already pay income tax, pay related social insurance, health contributions and the 1 per cent employment training levy. The system must be simplified and reformed. I accept the point made by the Minister, in his reply to the debate on Second Stage, that most people understand tax reform to mean payment of less tax. Tax reform does not necessarily mean that people will pay less tax, although that would be desirable.
I cannot understand the proposed tax amnesty for those who have evaded taxes. It is like offering to return to the owners the drugs found on the south coast last week or telling those who have  profited from drug trafficking, whose money is lodged elsewhere, that they can bring the money back into the State with only a 15 per cent penalty. It is an invitation to and an endorsement of impropriety. It is not acceptable and that is why this recommendation is proposed.
Ms Honan: I second the recommendation. The terms of the proposed tax amnesty are outrageous. They mock the complying taxpayer. I spoke on Second Stage about the principle of fairness in the distribution of the tax burden. Most taxpayers would like to see that principle applied in the tax system. They will accept the taxes they must pay if they believe that everybody is treated fairly and equally by the State.
This amnesty gives the wrong signals to the people who pay the bulk of tax, particularly PAYE workers who have always considered themselves unfairly treated. It is very damaging if people believe they are being unfairly treated. PAYE workers and business people who comply with taxation regulations and pay their taxes each year will feel aggrieved.
I do not agree with the comments of Labour Party Senators that the financial yield from this amnesty will help reduce taxes for everybody. I believe there is very little money out there. What is most important is the implied message of the amnesty. I agree with the Minister that those who call for tax reform believe that such reform will mean lower taxes for everybody. For me tax reform means lower taxes for people who have carried more than their fair share of the tax burden and more taxes for those who have not. When the Commission on Taxation recommended tax reform it suggested that people who were generously treated in the past would lose out as a consequence of such reform.
The people who will benefit from this amnesty were more than generously treated in the past. They paid no tax whatsoever and took their money out of the State. They have no allegiance to this country. People whose taxes have supported the services provided by this State are being ignored and told that  they do not matter. This Government will look after the people who have forgotten about this country. Those people can repatriate their money by paying 15 per cent tax.
We have had tax amnesties in the past but people have never escaped paying their share of taxation. They were allowed to forego penalties and interest. These were people who were already within the system but who had found it difficult to keep their businesses going and availed of the opportunity to sort out their affairs. They would have done so eventually and the tax amnesty just accelerated the process.
The proposed tax amnesty is appalling. I cannot understand why the Government thinks it will give a signal of fairness; it will do the opposite. I oppose it and most of the people with whom I have discussed it are shocked. They cannot understand it. They are not interested in how much money it will yield. They believe it is totally unjust and for that reason I ask the House to support this recommendation.
Mr. Roche: We have been treated to a fine display of hand-wringing. My views on tax avoidance and tax evasion are well known. People who regard themselves as being better than most in society have siphoned money out of this country. It is, however, naive to suggest that we simply throw up our hands in horror and walk away from the issue. It is also naive to suggest that it does not matter how much money is involved, that we are so pure we should not devise some method of bringing it back.
I abhor the rhetoric that has surrounded this issue. In saying that, I am not referring to either of the two previous contributions. We must put this amnesty in perspective. Tax havens are a part of the world in which we live. The Isle of Man lies within a very few miles of this building and very few questions are asked there about money deposited. The banking systems in Jersey, Guernsey, Luxembourg and Switzerland welcome this kind of money. These tax havens depend on the movement of money around Europe.  A substantial number of people in Irish society are willing to avail of these devices. It is worth trying to bring this money back into the country. Enforcement procedures must, however, be put in place. It is an extraordinary fact that the best educated and the best placed people in Irish society avail of devices to send money out of the country. The ordinary PAYE worker, the owners of small businesses, those who live on social welfare or the small farmers, are not sending millions of pounds out of this country. High earners in the legal profession, in medicine and in dentistry are sending money abroad.
I have mixed views about amnesties. Perhaps this is because I have always been in the PAYE system, as a Member of this House, the other House, and as a civil servant. Like most taxpayers, I am affronted by the reality that faces us. We must also be practical, however, and we need to be better informed than we have been to date on this issue. I am appalled at suggestions by the leader of the main Opposition party recently, that somehow or other this amnesty has been arranged to launder money for terrorists or drug dealers.
We must face the fact that millions of pounds leave this country every year. It is worthwhile proceeding with this amnesty for a limited period to see how much comes back into the country as a result. The same kind of debate surrounded the original tax amnesty which allowed those who, not always because they were criminal in intent, were outside the tax system, to become compliant tax-payers. I would like to see an undertaking that a very severe audit system is put in place when the amnesty has run its course.
We know, roughly speaking, which sectors of society are involved. Some of the leading practitioners in medicine, for example, draw salaries up to and in excess of £0.25 million. They also draw substantial payments from the VHI and private patients who do not come under State schemes or the VHI. It is clear that this sector is not sufficiently audited or policed, this is equally the case in other  professions. These people consider themselves to be the very essence of society, yet they give a very bad example to others.
I have received communications from people in my county, who are annoyed about this amnesty. The rhetoric in this debate has not allowed us to form a calm view of the issue. In spite of the distaste I have for the general issue of tax avoidance and tax evasion it is worth proceeding with this for a limited period, provided we put a very strong policing and audit mechanism in place to ensure that very severe penalties, including imprisonment, will be imposed on people who move money around. It is increasingly difficult in the modern world to do this, with exchange controls gone, but we must ensure that people who have been well supported by society, particularly the professionals who have been educated at huge cost to the taxpayer are not allowed to reap the benefits of this behaviour. There has been an excess of hand wringing about this issue. There have been other amnesties, they have proved successful, and we should adopt a calmer approach to this proposition than we have to date.
Mr. Dardis: I listened carefully to Senator Roche's contribution, we do not diverge significantly in our overall view of this matter. My difficulty with this is not that there is an amnesty — it would be desirable to bring money back into the country — but with the Government's proposal to impose a 15 per cent rate on this money. If somebody has £100,000 and would normally be liable for £57,000 tax on the full amount, they will now be liable for £15,000 tax. The State is giving them a gift of £42,000. Will the Minister state how much money he expects to accrue to the State from this amnesty? How confident is he that such moneys will be repartriated? It has been said that people will be brought into the tax net when they take advantage of this amnesty, but this is arguable. Those likely to find themselves in the tax net are not likely to repartriate their funds.
Another fundamental objection dealt  with in the recommendation is that the amnesty discriminates between different classes of taxpayers. How confident is the Minister that this aspect of the amnesty is in accordance with the Constitution? I realise that this is a matter for the courts to decide, nevertheless it is something we must consider. I agree with Senator Roche in respect of improved discovery, and about the way the Revenue Commissioners pursue those who are misbehaving. That is not in dispute, but it appears that people who have money outside the State are not being pursued in this way. It seems unfair that a small trader in Donegal or a farmer in the west should be pursued with a rigour absent in the case of those who regard themselves as being outside the jurisdiction of the State. These matters were referred to previously when we debated Greencore and the Beef Tribunal. There are people who regard themselves as being above any responsibility to the State, while the PAYE taxpayers fulfil their responsibilities in full.
As regards money deposited in the Isle of Man, I asked on the Order of Business, when this matter was first raised, if the fact that we had introduced a 15 per cent tax rate on the money had anything to do with the tax rate on income in the Isle of Man being 20 per cent, discounting the Isle of Man rate by 5 per cent. I agree with Senator Roche's points about punishment. People who do what some of these people seem to be doing should be pursued and punished, but they are not being punished by this measure which is selective in its nature.
Mr. Enright: As I said yesterday, this tax amnesty is a dangerous proposal and the Minister should reconsider it. I understand that the best advice the Minister and the Government have received from senior officials in the Department of Finance and the Revenue Commissioners is strongly against this proposed tax amnesty. The Minister is an experienced politician and aware that senior personnel in the Department of Finance are charged on a permanent basis with the  responsibility of carrying out the administrative work of Government. The Government decides on policies and they are implemented by the Departments. Nevertheless, when senior officials' best advice is rejected, it is time for someone to shout stop.
I appreciate there are difficulties in the Cabinet over this matter and I am not surprised there are divisions. The leader of the Labour Party often spoke at length about honesty, integrity, justice, fair play and trust. These are all absent from this amnesty. It can only be described as a cheats' charter. Condoning cheating is the wrong signal for this House to give. Young people sitting the leaving and the junior certificates are advised by their teachers and parents to be honest and not to cheat by copying from others. Yet, we are introducing a cheats' charter condoning everything that is wrong in our society. This amnesty will be proved wrong in years to come.
Senator Dardis mentioned the beef tribunal which was set up because the then Minister for Finance was advised by senior officials in his Department and the Department of Industry and Commerce not to grant certain loans. Despite that advice, taxpayers' money was risked and lost. The same officials have given advice on this matter and again it has been rejected. I know there are differences in Cabinet, but the Minister for Finance will have to bear responsibility and the odium attaching to this proposal.
I have admired the work of the Minister and I make no bones about that. In the Departments of Labour and Finance he has conducted himself in an exemplary manner. However, this proposal stinks and must be re-examined by the Minister. Otherwise politicians' reputations will be damaged nationally and abroad.
As I said yesterday, foreign managing directors reside here whose companies are also based here. All their staff pay their taxes as legislated by these Houses and yet people who have broken the law are allowed such an amnesty. Something is seriously wrong.
I listened with interest to Senator Roche. If he wishes to play poker that is  his prerogative as long as he plays with his own money, but he should not be able to take gambles such as this. The Senator said that it is worth taking a shot at bringing the money back in and that millions leak out each year. That means granting a pardon to people who have flouted the law and allowing them to get away without paying their taxes. That is wrong and should not be condoned.
Mr. Enright: There was general goodwill towards that amnesty because previous governments had brought in similar amnesties. In all previous cases, however, the arrears of tax due had to be paid. In this instance arrears have not been demanded and that is why this amnesty will do irreparable damage to our taxation system. These proposals will cause numerous court actions and ultimately prove unconstitutional. We should not be taking that risk.
Yesterday I outlined the different taxes of £100,000. A person who invested £100,000 overseas ten years ago, cheating this country, has made a net profit of around £77,000 compared to somebody who kept his money here and paid his taxes. There is no justice, equity or fair play. Regardless of how it is dressed up those who took their money overseas have flouted the law.
Apart from the two cases outlined, what about the person who siphoned off £100,000 at home and tells the Revenue Commissioners that he has spent the money? He has spent the money in Ireland and looked after his wife, family and business, although he has broken the law. He will be in the worst position of all and yet has tried to do something for the country by investing money here although he has broken the law. It is wrong that there should be such a difference between the last amnesty and this one. Senator Roche mentioned that the Fine Gael leader, Deputy Bruton said  this money may be laundered money. There have been many financial scandals in the last number of years. People have flouted the law and I do not know where they put the money. Will a general exemption and a general amnesty be granted to all who break the law? This gives the wrong signal to Irish youth and to those who respect the laws of Ireland. It is a mistake and the decision should be reconsidered.
Mr. Calnan: I am apprehensive about tax amnesties because an amnesty is, as the word implies, a type of forgiveness. People who have flouted the law cannot be fully forgiven; we are talking about large sums of money which have been removed from this country. The small saver, often the PAYE taxpayer, has money in the local credit union or post office or in savings certificates. The small money remains and the big money is taken out of the country.
Where did this big money come from? I will not single out any individual; I am going to talk in very general terms. Money is handed over for the provision of services and that money is often not easily accounted for. There are certain services in this country where if a tax rebate were given money would be held here. I may be talking in riddles but some will get the message. Certain services in this country could be allowed against tax for PAYE workers and others. The tax could be refunded and that would identify the person who is receiving the money which is very often sent abroad and of which there is no record kept. If money is given in relief, it has to come from somewhere and requires invoices which would have to be used for tax purposes. This is one method of stopping the dealing.
We have to face reality. A person entering Ireland from a foreign country would see we are a little tax haven. Advertisements say if one invests money here, special rates apply. However, there are bigger tax havens than Ireland such as Switzerland, Liechtenstein, Andorra and Liberia. To stop this practice it is not enough to pass a Bill in both Houses and  have it signed by the President. While there was some way of checking money before, now there is nothing to stop a person filling a suitcase with money, if they have it, and taking it abroad. They will not be checked except for arms.
Mr. Calnan: Most of the time the money is taken out of the country unnoticed. It is difficult to stop this free movement of money. If it could be done easily, Deputy Ahern or somebody like him would have found ways of doing so.
What is the situation with regard to returned exiles who wish to return and settle in Ireland and have made money abroad? How are they situated with regard to bringing money into the country? They can benefit from this amnesty.
The big job is to take the necessary steps to stop the money going out. I outlined a few steps that could be taken but it is important that we think of more. People talk in the present tense about money going abroad. Money has been going out of this country, without doubt, for decades during a succession of governments. If there is no tax amnesty and if we are to be fair to everyone the money will stay abroad. Is it not right and proper that we should try to bring this money back and make the best of a bad lot?
I would love to see everyone who has money abroad and who has not paid all tax due being taxed fully but how can one do that? If somebody can think of a better method of retrieving this money, I will give them my full support. I will give the Minister for Finance my full support if he can do it but I do not think it is possible. If we want to let the money rest abroad in foreign banks we can do so but this country badly needs that money. No doubt the Minister for Finance would say that money that would come back from abroad would be used here and he would come up with a number of areas which require money. It could be used for job creation, building houses, better grants for education, better grants for new  houses and for a better tax system. There is money resting abroad. If we leave it there and hide our head in the sand, everything will stay as it is but is £1 or £100,000 not better than nothing?
Mr. Roche: It strikes me that Senator Enright's contribution indicated the confusion in logic surrounding much of this debate. It was rather unfair of him to suggest I could be characterised as arguing that we should in some way play poker with people's money. If he had listened carefully to what I said, both today and last night, he would accept that that is not fair or reasonable characterisation. He gave an example of someone who did not comply with the tax code here in Ireland, who put money in a nominee account, siphoned it out of that account, made imprudent or poor investments and lost some of the money. He suggested that poor devil cannot avail of the benefits of the tax amnesty. He misunderstands the details of the tax amnesty.
Mr. Roche: The Senator misunderstands the details that have been published to date about nominee accounts and investments in this country. The biggest frailty in logic in the Senator's contribution is his evident sympathy for the person in his example. That person's sin, culpability or misbehaviour is no different, because they misbehaved with tax money in this country, from that of the person who put money into a suitcase and took it to Liechtenstein, Andorra or elsewhere. If the Senator has sympathy for that person, he accepts the principal of the activities on the part of that person.
Mr. Roche: I do not want to mischaracterise the Senator, I suggested he may have mischaracterised me and if he did not, that is fine. The reality is that  the culpability is equal in both cases. However, the more important flaw in the debate on Senator Enright's part and that of his party in recent times is the suggestion that Ministers should almost always automatically accept advice given by civil servants. I was a civil servant for a long time and I served many Administrations, particularly the Department of Finance when the former Deputy Richie Ryan was Minister. He was a fine Minister and a good person with whom to work. I would have been appalled if former Ministers for Finance, Messrs. Ryan, Reynolds, Haughey or the current Minister automatically accepted all the advice from civil servants. In fact, the civil servants would be appalled themselves because the burden of making unpleasant political decisions would then fall back on the administration, i.e., the permanent Government. Civil servants and administrators already have an undue amount of power.
In a democracy — and I know that Senator Enright is a democrat — to suggest that politicians should shirk their responsibilities in making the political, i.e. the policy, decisions at the end of the day is not acceptable. We elect Governments to govern and we appoint civil servants to guide Ministers in the way they govern. Political decisions must be made by the people answerable to this House, the other House, and ultimately to the ballot box. It would be a poor state of affairs if Ireland was ruled by a non-democratically answerable bureaucracy.
One of the flaws in much of the debate on this and other areas from Fine Gael in recent years has been the propensity to propel every decision into non-democratically answerable bodies and to suggest that tribunals, commissions or boards should be set up to deal with problems. That is a dangerous road to take in any democracy, and I know that Senator Enright accepts that. I also know that in his heart he does not subscribe to the doctrine he propounded here, that Ministers should automatically accept the advice of civil servants. From my experience as a civil servant working in mandarin-land  in the Department of Finance for a while, various civil servants were cautions and clever in their approach to Minister——
Mr. Roche: That is true, they do not have much choice in the matter. They are clever and cautious in their approach and usually give more than one piece of advice, arguing both sides of a case. It is normally not difficult to see the particular departmental bias in relation to an issue. It is a fallacy in a democracy to put forward Senator Enright's view, that Ministers should always and forever accept advice, no more than county councillors should always accept advice. We are elected as politicians to represent the views of the people and make policy decisions and we will be judged on that.
Mr. Enright: In regard to my comments on the advice of senior civil servants and senior officials in the Department of Finance and the Revenue Commissioners, I fully accept that the advice is given by officials in the best possible interests and on occasion different viewpoints are put forward. When discussing matters where laws will be changed in such a fundamental manner, serious and well thought out advice should not be flouted or thrown back in officials' faces. This matter affects every principle of which we are aware. For the first time, taxes lawfully due are being written off under a cheats' charter, and that is why in this instance the advice of senior civil servants should be seriously considered, analysed and accepted. I do not know how the matter has broken down in Cabinet but I gather it has not voted on anything yet, which is strange as voting is part and parcel of a democracy. Nevertheless they have agreed on everything according to my sources. If any Government wishes to go against the  advice furnished then I think they are heading up a cul-de-sac.
Mr. Dardis: Yes, but I would refer to the fact that the Labour Members who occupied these benches were always consistent and fair in their arguments. How can the Labour Members opposite go along with the type of proposal in this measure? Will the Minister explain how he can defend it?
Minister for Finance (Mr. B. Ahern): I thank Senators for expressing their views on this matter. You can appreciate, a Chathaoirligh, that the matter under discussion is not part of this bulky Finance Bill. We seem to be debating a Bill that has not yet been published, printed or cleared through Government. Interesting as the debate is, it seems as if many of the Senators who have spoken seem to know more than I do about this Bill. Perhaps the Seanad is drafting the Bill.
Mr. B. Ahern: A number of proposals for what has colloquially been called a “hot money” amnesty has been the subject of media speculation for some years now. The proposals have featured since the last amnesty in 1988 and are all based on the premise that there is a large amount of money in evaded taxes and undeclared income salted away in accounts and assets abroad or indeed at home. I stress that there are no reliable estimates available for the amount involved, although there are people who say it could be in the order of £1 billion to £2 billion. In reply to Senator Honan I do not have knowledge of the figure. This has been mentioned by commentators and other people who may have knowledge. In the nature of such funds any figures mentioned are speculative. We should be clear about this in the debate because nobody knows the amount of money involved outside or inside the country.
The main argument in favour of a new amnesty is that, given appropriate incentives, a portion of this money could be attracted back home for useful purposes, maybe for capital and social developments. A variety of beneficial uses for this money has been suggested and many good suggestions have been debated at length in both Houses. Some people say we could get a revenue take for the Exchequer, an improvement in external reserves, a release of moribund funds for productive use and a new flow of funds to the economy. The funds could be used to assist PAYE workers for schemes in health, education and welfare, as well as helping socially deprived areas, trying to assist education schemes, and generally helping to fund capital expenditure schemes. These areas have been suggested  as being useful if we can attract some of this money home. It has been mentioned that if we received this money in the Exchequer we could perhaps use it on hospitals, homes for the mentally handicapped and other areas.
The Government has three main objectives for this proposal. It should provide those who failed to meet their tax obligations in the past with a final opportunity to regularise their affairs in advance of more stringent penalties, including imprisonment for tax fraud. It should facilitate the use for general economic benefit of funds arising from tax evasion whether held dormant in Ireland or abroad. Finally it should secure the highest possible proportion of undisclosed liabilities for the period prior to April 1991, bearing in mind that such evasion may be difficult to detect at this remove.
The Government has carefully examined all the complex arguments involved and decided that an incentive scheme will be directed at those with previously undisclosed tax liabilities. It will offer partial relief for certain categories of undisclosed tax liabilities which arose prior to 6 April 1991. The new scheme is intended as a final opportunity for those concerned to regularise their affairs. It will be accompanied by the introduction of stiff penalties, including gaol sentences.
Many people who spoke on this matter have mixed views. They would like all taxpayers to be compliant and honest. They would like if there was no need to speak of “hot money”. Senator Roche stated this is not an Irish problem, that Luxembourg, Geneva, Lichtenstein and the Far East all suffer the problem of “hot money” in circulation. During the currency problems last September extraordinary amounts of money, not all dubious, were moved around the world from Japan and the Far East to the United States and Europe at the flick of a switch.
Although Ireland is a small country, during the currency crisis Japanese banks operated in the Irish system on behalf of others to make speculative gains. There  were many debates in this House and elsewhere about the rights and wrongs of that. It may be a more interesting debate than that on “hot money” because it involves billions of pounds floating around the world.
No country has yet succeeded in finding a method to deal with that problem. I have had the good — or bad — luck to be in the Department of Finance to experience the worst turbulence to affect any system in 30 years. Whether it was lucky or unlucky it was certainly an experience to see how the system operates. It makes me feel strongly about the movement of money.
The amount involved here is far less. It is clearly not right that these people broke the law and are non-compliant tax-payers. However, as I said in the other House, our population is 3.5 million people. About 1 million are young, many doing examinations this week to help them enter the labour market for the first time. We all wish them well in that. There are also many old or unemployed people who do not save money, they simply live from day to day.
Mr. B. Ahern: That is a good policy. It is far better to spend the money while alive. It is good for the economy. There are lifetime transfers and other methods. Senator Enright, when a Member of the other House was a great advocate of appropriate conditions for lifetime transfers. Having to pay tax on inherited money is an appropriate way to do it, as well as the other schemes I dealt with, educational schemes for farmers and changes in thresholds. I do not think there will be a rush to transfer lands because many will have section 60 policies so it may not make much difference.
There are 3.5 million people in the country but it is estimated there are 15 million bank accounts. When a small tax on ATM cards was introduced last year it was said it would be a complication but it is not. There are about five bank  accounts per individual. I do not have five accounts, I may have five overdrafts.
Mr. B. Ahern: I do not have quite that many. Ministers' salaries have improved recently. Certainly people have an extraordinary number of bank accounts and we can take it a large number within that system have bank accounts for legitimate reasons. They may be paying certain bills from different accounts. They may divide their money and pay education expenses from one account. It is totally legitimate for them to do that.
All Members of both Houses will be aware of people siphoning off money through suppressing their income or VAT returns or having undisclosed liabilities in some other way. That is what must be addressed. Do we close our minds to that or do we tackle it? The Government's proposal is not connected to this Bill, is to give people one final opportunity to address their tax.
An issue was raised frequently in the other House although only one Senator mentioned it in the course of yesterday's debate. I mentioned last night some of the “doublethinks” in this country. One arose in recent weeks in relation to “hot money”. People will assert that non-compliant taxpayers are wrong and should be in gaol and that a Minister, Government or system should never assist them. They think their names should be published as a punishment. However, the same people will say without any apology that measures such as revenue powers, attachment orders, third party interventions, linking into bank accounts and calling in the Sheriff goes too far.
I do not like non-compliant taxpayers, as everyone knows. However, you cannot have your cake and eat it. One cannot argue against public service pay and say there are too many public servants when they are needed to detect non-compliant taxpayers. The limited staff available can only go so far and they meet many problems. We have experience  of that. There is no need to cite any cases, there have been several in the last three years. Inspectors and courts have gone around the world to establish trails. We do not always have sufficient powers and I am not suggesting we acquire the ultimate power, that is, the ability to gain access to bank accounts.
Some argue that the Government is wrong to consider granting concessions to non-compliant taxpayers but that extra resources and powers should be given to Revenue, Finance and Social Welfare to issue attachment orders, court orders, link into bank accounts — a measure that has only rarely been undertaken — and that this will produce the desired results. The difficulty with this argument is that the pre-1991 money is already gone. That method would catch current money and only a proportion of old money. This would be the case even if massive resources were employed, which probably could not be sustained. Undoubtedly more money would be netted on the basis that the more money and powers invested the greater the return. Even then not all the money would be caught which is in places like Luxembourg, Geneva, Lichtenstein and so on. People can move money at the speed of light. Good as the Revenue Commissioners are, they are not that fast. Obstacles are put in their way to impede them.
We must be realistic. We are seeking to achieve compliance by offering, between now and the end of the year or thereabouts, a final opportunity to those who have been non-compliant and have broken the law to regularise their affairs.
Senator Enright referred to individuals who have undisclosed liabilities within the State in the form of non-cash assets. Senator Roche made the point that these would be included in the measure. He is following my remarks in the Dáil when I referred to the case of an individual, either inside or outside the country, who has undisclosed non-cash liabilities. An example would be a business person, who over the last five years has siphoned off £20,000 a year. That £100,000 is no longer in the form of cash. It is not in the Isle of Man or in any of the other centres of  hot money but it is invested in a property in Benidorm. That kind of individual should also be included in an amnesty. Such an undisclosed liability, whether it is a house in Benidorm or in County Offaly, should be dealt with in the same way as a cash liability.
The Government agrees with the points made by Senator Dardis and Senator Enright that to introduce amnesties on a regular basis every few years would damage the system. However, the amnesties in 1932, 1969, 1974 and 1988 never dealt with the issue of undisclosed liabilities, either offshore or in dormant accounts. They did not have that facility.
The last amnesty only collected moneys that should have been paid in the years immediately preceding its introduction. The number of new clients unknown to Revenue that came into the system was only something like 342, despite a collection of £540 million. Generally most moneys collected were from people already within the system who were behind in the payments and availed of the amnesty to tidy up their  affairs. The accountants and tax planners made the point that if there had been more time at their disposal there would have been a move on the next group.
There is a view that all this money is abroad. This is not the case. Much of it is in accounts in this country. Many people listening know what I mean by that. I understand from Central Bank sources and other sources that in some cities, towns or areas in the country there are more foreign-owned bank accounts than domestic accounts. I find that extraordinary. I would not speculate on whether there are more foreigners living in these cities, towns or areas or whether there are addresses being used by domestic residents. An amnesty might answer the question. Following that, we would be able to live in a more compliant society in 1994, having finally resolved these matters.
Cregan, Denis (Dino).
Enright, Thomas W.
Farrelly, John V.
Mr. Dardis: I move recommendation No. 3:
In page 12, between lines 32 and 33, to insert the following subsection:
“(2) A tax free allowance will be claimable for child minding services in the home, to the value of £500 per year, where such services have been the product of a training scheme approved by the Minister.”.
The Minister for Finance will be aware that a similar recommendation was moved in the Dáil. This recommendation is slightly different because it does not confine itself to a particular FÁS scheme. It gives the Minister for Finance power to choose the appropriate scheme.
I would like to reply to some of the points the Minister made. I was confused about assets and liabilities. My impression was that a house in Benidorm, which was paid for with money which had been taken out of the State, was an asset rather than a liability. I would be happy to have a house in Benidorm and I would regard it as an asset. However, I would regard the flight to Benidorm as a liability.
Mr. Roche: Perhaps the Senator could explain it to us.
Mr. Dardis: We cannot legislate for the banking practices of Swiss or Japanese banks. We must legislate for ourselves. We should do that now.
Acting Chairman (Mr. R. Kiely): I ask the Senator to speak on recommendation No. 3.
Mr. Dardis: I will attempt to provoke you.
There are many schemes in operation where people are given incentives to offer employment. If a parent, especially a woman, leaves the home to work, she must find a trained person to look after the children. This woman should enjoy a tax free allowance of £500. This is a reasonable request. It is a valid source of employment and it is one which should be encouraged. It should be possible to free people from the home if they can find employment outside, thus providing employment for childminders. People should be given this incentive and that is my reason for moving this recommendation.
Mr. Cregan: A tax free allowance to the value of £500 per year, claimable for childminding services in the home, provides a person with £10 a week. I would broaden this recommendation. I would not give it to the person who is leaving the home. We must not give the impression to people who are employing a childminder that they will gain as a result of their actions. The child minder must be prepared to look after the child while the woman works. She may need to work if her husband is unemployed, although he will receive social welfare payments and she would also be entitled to these benefits.
Incentives should be given to the person who is prepared to train as a childminder. When we look at the dangers in other countries with regard to childminding, we are lucky to have sensible young people who are interested in training as child minders. Every incentive must be given to these people. I do not believe that £500 a year or £10 a week is sufficient. Perhaps the Minister for Social Welfare, Deputy Woods, could introduce a system whereby State benefits and money paid for childminding services could be combined so that the child minder would benefit.
Dr. Henry: I support this recommendation, not only from a financial point of view. Senator Dardis made a  valid point that it would be useful to the employer. Senator Cregan said that it would be useful to the employee. It would also raise the status of childminding, which is an important career for a young girl to embark upon. These are people who have been involved in officially recognised training schemes. This recommendation would give further recognition to post-scheme training. It would also make the childminding service more professional.
The recommendation would elevate the position of childminder, regardless of who obtains the money. Child minding is an important position, but our young people are prejudiced against service jobs. I would like to see a change in this area.
I do not agree with Senator Dardis that a house in Benidorm is an asset. Many people, including the Minister, are correct when they say it is a liability.
Acting Chairman: The Senator is straying from the recommendation.
Dr. Henry: I apologise. I am agreeing with the Minister because the Costa Brava is not what it was.
Ms Honan: I support this recommendation because there is an anomaly as between a parent who employs a person to look after a child in the home and an employer who employs a person in his business. The latter is allowed the cost of the person's wages or salary. This affects women because when a woman decides to work outside the home, she is obliged to provide alternative facilities for looking after her children.
Child care is a bona fide occupation which requires specific skills. This should be recognised in the interests of the children, parents and those who look after the children. There is great potential in this area for job creation. Many men and women would work in the home and look after children if it was given a status in our society. At present, it is an area in the black economy. It is not considered to be a proper job. This is wrong and it  affects the choices which women make about returning to work.
It is difficult for women, particularly in the PAYE sector, to employ child minders because they must pay child minding costs out of their net income. As a result, they tend to pay low rates to the person who is looking after their children. In many cases, people pay low rates and then allow the childminder to claim social welfare payments. This is unacceptable and it will continue until a tax free allowance system for childminding is made available.
This is an area which involves females. Job creation is an important area. We could take people off the dole and secure worthwhile jobs for them. This would give the job some status.
Mr. Roche: This recommendation is a good one. I agree with the view expressed by Senator Honan. The child minding service, by its nature, is forced into the black economy. The recommendation that the tax benefits should accrue to a childminding service which has been subject to a proper training scheme would have the benefits of professionalising childminding and ensuring that a better standard of child minding service is provided.
There is a negative side to this also. Most childminding services in my area, are provided by young married women who are using the childminding service they are providing, often in their own homes as opposed to the homes of the children, as another form of income. Theoretically that should be in the tax system and they are operating in the black economy. This scheme would have to be looked at.
I am not opposed to a scheme like this, but it needs to be teased out. I do not know what the full cost of this scheme would be. I suspect if it was put on a fully professional basis, the cost would be substantial. If it were to be introduced, it would be fair and reasonable to look at how the State training agency, FÁS, would provide a training scheme because, as Senators will be aware most married women cannot avail of FÁS  schemes. The childminding services provided in many homes for additional incomes is an important and valuable part of the income in many households. If we are to change that system we need to think carefully about how we go about doing that. I am in favour of changing and professionalising the system. I am also in favour of people, when they pay for a service, encouraging that service to be brought into the tax system, and for there to be tax and other benefits for the providers of the service.
However, I would add a word of caution. When I worked in the Department of Finance in the late 1970s, we introduced a scheme to try to overcome the black economy on nixers in the household. I am sure Members will remember this scheme. We allowed anyone availing of services in the household to write off the cost of those services against their income tax. The uptake on that scheme was incredibly low. Unless we introduce a scheme like this in a way that includes training and appropriately linking the registration of professional childminding into the tax system, although it is a good idea, it might end up like that previous scheme — which was also a good idea — not having any impact at all.
The aims of professionalising childminding and providing some tax benefit for the family engaging the childminding service, are good, but we would need to know more about the cost. I do not know if the proposers of the recommendation have any idea of the cost, but there must be some sort of ballpark figure. I do not know how many families avail of childminding services, it would be difficult to put an estimate on it. When we make recommendations to something as important as the Finance Bill we should have a ballpark figure.
There is a need for a scheme of this type, but I am not sure if the Finance Bill is the appropriate place to introduce it. Obviously it is appropriate for introducing the tax element but I would like to see such a scheme thought through and teased out, and if it was to be introduced I would not like to see young women who currently are providing childminding services — in many cases excellent childminding services since they have the best of training having raised their own families — penalised. I am aware of many childminders who fall into that category, young married women, who depend on that income. Although, marginally, we could argue that they are not in the system at present, it would be important that if we introduce a scheme like this we would facilitate their being included in the training aspect. I am sure Senators will recognise that they should not be excluded from the system. There is a need for a scheme along these lines.
Mr. Enright: There is a considerable amount of unanimity on this issue. I accept what Senator Roche said — that the majority of the people who look after children during the day are in the black economy. This arises because both parents are out at work and the mother has to leave her child in the care of a third person. Normally, only small amounts of money are involved and, consequently, the beneficiary does not report them for tax purposes. It would not be easy to change this arrangement because if the childminder was to pay tax, the net pay would be negligible. A regulation to put childminding on a proper basis would improve matters for everyone.
There has been a great deal of sadness when children were not properly looked after, were in care or had psychological problems. A lot of that trouble stemmed from the fact that the two parents were forced to go out to work. This is unsatisfactory as the children might be left with people who were not trained or capable of looking after them. A change in this direction is highly desirable and would be most welcome. I am sure the figure of £500 could be altered; I am sure that is the principle Senator Dardis has in mind.
Senator Cregan was right when he made the point that there should be some benefit for the childminder. If the Minister is considering a change perhaps he should move in that direction because there is a great responsibility on people who look after children and we should  make it attractive and desirable for them to do so. I support this recommendation.
Ms Honan: I would like to reply to a few of the points made by Senator Roche. He talked about the cost of this scheme. If 50,000 people were in receipt of this £500 allowance per year, which is approximately £10 per week, and were paying tax at the standard rate, the cost of the relief to the Exchequer would be approximately £7 million; at the higher tax rate it would be £12 million and it might be slightly higher than this as some people who are on the higher rate could move into the lower tax rate. A portion of the cost could be recouped if these people move into the formal economy since they would also be paying PAYE and PRSI.
The majority of people providing this service are in the black economy. I accept the point Senator Roche made that many of these people are married women who are looking after their own children, and perhaps one or two other children, in their own homes to supplement the family income. The point has been made that if these people were brought into the formal economy they would be receiving a greater gross pay and could, therefore, afford to pay tax and PRSI.
The Second Commission on the Status of Women made the point that we do not have any State childcare facilities and that we need to develop a childcare policy unit. They recommended that the Department of Health should prioritise the provision for childcare, children in need, etc., and also that they would establish standards for childcare and other related areas. The majority of women in Ireland have shown that they would prefer to have their children taken care of in their own homes. We should have a two-tier system with State provided childcare facilities and a tax allowance for women who employ people to look after their children.
Mr. Burke: I support this recommendation. I too would like to see this benefit extended to Montessori schools  which are growing in number around the country.
Mr. Cregan: I do not agree that a person who wants somebody else to mind their children should get extra benefits. I believe in the opposite. A person who is prepared to stay at home and mind their children should get money for doing so. I know of one woman who has just had her fifth child and who has a person to mind her children. A woman still going out to work having had five children is not my idea of how Irish society should be. I have no objection to paying a mother to stay at home and that would make jobs for others. I would take money from others to pay mothers to stay at home. As a father of seven I sincerely believe if this recommendation is passed it will encourage more people who have children to go out to work because they will get tax benefit. I ask the Minister to consider the idea that more recognition should be given to mothers staying at home.
Mr. Dardis: I could not disagree more fundamentally with what Senator Cregan has just said. It is about choice and it is important that a man rather a woman makes this statement. Women must have a choice and should not feel they are locked into their homes by virtue of motherhood or any other position in life. That is one of the intentions of the recommendation. I take strong issue with the remarks that have just been made.
There are training courses, such as FÁS courses already in existence and it would be up to the Minister to designate courses. I am prepared to accept that we can be flexible as to the amount, as to whether it should be £500 or some other sum. My contention, which was also the contention of several Fine Gael Members in the other House is that the allowance should be paid to the mother. It is an issue of empowerment and choice. The choice to stay at home to mind children is a valid one. I do not have difficulty with people making that choice but if they make another choice they should be empowered to have that discretion.
Mr. Cregan: I did not object to anybody having a choice but we should not pay them for having it. For example, should we also pay a husband if he wants a choice? Under equality legislation everybody should be treated equally. Everybody should be entitled to do whatever they want to do and I have no objection to that but I will not pay any person extra because they want somebody else to mind their children while they work. Does it mean that a husband should also get extra money? What benefits did widows get in the past and most importantly what benefits did widowers receive? A widower never received anything and he had twice the responsibility since he was not a woman.
Mr. B. Ahern: The recommendation is similar to recommendations that were proposed in the other House. There are a number of arguments, which I answered in the other House, and some of these have been mentioned here this morning. The point made in the other House and here today is that the granting of an allowance such as this would make it easier for both spouses to go out to work. That is the principle behind it. Perhaps a less relevant element is that it would create jobs and help combat the black economy where childminders pay no tax and draw social welfare at the same time. There are two or three aspects and Senator Roche gave the example of tax relief for personal services. I was very much in favour of that in respect of home improvements in the late 1970s and the early 1980s. During the debate in the other House we examined that suggestion in terms of cost.
The experience at the time was that contractors operated a two-tier pricing system, depending on whether the taxpayer was claiming tax relief. That relief is not known to have created any worthwhile additional employment. At that time a person who operated the allowance system paid a different amount from a person operating through the black economy. Nothing was achieved and as Members are aware a previous Government abolished that relief in 1983. I gave  an undertaking in the other House to examine this matter to see if it is of benefit. The realities of the home and of the labour market tend to move in this direction.
I do not intend to discuss the merits of whether it is right or wrong to give options. However if the £500 allowance were given which parents would claim on their tax free allowance or joint assessment, would it get the childminder off the dole? That is the major question and I do not think we can answer it today. If the allowance were given I, as Minister for Finance, would have to make sure that it was being given for a number of purposes. I have outlined these and they include making sure that it helps employment and that the beneficiary is in the PAYE/PRSI system.
Parents may already have contracts of employment for their childminders but we do not see the benefits of those at the moment. However if this allowance were implemented parents would have to be told they now have a contract of employment and must return PAYE/PRSI for the individuals they employ. Would people bother to use the allowance or would they continue to operate as before?
These are just some of the questions but I am not against evaluating the proposal which a number of Senators have asked me to examine. It is not just a matter of giving the £500 allowance. The task force on employment examined this proposal but it did not come up with final figures on the cost of implementing it. A figure of £20 million was mentioned, but I do not say that in any negative sense, the cost was never fully calculated. Senator Honan's figure may be just as accurate.
One would have to pay the allowance as soon as the proposal was implemented; that is the sting in the tail. I know of one person, who takes a principled stand on these things and who already returns PAYE and PRSI for their childminder. Naturally the allowance would be a straight benefit to them. I know of only one person who does this; others pay out of their pockets, in some cases, as Senator Roche mentioned, to a married  woman who receives an additional few pounds a week for providing a childminding service. From a Revenue point of view one would not get too excited about trying to stop it.
One of the new issues public representatives in Dublin are coming across is the establishment of commercial child minding services. When a new estate is built, many houses are purchased for this purpose and this leads to arguments over planning. I currently have three major conflicts relating to this in my constituency. I will examine the matter with my officials during the course of the year.
Mr. Dardis: I thank the Minister for his reply. I would also advise him to speak to the Minister for Equality and Law Reform, Deputy Taylor, in the same vein.
Recommendation put and declared lost.
Section 1 agreed to.
Acting Chairman (Mr. Calnan): Recommendation No. 4 is out of order as it is declaratory in nature and more appropriate to Second Stage. Recommendations Nos. 5 and 6 are related and may be discussed together.
Recommendation No. 4 not moved.
Mr. Dardis: I move recommendation No. 5:
In page 12, in the first entry in column (1) of Part I of the Table, to delete “£7,675” and substitute “£11,625”.
The Minister will be aware that similar recommendations were moved in the other House. The intention is to establish progress on the recommendations of the Culliton report and to have a yardstick to measure the commitment of the  Government to them, whether intellectual or otherwise. Culliton stated that there should be no more than 20 per cent of taxpayers above the standard rate band. I realise that cannot be achieved overnight and it would be an impossible imposition on the State. Any notion of fiscal stability would be removed. At least we should move in that direction at a proper pace.
A related aspect covered by these recommendations, which would have been more fully dealt with by the recommendation that has been ruled out of order, concerns the poverty trap. I have met many in my constituency who tell me that they work for a certain body and earn approximately £120 per week. Their discretionary spending at the end of the week is minimal — they say that their neighbour in receipt of social welfare has all the allowances — medical card, rent relief, fuel allowance and so on — and ask why they should bother to go to work. That is part of this argument and it is related to these two recommendations. If we abided by Culliton in that no more than 20 per cent of taxpayers should be above the standard rate band, that would necessitate increasing last years figure of £4,150 for a single worker, on a band of £11,625 at the standard rate. The increase is £200 this year.
Mr. Roche: I understand the cost of this would be extraordinary. Unless we say what recommendations we have for cutting back services or for introducing substitute taxes, it is a little unrealistic from a financial point of view, although well-intentioned from an electoral standpoint. It would cost over £80 million——
Mr. Dardis: I entered a caveat.
Mr. Roche: No Senator would be against, in principle, giving a better tax break to those in the tax system, but in practice, it would cost over £80 million. If this is added to the estimate of £10 million for the previous scheme, it totals £90 million. This is a lot of taxpayers' money. One would like to see us moving in this direction but it is difficult to see  how the public finances could be balanced or what alternative taxes could be introduced. Perhaps alternative taxes should be devised to deal with situations like this, but unless we go down that route, this could not as it currently stands be supported.
Mr. Cregan: I agree with this recommendation and would simplify it further. Those earning low amounts of money are taxed too soon; there is no incentive to work, especially for the lower paid. There are many, especially in the public sector, who would be better off by not working at all. Many paid at local authority and health board levels as general operatives are getting a supplement and are paying tax at the same time. We are taking tax from them while at the same time they claim a supplement to pay their expenses.
The lower paid must be given an incentive to work. Many people have told me that it does not benefit them financially to work. There are five different forms of direct taxation levied on the PAYE sector and the bands are so low that the incentive is not there. PRSI and PAYE are one and the same; everyone should pay one tax. When an individual earns more than £22,000, he pays no more PRSI. This is ridiculous. It is most unfair to the lower paid worker who should be paying less. Many civil servants who are paid low wages must be angry about this. We are ridiculing those on lower incomes and this is unfair.
Mr. B. Ahern: Acceptance of this recommendation would limit budgetary flexibility over the next four years. The Government would be obliged to concentrate exclusively on one aspect of personal income taxation. The Programme for a Partnership Government commits the Government to improve other aspects of the tax code, in particular the removal of lower paid workers from the tax net. I agree with the points made by Senator Cregan.
We must maintain basic tax relief on mortgage interest and VHI and structure the tax system so as to support employment  and minimise financial imbalances and outflows. Over the past seven years exemption limits for lower paid workers have increased. Families have also benefited by means of a child addition. The top rate of tax has been reduced from 58 to 48 per cent and the standard rate from 35 to 27 per cent. The standard rate band has been extended by over 63 per cent.
These recommendations propose to increase the standard rate tax band beyond that outlined in section 2 of the Bill. The Bill proposes to increase the standard rate band by £200 for a single or widowed person and £400 for a married couple. The recommendation seeks a further increase of £3,950 and £7,900. The cost for one year would total £303.7 million. This recommendation would require the same adjustment in one year as recommendation No. 4 would require on an incremental basis up to 1997-98.
I sympathise with the thrust of this recommendation. The Programme for a Partnership Government lists as one of its priorities the broadening of the standard rate band so as to ensure that only high earners pay the high rate of tax. In addition, we will attempt further to reduce tax rates, especially the standard rate. This can only be done as budgetary circumstances and economic conditions permit. The adoption of the correct budgetary strategy, with exchequer borrowing and inflation under control will encourage economic growth and job creation. The acceptance of this recommendation would put this at risk. Furthermore, it would require increased borrowing and, therefore, it cannot be contemplated.
Section 2 provides for a widening of the standard band for 1993-94 by £200 for a widowed or single person and £400 for a married couple. This is a continuation of the progress that has been made in widening this band in recent years. Since 1987-88 this band has been widened by almost £6,000 from £9,400 to £15,350 for a married couple and by almost £3,000 from £4,700 to £7,675 for a single or widowed person. This is an increase of over 60 per cent. We are in  agreement regarding these measures, but the pace is unsustainable.
Over the same period, the standard rate of tax has been reduced from 35 to 27 per cent and the higher rate has been reduced from 58 to 48 per cent. The cost of this income tax packet will total £87.1 million in a full year and this is all that can be afforded in present budgetary circumstances.
I realise that this recommendation seeks to assist lower paid workers, to provide an incentive for those seeking employment and to ensure that people paying the standard rate of tax continue to do so. This has been acknowledged by successive Governments. As I said in the Dáil, we must maintain all of the tax allowances and keep them in-line with inflation. The Government seeks to assist lower paid workers and keep them out of the tax net or at the standard rate and to provide incentives for those who seek employment.
Mr. Dardis: I am encouraged by many aspects of the Minister's reply. I am not surprised that he has not accepted this recommendation, but I am encouraged by the fact that he has sympathy with the thrust of the recommendation. The Minister has accepted that a problem exists in that it may be more advantageous for people to remain on social welfare than to seek employment because of the benefits they would lose.
The Minister has also acknowledged the need to simplify the system. There are many ways in which one pays tax. I will discuss the 1 per cent income levy, which we object to, at a later stage. This Bill has 170 pages and the Fifth Schedule contains one and a half pages of closely typed text about the number of related enactments, thus highlighting the complexity of the situation.
Regarding the tax amnesty, such situations arise because well-paid people sit in offices dreaming up weird and wonderful ways of driving a coach and four through the legislation. We must simplify the system.
This recommendation has achieved its  objective because the Minister acknowledged its thrust. It is related to the Culliton report and its implementation. The Minister for Transport, Energy and Communications, Deputy Cowen, when dealing with the increase in telephone charges in this House, said the Government was committed to implementing all aspects of the Culliton report.
Recommendation, by leave, withdrawn.
Recommendation No. 6 not moved.
Section 2 agreed to.
Mr. Dardis: I move recommendation No. 7:
“3.—Section 4 of the Finance Act, 1991, in respect of allowances for widowed parents is hereby amended such that for so long as there is ‘a qualifying child’ in relation to a claimant in the year of assessment having the meaning assigned by the relevant Finance Acts that such a widowed claimant be entitled for the purposes of personal reliefs to be treated as if that person were married and not widowed.”.
This recommendation ensures that widowed people are not disadvantaged. If they have a qualifying child they should be assessed in the same way as a married person.
Mr. Cregan: I raised this point earlier, I said they were disadvantaged for far too long. It is not asking too much. For a long time, a widower was not as well off as a widow, from a tax point of view, and did not receive tax benefits for employing a childminder. This is relevant and important and is not really an extra benefit because we are asking for the person to be given the benefits in the relevant year. I ask the Minister to take this recommendation into consideration.
Mr. Neville: I spoke about this issue in the House on a previous occasion and I quoted from an article in The Irish Times by Nuala O'Faolain in which she had interviewed a widower. He outlined to her, at some length, the problems facing a widower with young children. It was a well written article and described the harrowing experience of the death for the family and the severe financial losses as a result. The Minister is aware of this situation but there has been only a small improvement in regard to tax free allowances for a widower.
That man is a personal friend of mine and I have discussed this with him in detail. There is a significant decline in his income due to changes in his tax status. Senator Dardis spoke about a qualifying child, which I would extend to children in full-time education. It is sad to lose a wife or husband, but this is compounded if the widowed person is living in the country, in a job which is not well paid and cannot afford a car to travel to work. In this case, the wife had worked and the loss of her income and the change in tax status had a serious effect. They had planned budgets for normal life spans and suddenly everything was shattered. I am not certain what these changes would cost. The last change which Senator Dardis proposed cost in the region of £80 million. I imagine this change would cost in the region of £0.5 million. The Minister will say that every £0.5 million must be raised somewhere but this——
Mr. Cregan: Amnesty.
Mr. Neville: ——is a very deserving cause. It is expensive to get a baby-sitter to look after children. One must bring some children to primary school and others to post-primary school and get to work. If there were changes in the tax free allowances, it would be a major step in the right direction. I support this recommendation.
Mr. B. Ahern: I heard Senator Enright make this case in the other House several years ago when the changes were made, so I know that he has been consistent  in his arguments. The recommendation proposes——
Mr. Neville: Consistency is not always a sign of progress.
Mr. B. Ahern: ——that where a widowed claimant has a qualifying child, the widowed person should be treated for the purposes of personal reliefs as if that person was married and not widowed. Widowed parents are already entitled to the same personal tax allowance as a married person. The House will see from the table in section 3 of the Bill that the married personal tax allowance for 1993-94 is £4,350 and that widowed persons have an allowance of £2,675. However, where they have a qualifying child they are granted an additional personal allowance of £1,675. Their allowances are £2,675 plus £1,675 which is a total of £4,350, equal to those of a married person.
Mr. Cregan: Does that apply to widows or widowers?
Mr. B. Ahern: It applies to widowed persons. The recommendation refers to section 4 of the Finance Act, 1991, which entitles widowed parents with qualifying children to a special additional allowance which applies in the first three tax years immediately after the year in which they are bereaved. I think this is the section to which Senator Enright was referring when it was changed a while ago.
The allowance is £1,500 in the first year, £1,000 in the second year and £500 in the third year. It was introduced to help widowed parents to cope financially with the transition from married to widowed status. Over the three years in question, widowed parents receive greater personal allowances than married persons. In subsequent years, the personal allowances of both widowed persons with children and married persons are outlined in the table in section 3.
All Senators have argued generally for further initiatives on this matter. This is always under consideration but the costs  are high. The constant difficulty in this area is targeting, so at this stage it is not proposed to go any further than this but——
Mr. Neville: What other areas does the Minister have in mind?
Mr. B. Ahern: A number of suggestions were made in the other House such as an increased allowance which would benefit all tax paying widowed persons, improved exemption limits and increased  tax bands for widowed people in the lowest income groups. These are all matters which, quite frankly, we are only examining. Costs build up quickly but we will continue to monitor the situation.
Acting Chairman: It is now 1 p.m. and, in accordance with the Order of Business agreed this morning, I am required to put the following question. “That the sections of Part I of the Bill not disposed of are hereby agreed to”.
The Committee divided: Tá, 27; Níl, 13.
|Belton, Louis J.
Cregan, Denis (Dino).
Enright, Thomas W.
|Farrelly, John V.
Tellers: Tá, Senators Mullooly and Wall; Níl, Senators Cosgrave and Dardis.
Question declared carried.
Sitting suspended at 1.20 p.m. and resumed at 2 p.m.
Question proposed: “That section 52 stand part of the Bill.”
Mr. Enright: I gather that there was goodwill in the lower House in regard to this section. Will the Minister look at a section which was not reached this morning?
Acting Chairman (Mr. R. Kiely): That is out of order. We disposed of Part I of the Bill this morning. We are discussing Part II now. I am sorry but I have to rule the Senator out of order.
 Question put and agreed to.
Sections 53 to 56, inclusive, agreed to.
Mr. Enright: I move recommendation No. 20:
In page 111, before section 57, but in Chapter I, to insert the following new section:
“57.—The provisions of section 92 of the Finance Act, 1989 and Disabled Drivers (Tax Concessions) Regulations, 1989 (S.I. No. 340 of 1989) shall be extended to that category of disabled persons who are without one hand or without one arm, and who are permanently seriously incapacitated or seriously disabled due to either a disease or an illness.”.
As I said on Second Stage, I want the Minister to investigate the concessions for disabled drivers as they were available only to those permanently disabled by the loss of a limb when the then Minister for Finance — the present Taoiseach — extended the category to include those who are permanently physically disabled.
However, those suffering from severe arthritis are unable to avail of the concessions. I have been in communication with the Department about a person who is almost permanently disabled by arthritis, but who can drive with difficulty. That person intends to import a car and wants the import duty to be waived and to get tax concessions, petrol allowances, etc. I know there is goodwill in the Department of Finance, the Revenue Commissioners and the Minister in this case.
This recommendation is important to a small number of people. The Irish Wheelchair Association, the Multiple Sclerosis Society of Ireland and other groups have made representations to the Minister. I ask him to be sympathetic to this recommendation.
The person in my example has very limited use of his limbs and it is important  for him to get a car that can be adapted. I appreciate that the Minister does not want to over-extend the net in case he reduces the benefits that may be payable to some of the people already drawing allowances. Nobody wants that to happen but I ask the Minister to extend the scheme in this instance to people who are permanently and physically disabled, which would cover the area.
Mr. Crowley: I have experience in this area. The Revenue Commissioners have been most helpful to me whenever I have had to approach them with regard to the rebate available to disabled drivers. It is important to remember that the reason for the introduction of this regulation was to increase mobility for people with disabilities because public transport was not available to them in the way it is to other people. It is important that any review or changes will not affect those most in need of the extra mobility allowance. There is a fear among certain people that if the net is widened too much people who are supposed to benefit from this regulation will be excluded. I understand Senator Enright's point that certain people should qualify but, because of the system, do not at the moment. One of the areas which requires improvement — and I am sure the Minister will look favourably on this when reviewing it — is that of people who cannot drive themselves because of their disability or physical incapacity and therefore, need someone to drive them around. Regulations were introduced from 1988 to 1989 to allow for rebates and grants to be paid to people driving a permanently disabled person who cannot drive themselves. An extension of this area might help to alleviate some of the problems about which Senator Enright was talking. Whatever is done, care must be taken that the people who are supposed to be helped by and benefit from these regulations are not affected. Those who require assistance are the people who cannot use any form of public transport. I ask the Minister to keep this in mind in any review in this area.
Mr. Dardis: I bow to Senator Crowley's experience in this matter. I support the recommendations and I have had a similar case to the one cited by Senator Enright. A person who is very severely disabled by arthritis and has all the medical evidence to prove such disability, cannot benefit although he is just as seriously disabled as someone who might be eligible in other circumstances. The Minister should look at this area carefully and I am confident he is already conscious of it. A degree of flexibility is required. We spoke earlier about not disadvantaging people by reason of the fact that they are widowers or widows or because they work outside the home. Those principles are accepted and this is a similar principle. Somebody who has a severe disability should not be excluded.
Mr. Norris: We have listened to the direct personal experience of Senator Crowley. The relief must be targeted directly at the people most in need. I sympathise with the sentiments behind the recommendation. I do not want to be uncharitable or flippant but there is an expression that it would cost one an arm and a leg. Apparently, an arm and a leg is not sufficient to automatically entitle one to this type of concession. It seems a very severe imposition. Perhaps it is an arm and a leg but apparently the loss of an arm or a leg on its own is not enough. I would have thought that someone who is mutilated in this fashion, by losing an arm or a leg, should in decency qualify for this form of relief. My difficulty with the recommendation as tabled is that I am not quite sure who decides the degree of seriousness of the incapacitation, disablement, disease or illness because if someone presents themselves and says that they have some obscure disease of the nervous system and is disabled, even though they may not appear to be disabled, who judges and decides? Is there a medical referee? If I could be persuaded that there was an efficient method of deciding and determining the appropriate benefactors, then I would be in favour of the recommendation. As it is phrased however, it is a little vague but  I am sure the Minister will take on board the intention behind the recommendation.
Mr. Cregan: We are an extraordinary breed of people because in one sense we want to facilitate people who have lots of money by giving them a tax amnesty, yet we are not prepared to facilitate people who cannot do something for themselves. I understood, and Senator Crowley has made it clear, that the Revenue Commissioners have been very helpful. I handled cases involving disabled people and I too found them very helpful. I did not know there were certain situations where a person who was defined as disabled would not benefit. From a realistic point of view, would it not be better to give any person who has lost a limb every possible facility to ensure that everybody else is safe? That would be much cheaper than an amnesty. How can we say that we think that £1 billion or £2 billion will be collected under the amnesty and at the same time, are not prepared to consider an area that may consist of 200 arguments or 150 cases? Why are avenues not open? If they are open, I apologise. I would like a reply from the Minister that the avenues are quite broad because they should be in cases like this.
Mr. B. Ahern: I made clear in the other House that I was supportive of the fundamental review of this area. As Senator Crowley said, the scheme has been up and running for a few years. Senator Enright outlined some of the history and background of the scheme, which was limited initially, and there was a major debate. I would not get into a debate with Senator Norris regarding the loss of arms, legs and hands. As I said in the other House, it is not even pleasant thinking about it. The principle of the decision made at the time was based on mobility. It has been rather difficult. A colleague of Senator Enright gave me details of one individual's case. I met the individual when pursuing another matter, he had one leg and no arms and was driving a car. He had been driving successfully for several years by operating  the shoulders and is in employment. If assessed on mobility the person is mobile.
A school teacher started the case back in 1988 to achieve this concession which covers VAT up to £7,500 for a driver and vehicle registration and £9,000 for a passenger, excise, petrol and road tax. However, like every scheme, it was suggested that we operate it first and review it in a few years time, and that is what we are undertaking. On a point Senator Crowley raised, at the moment, providing the criteria are fulfilled, a passenger is eligible providing the adaptations to the car for the invalided person represent 20 per cent of the pre-tax price of the car. If the car is adapted, the individual does not have to be the driver, clearly I am talking about cases where the individual cannot be the driver.
The question of medical assessment was raised by Senator Norris. I am glad I am not the medical assessor in such cases. Indeed, it would be inappropriate for officials of the Revenue Commissioners, the Department of Finance or the Minister to hold such a position. The medical assessment is undertaken by the directors of community care in the health boards in the first instance, based on the relevant criteria, or, in the case of appeals, by the medical board of appeals. There is no involvement in the assessment by officials of the Department of Finance or the Revenue Commissioners. I would thank Senator Crowley for his kind remarks about my colleagues in the Revenue Commissioners. I believe, from my own experience of cases over the years, that they endeavour within the criteria to treat these matters with due care and attention. These are not clear-cut cases where one can say there is a loophole, an exemption or a threshold, because it is an entirely different area.
I indicated on Committee Stage in the Dáil that the operation of the scheme is being reviewed and I have given a commitment that the outcome of the review will be discussed with the finance spokespersons of the main Opposition parties prior to the regulations being amended. If representations are made  they can be looked at then. I do not want to labour the point about opening it up and I appreciate Senator Enright's understanding in that regard. Needless to say we are talking about people whose mobility is extremely restricted, and their ability to live any sort of normal life is based on their access to transport. Various associations and organisations have argued that all their members should be included, but if any consideration was to be given to that, one would end up taking away what are accepted as very favourable terms for those who need them most. One would probably end up using a far greater number to get value from the money already spent, or an additional increase that would ruin the scheme for those who genuinely need it. I am prepared to look sympathetically at the review's findings by experts in this area, and to discuss them with the Opposition spokespersons in the Dáil. They have also been involved in various meetings of bodies and we will certainly try to have it ready for next year. It is an area where, as Senator Enright said, we are sympathetic.
Mr. Enright: I welcome the Minister's statement that he hopes to have the review completed next year and that more progress could be made on this matter. I also spoke to Senator Crowley about the matter prior to the start of this debate because I knew of his interest. Senator O'Kennedy and others are equally interested. I first came to know of this matter through a constituent who had been involved in a serious accident, and, while not suffering the loss of a limb, had limited powers of movement. This person had great difficulty in lighting a cigarette and yet could drive a car. The Barnardo Trust in Britain provided a car for this person almost free of charge, but they had to know the details of the registration by a certain date. The Taoiseach, when Minister for Finance, was helpful and made a change back in 1989. He promised at the time to carry out a review in the 1990-91 period which I am pleased to see and I am glad it will be  completed, I hope, in 1994, with significant improvements.
Obviously, Senator Dardis and I are in correspondence with the same person judging from what the Senator said about the arthritis case. That concerns someone who is totally incapacitated but can drive an adapted car. They have been able to obtain a car in Britain which has been specially adapted in every respect to accomodate this person, but, because of the current regulations, they cannot import the vehicle although it is available. I do not think the matter can be encompassed here, but I have been in touch with the Minister's Department about it, and I ask the Minister for a sympathetic hearing because the person is permanently disabled and, regrettably, getting progressively worse.
Mr. B. Ahern: I may have given Senator Enright the impression that I would have to wait until next year's Finance Bill to act on this. However, because it involves amending regulations it is not necessary to wait for another Finance Bill. When the review is ready I will circulate the proposals to the finance spokespersons of the main Opposition parties so that we can finalise the work and amend the regulations. I hope that will happen sometime before the end of the year.
Recommendation, by leave, withdrawn.
Sections 57 to 59, inclusive, agreed to.
Question proposed: “That section 60 stand part of the Bill.”
Mr. Enright: All the country's licensing authorities are county councils. The only areas in which a car can be registered are in the county towns, like Tullamore or Portlaoise, where the county council offices are located. To facilitate people, will the Minister examine the possibility  of extending the registration process to urban district councils? Also, because the Government appears anxious to expand the business role of post offices — they are being computerised and open on Saturdays — will the Minister consider extending the registration of motor vehicles through post offices? They are safe regarding moneys, their financial structures are sound and they keep good records which can be closely analysed. The post offices are anxious to extend their business role. Most of the local authorities find that the amount of legislation coming from the Houses of the Oireachtas is increasing in volume all the time and their number of personnel curtailed. They are overworked and unable to expand into other areas. My first choice would be to allow registration of motor vehicles through post offices. Has the Minister considered this?
Mr. B. Ahern: At present, driving licences can only be issued by the local authority in the area in which the driver resides. The vehicle licences and road tax discs are also issued by the local authorities. Under this section it will be possible at a future date to renew licences in any motor tax office in the country. This arrangement will be far more convenient for motorists. For control reasons the facility cannot be extended to a person's first licence. The section will be brought into operation by the Minister for the Environment once computerisation of the motor tax offices is sufficiently advanced to cater for the revised arrangements.
It costs roughly £11 million to collect road tax at present. That will obviously be looked at and we will use technology to best advantage. We must first reach this stage where people would not have to pay in their own regional area before extending the payment centres to post offices, etc. This facility will be of major benefit if, through technology, people can register, wherever they live. This would ease the congestion and solve many of the existing problems.
Mr. Cregan: The Minister admits that technology can improve the system. Would he agree that a move to collect the unpaid tax on vehicles is long overdue? It is only thorugh inspection by the gardaí on the roads we find that money is overdue. Has the Minister considered introducing a system similar to that operated by the ESB, so that car tax could be paid on a phased basis or by direct debit? In this way the Government would be better protected and would get more money. Many people pay their bills through the banks — and I am delighted to see a banking machine in the Houses of the Oireachtas. It would be a good idea to give the public an opportunity to pay their car tax by direct debit. Whether on a quarterly or monthly basis, it would be better than making one payment of £400 each year and the country would gain.
Question put and agreed to.
Sections 61 to 78, inclusive, agreed to.
Question proposed: “That section 79 stand part of the Bill.”
Mr. Enright: At present roughtly 1,250 vintners are not licensed because they failed to obtain a tax clearance certificate. They are living in limbo; about 2,000 people have paid their arrears. I have met a number of those people, whose businesses are at a critical stage and they are unable to meet their liabilities. They are trading without licences; which is illegal trading, and they have been so informed by the Revenue Commissioners.
The total number of licences in rural Ireland is about 6,000 and approximately 1,225 vintners owe enormous amounts in arrears. Family businesses will have to be sold and the people will have to go on the dole. The position is serious. I do not condone the non-payment of tax but these businesses will be sold. Could the Minister allow these people to come to an arrangement with the Revenue Commissioners?
Mr. Cregan: I am a former publican. Like other Senators and the Minister I am aware of the problems in the licensed trade, particularly in rural areas and in the smaller city pubs. We appreciate the problems of the Revenue Commissioners and Ireland's problems are such that every penny possible must be collected. When we pay £10 million per day in social welfare it is vital to raise all available money.
I look at the amnesty which will benefit people with money in the banks in Ireland and supposed millions outside the country and I then look at people with small businesses. I must admit that the Revenue Commissioners have been fair to the licensed traders when it comes to this problem, but there is more involved than money. This is a social problem. At one time people thought that selling alcohol was a great business, but that is no longer the case and anyone who says otherwise can expect an argument from me. If a publican spills no more than a drop of alcohol, 20 pence is lost. If a person spills milk he will pick up the bottle — and milk is eight times cheaper than alcohol. The price of drink is very high. I must emphasise the seriousness of closing down small family businesses, the owners of which never even thought they were in the tax bracket. I am not saying they should not be taxed but through ignorance they may think they are not liable for tax. The Revenue Commissioners give the impression everyone is making the same amount of money and that is not true. In west Cork one Monday a pub only sold two pints and I am sure many people could cite similar examples. Business is not good. Does anyone in this House realise what is happening outside and how bad the business climate is?
I acknowledge the Revenue Commissioners have been fair. However, we must consider carefully the proposal to tax the non-compliant at 15 per cent while at the same time imposing a heavy tax burden on the ordinary individual trying to rear a family, maintain a business or whatever.
 While assistance has been given to those starting up in business, more is required to counteract the prevailing view that some people are better off on the dole. People who send their children to sign on without fear of a means test because they have nothing are burying their pride. Small businesses such as small pubs are closing down all over the country which at one point employed many. It is untrue to suggest they are doing well; they require every possible concession and help.
The Minister must have received submissions from small businesses in trouble with the Revenue. It is not fair that these businesses are being stifled while there is to be a tax amnesty in another area. A measure of this kind, proposed for one group should be proposed for all.
Acting Chairman: I must remind the Senator that Parts II and III have to be completed by 4 o'clock and I ask him to be as brief as possible.
Mr. Cregan: This is an important matter. I am asking for help for people who could be and are being put out of business while at the same time a tax amnesty is being introduced for others.
Mr. Norris: Senator Cregan lost my sympathy to a certain extent towards the end. There are economic realities and any pub, whether in the West of Ireland or in Dublin, that sells two pints only on a Monday would be well advised to go into the typewriter business.
Mr. Enright: There is one town in my constituency——
Mr. Dardis: I hope there is more than one.
Mr. Enright: There is one town in my constituency where, out of approximately 12 pubs, only two open before 8 o'clock in the evening. The situation today is that a number of pubs — some may be taking Senator Norris' advice — do not open on a Monday, Tuesday or  Wednesday. On Thursday and Friday they open at 8 o'clock in the evenings and on Saturday at 11 or 12 o'clock in the day.
This change has arisen largely because of changes in attitude to drink for health reasons and because of the drink driving campaign. Given this situation publicans who have met all their tax liabilities, and may have borrowed money to do so, are not happy to see others avoid their liabilities through an amnesty. Furthermore, because of this change in attitude to drink, many pubs in small villages which contribute to our national tourist appeal will disappear. Some measures should be taken to remedy this situation.
Mr. B. Ahern: I thank the Senators again for acknowledging the patience of the Revenue Commissioners.
I am aware that some small pubs are having difficulty with the intoxicating liquor tax certificates that were introduced last year. Some 10 per cent have not applied for tax certificates at all. I presume nobody would condone that, because the favourable arrangements that the Revenue apply to help publicans who sell only two pints a day are of no use if they are not taken up.
Regarding the 90 per cent who have applied for tax certificates, 68 per cent have been tax cleared and licensed, eight per cent have been tax cleared and not yet licensed and 14 per cent are in negotiation. Therefore with the patience of the Revenue and the co-operation of the vintner's trade, which is well represented in this House, matters are improving and time will be given to facilitate this. However, regarding the 10 per cent who have not applied for certificates, we cannot continue to ignore the fact that that 10 per cent is not even attempting to regulate its affairs.
Mr. Enright: The same pubs could be closed.
Mr. B. Ahern: Some of them may be closed. I presume the 10 per cent who have not applied for certificates comprise mainly the smaller pubs. While there  were battles last year with the licensed trade——
Mr. Enright: They are fighting Guinness now.
Mr. B. Ahern: They are fighting amongst themselves now. We have endeavoured to regularise matters as much as possible.
This time last year when this House was debating the 1992 Finance Bill, the pub with two pints in west Cork was discussed. Mention was made then of pubs that were full from one end of the year to the other and managed to sell no Guinness at all officially. It is remarkable how times change.
Mr. Farrelly: The Minister advises that 10 per cent of pubs have not applied for tax certificates. There are some 1,100 family premises involved in that figure of 10 per cent and that is a worrying factor. If they cannot comply, the Government will have to find another way of providing these people with a living.
Is the Minister aware that after a Revenue audit has been completed on publicans while the publican is awaiting a tax clearance certificate another branch of the Revenue may seek another audit? Those carrying out the additional Revenue audit often insist on payment of moneys beyond what is owed. Is the Minister aware of this type of heavy handed behaviour which is being imposed on many family businesses throughout the country? I know of five such businesses where this type of tactic has been used by the Revenue Commissioners.
Mr. B. Ahern: If Senator Farrelly provides me with the relevant data I will have the matter investigated. I would be delighted to hear my colleagues in the Revenue would be so efficient as to undertake two audits.
Mr. Enright: I do not believe that the Minister would.
Mr. B. Ahern: I do not believe this  happens too often. The only circumstances where I could even envisage that happening is where a VAT audit was followed by a Revenue audit. Given the level of audits at 4 per cent, the Revenue Commissioners would need to be homing in on somebody before that would happen. It could happen with a VAT or a PRSI audit. I would say to Senator Enright that some of that 10 per cent would consist of dormant licences so the real figure would be smaller. Although Senator Farrelly may be referring to a specific instance there is a general feeling in the trade that the Revenue Commissioners have been sympathetic. It is more likely that the Revenue Commissioners would investigate pubs in my constituency because they would be the busier ones. Frankly, if a pub is selling only two pints a day it will not take the Revenue Commissioners long to do the audit anyway so the Senator has nothing to worry about.
There is another aspect to this which is not just about pubs. We talked earlier about compliance. The public are very annoyed they have to pay VAT at the point of purchase; people buying a drink pay VAT at that moment. In many cases the Revenue Commissioners are still trying to collect this tax two years later. That is suppression of taxes and cannot be condoned. Senator Enright asked about taking a sympathetic attitude to small village pubs which generally are not doing well, many of which are family-run pubs that are not often open. The answer to that question is that if they apply we will certainly continue to take a reasonable attitude to them.
Mr. Enright: Is it correct in some cases unless a pub reaches a specified target turnover, it is not actually liable for VAT? Near my home an elderly lady owns a pub and opens only once a year so as to retain the licence. Once, she bought three dozen bottles of stout and three dozen bottles of ale and invited a few neighbours in to drink them. She went to have her dinner while her neighbours were drinking the six dozen bottles and lo and behold the gardaí arrived. It  was a Sunday afternoon and on her only day of opening she was caught for breach of the licensing laws.
Acting Chairman: I thought the Senator said he would be brief.
Mr. Enright: I am aware that sheriffs are paid on a percentage basis. I have been asked by a number of people to find out if people who conduct audits are paid on a salaried basis or are paid percentages of the revenue obtained as a result of their audits. I do not know if the Minister is in a position to answer that question. I imagine it is highly unlikely but I would like it confirmed that they are paid other than on a salaried basis.
Mr. Roche: The tone of some contributions, particularly that of Senator Farrelly — I mention Senator Farrelly because I was here for his contribution — is a tone we would all use from time to time. We want to go soft on people who are non-compliant in the tax area. This is really the core of the issue.
Mr. Farrelly: That is not what I said.
Mr. Cregan: We are all going soft on £2 billion.
Mr. Roche: We are all very humane in individual cases.
Mr. Farrelly: The Revenue Commissioners gave guarantees that this would end.
Mr. Roche: We agree in principle that the tax code must be enforced but when it is enforced we all want lax treatment of certain individuals. The reality is that the provisions of section 79 are good and should be welcomed because the vast majority of taxpayers are compliant. If those provisions hurt anybody they will hurt those who are non-compliant. I am certain what Senator Farrelly says is correct. If somebody was unduly harshly treated or abused in any way, clearly the Minister or the Ombudsman would be  entitled to carry out a full examination of the case and report on it. We would then have an objective appraisal. But I do not think we can wring our hands about people who dodge tax and then wring our hands about the tax officials who try to apply the tax rules.
Mr. Farrelly: The training the Senator received has affected him.
Mr. B. Ahern: I think I have answered Senator Enright. I wish to reiterate that tax clearance does not impose any additional taxation burden on taxpayers. It is merely to ensure that taxes that are properly due, such as VAT, levies, PAYE or PRSI, are actually paid. Strenuous efforts are being made all the time by the Revenue Commissioners — I am glad that was acknowledged here today — to facilitate taxpayers through instalment arrangements. That system is working well.
Mr. Dardis: I detect a certain impatience in the House. I will not test the patience of the House or of the Minister, but I want to make a minor point. Nevertheless, I do not say it flippantly. I referred, when we were discussing previous legislation a few weeks ago, to the “in relation” syndrome. This syndrome is very manifest in section 79 because in page 121 the words “in relation to” are mentioned on seven occasions. “In relation to” is a disease which is spreading across the country. It was referred to on Gay Byrne's radio programme this morning. The Bill refers to “a tax clearance certificate in relation to that licence”. What is wrong with saying” a tax clearance certificate for that licence”. I asked a senior counsel in the past few days if “in relation to” has a precise legal meaning. He told me it does not. I would hate to see an action taken in the High Court against the Minister for Finance to define “in relation to”. There is also “in respect of”. We could get into that area also but sensing the impatience of the House, we will not. Could we please use the English language as it is meant to be used which is clearly and succinctly and  not have “in relation to” in every section of every Bill.
Mr. Farrelly: The programme managers made the changes.
Question put and agreed to.
Sections 80 to 93, inclusive, agreed to.
Mr. Dardis: I move recommendation No. 21:
In page 135, before section 94, to insert the following new section:
94.—Sections 186 and 193 of the Finance Act, 1992 shall be amended such that the promotion of concerts or other cultural events be subject to reasonable exemption limits, especially in so far as they relate to services supplied by non-resident performers and where under a section 37 notice the Irish promoter may be deemed liable for the said taxation.
We almost put the words “in relation to” into the amendment; it was a near thing.
The intention of this recommendation is self-evident. A concert may be held in the National Concert Hall or in the Cork Opera House — I am not talking about a concert featuring a big pop star organised by a commercial promoter who, no doubt, has his funds abroad and is now about to repatriate them under the 15 per cent rule. For example, a visit to the National Concert Hall by the Russian Army ensemble or a band from west Cork would be a liability. If a foreign act travelled abroad for a performance, it would be expected to pay tax. However, as the act came from outside the jurisdiction, the person who promoted the concert would be pursued by the relevant authorities to pay the tax bill. Some form of concession should be made in these circumstances. We give the Minister the power to say that they could be liable. This is the point in this recommendation.
Mr. Enright: I support the recommendation.
Mr. B. Ahern: I want to outline this provision in detail because we had discussions on it in the other House.
The aim of the recommendation, with which I do not agree, is to introduce a registration threshold in so far as services supplied by non-resident performers are concerned, particularly in cases where the provisions of section 37 of the VAT Act apply. There was a debate on the workings of section 37 in so far as it affects the visiting performers. I should outline the background to the case.
Prior to 1985 the admission fees to concerts and other musical events were fully taxable. Following extensive lobbying by the sector concerned and the restructuring of the rating system, admission fees to concerts and musical events became exempt from VAT. It was accepted at the time that the practical effect of this change was that the VAT charge on inputs in relation to the events, for example, printing of tickets and ancillary costs such as hiring the public address system, would not be deductible. The same rule applies in the case of the VAT due on the service provided by the performer.
In accordance with EC rules, there is no registration threshold for performers who are not established in the State. This situation, which applies from 1 January 1993, follows an amendment to the EC Sixth VAT Directive. It is intended to ensure that a person cannot systematically avail of thresholds in each member state and thus avoid significant payments of VAT. Most of these people move around.
Section 37 of the VAT Act was amendmed last year to ensure that the VAT liability of persons who were not established in the State could be secured. Following the amendment, arrangements were put in place to ensure that the VAT, which is due on services provided in the course of business by performers who are established outside the State, would be collected. The VAT liability has always existed, but because the foreign based  performers stay a relatively short time in the State, it is difficult to pursue the liability. They come for one performance in the Point Depot and they they leave. The amendment to section 37 provides the mechanism to collect the VAT.
The new section 37 arrangements were introduced on a carefully planned basis. The first phase consisted of advising the promoters, the venue owners and other parties affected of their legal positions and the implications for them. The parties concerned were then given sufficient time to consider the implications and to take account of them. This phased introduction has meant that the parties affected have not been forced to pay VAT which they have no possibility of recovering. The parties concerned are now aware of the situation. Therefore, no problems should occur in practice because they understand that a VAT liability arises in services provided by foreign based performers which can be included in their costings.
The performer's fees represent about one third of the total cost of the concert. However, the VAT charge and the performer's fee increase brings the overall cost to approximately 7 per cent. It can be seen from these examples that section 37 is no more than a mechanism which allows VAT to be collected. Other member states also take various measures to ensure that the VAT liability of visiting performers is secured. In the UK this is done by a withholding mechanism. It is a strict regime in a number of countries.
During the preparations for the Finance Bill I had an opportunity to talk to the main performers, managers and owners of concert halls. The application by the Revenue Commissioners of the provisions of section 37 has meant that VAT liability due to the State, which would not otherwise be paid, has been secured. More importantly, the provisions have meant that there is a level playing field between home based entertainers and those based outside the State, as far as VAT is concerned.
Our better known performers and artists  who operate at home and abroad have the worst of both worlds. The regulations in Germany, the Netherlands and the UK are extremely rigid. Often, before the concert, they have to estimate how many people will attend at a specific price. Payment must be made beforehand on the basis of withholding. These performers are also caught in the tax net when they return home, while their opposition come for a night and then leave.
I hope that the explanations of the workings of the VAT system in this area are of assistance to Senators. I am unable to accept the recommendations put forward by the Senator because a registration threshold is not permitted under EC rules. However, we are satisfied that any initial difficulties which may have arisen in this area have been overcome, now that the promoters and other affected parties have accepted that the VAT liability of foreign performers is payable like any other tax. The VAT can now be included in the price of the tickets. We negotiated this prior to Christmas. Therefore, this has been done for all summer concerts.
Apart from the treatment of foreign performers, the VAT treatment of foreign traders was also discussed in some detail in the Dáil. People shared my view that these traders should also meet their VAT liabilities. Section 37 has played a significant role in achieving this goal.
Mr. Dardis: I thank the Minister for his comprehensive reply. I agree with him about the “wandering minstrel” who travels through each member state in the EC. I accept that the person, as a result of Single Market rules, should not be able to evade paying tax by holding concerts in different states.
I am still unclear about the situation for people outside the EC, which was the case I originally cited.
Mr. B. Ahern: The same rule applies.
Mr. Dardis: Therefore, who is liable if a person is outside the jurisdiction and  money cannot be recovered? Is it the concert promoter?
Mr. B. Ahern: It is the one successful way of catching a person. The old system involved collecting the VAT at the door of the concert. Shortly after my appointment to the Department of Finance, I was at a concert and I was asked how much VAT had been collected. The answer was that nothing had been collected; que sera sera. At least that cannot happen any more.
Mr. Dardis: I again thank the Minister. I do not wish to press the matter, but I would like him to consider it in future budgets and legislation.
Recommendation, by leave, withdrawn.
Sections 94 to 96, inclusive, agreed to.
Mr. Dardis: I move recommendation No. 22:
In page 136, between lines 10 and 11, to insert the following paragraph:
“(a) so as to ensure that VAT shall not be payable in respect of the provision by a person other than a non-profit making organisation, or an organisation providing golfing activities on a course affiliated to the Golfing Union of Ireland, or facilities for taking part in sporting activities,”.
The main thrust of this recommendation relates to private golf courses where, if I play, I will be asked to pay VAT on top of my green fees. It discriminates against the operator of the golf course in that the old members' golf club would not be subject to VAT. I know it is a matter of serious concern for those operating some of these courses as it puts them at a competitive disadvantage. It is part of Government policy to promote developments  such as these and significant European funding has been devoted to them under the operational programmes. Everybody should be treated the same way. I am prepared to accept that building works may be eligible for refunds, but this recommendation concerns the green fees paid by those who play on the courses, not their construction.
Mr. Norris: I admire Senator Dardis's brevity and his devotion to the beauties and accuracy of the English language. May I point out, with some degree of sadness, that the recommendation as it stands is totally ungrammatical? Perhaps there is a misprint and some of the Minister's advisers could advise us. I could not help noticing that at one stage there were significantly more advisers than Senators in the House. Perhaps there is a grammarian among them.
Mr. Roche: It is lucky the Senator is here.
Mr. Norris: I do my best, aided and abetted by Senator Roche. The amendment states “The provision by a person other than...” but it does not say of what. Perhaps the recommendation should read “...of facilities...” rather than “...or facilities...”. I presume we are talking about the facilities but I am not sure.
Mr. Dardis: We are.
Mr. Norris: Then it is a misprint. That solves the matter.
Mr. Cregan: I see the point Senator Dardis is making. I presume they can claim back the VAT on materials sold in the clubhouse. I would not like to think that the Senator is making the argument that green fees paid at a golf club are part of its workings. They are part of the annual returns of a golf club and are taxable. To argue that because a person decides to set up a business, a private golf course, they should not pay VAT on people using that golf course, is questionable. The only way round it is to  charge VAT on fees in all golf clubs. Whether that would be wise is questionable, but if VAT is charged on all fees for the facilities in a golf club, the club would be able to claim back the VAT from a business point of view, for example, where there is a golf professional at the club selling golfing equipment.
I did not think this was a great problem and it is not relevant to an amendment or an addition to the Finance Bill. I was not aware that there was so many new golfing facilities being built that there is a need for an amendment to deal with them. We would be opening up a can of worms is regard to facilities for young people in particular. Under no circumstances should people who have joined a golf club be charged even more because of private golf courses being opened on a commercial basis.
Mr. Roche: Senator Cregan has put his finger on the core point here. The issue at stake is that commercial facilities for golf, camogie or whatever, are essentially commercial operations. I do not see why their essentially commercial nature should be ignored in the tax code simply because they are affiliated to the Golfing Union of Ireland. That would be extraordinary.
I am indebted to Senator Norris as I could not make head or tail of the recommendation until he suggested the correction. It strikes me that the essential point is whether the facility is a commercial operation. If it is then surely it should be in the VAT net. I accept that some of the non-commercial operations, various clubs frequently stray into commercial activities and perhaps that should be examined. A pressing case cannot be made for changing the tax system for an essentially commercial operation simply because it is a golfing commercial operation.
Mr. Dardis: I take the Senator's point, nevertheless there must be equity. One could argue whether that equity means that the rule applied to all people playing  golf on all golf courses, or whether it did not apply to anybody on any course. That is the point at issue here. If people set up a commercial operation, and many of these people have got significant amounts from European funds, it would not make sense to have that money invested badly, so there should be equity. They should be able to compete on an equal basis with other clubs.
Mr. Enright: With regard to sporting and leisure activities, particularly outdoor exercise, where any facility can be given to for healthy recreation we should support it in every way possible. Many people will never be able to afford to join golf clubs because of the initial membership fee. A number of new golf courses have been set up around Dublin city, and if people play on them on a Sunday afternoon it is far better than engaging in leisure activities of other kinds. This recommendation by Senator Dardis is worthy of consideration although I do not know whether the Minister is in a position to accept it. As Senator Dardis pointed out, a number of these courses have obtained financial assistance. We are trying to expand the tourist industry and to provide facilities for our young people. We have problems with regard to crime, for example, and young fellows are better off outside hitting a ball around, it is good for them in every respect. I would support these golf courses being exempt from VAT.
Mr. B. Ahern: We had a discussion on this matter in the other House and I know the point Senator Dardis is making. The provision, on a commercial basis, of facilities for taking part in sporting activity — we are not talking about golf clubs but sporting activities, commercial or non-commercial, — became liable to VAT at 12.5 per cent from 1 July 1992, and prior to that date the provision of certain sporting facilities had been treated as exempt because of an implementation of a court decision that the provision of facilities for playing squash was the short term letting of immovable goods. The 21 per cent rate  applied in other cases and the example cited at the time was snooker. The exemptions could not be allowed to continue as they were contrary to EC rules. It should be pointed out that the change last year was necessary to remove the distortion of competition between sporting facilities provided as part of a hotel operation, which have always been liable to VAT, and those provided by other commercial operators which were exempt. The distortion, and most Senators are aware of it, became far more pronounced because of the trends in the commercial sector over the last few years. This led to a plethora of tax planning and avoidance schemes to artifically separate the sporting facilities, whether swimming pools or golf clubs, from the hotel operation and to place them under separate corporate control to avoid VAT liability. The anomalies that had been created could not continue. What was happening was that several hotels with recreational centres were naming them as separate companies, and claiming they were exempt. Bringing commercial operations within the VAT net has meant the provider of the facilities is entitled to input credit in relation to any VAT charged to him or her. This is an important element for a number of facilities, particularly golf, Perhaps golf has been specifically mentioned because of the significant level of development work golf clubs undertake. Golf clubs are continually trying to upgrade and improve their standards.
Turning to private golf clubs, the position here is that a club which has been established on a non-profit making basis for the benefit of its members is exempt from VAT. In practice this means that although such clubs do not have VAT liability on their membership or green fees, at the same time they cannot claim input credit on any expenditure involved. For example if they rebuild the last nine holes and spend a large amount of money that is too bad. Much was made in the Dáil of the fact that this exemption seemed unfair given the exclusive nature of these facilities. I am not a member of a public or a private golf club but in fairness the key element is often overlooked.  Bringing these clubs within the VAT net would not in many cases give rise to any overall VAT liability and could cost the State money because golf clubs are always developing and improving their facilities. Once in the VAT net the club would not be able to claim in put credit on all its costs, including the expensive development work, and could actually end up in a VAT repayment position. This is more likely than people might imagine because a significant proportion of the input credit claimable would be at the standard rate. In the case of private clubs, any surplus arising is invariably ploughed back into improving the facilities because they are non-profit making thus giving rise to further input credits.
Other income of golf clubs from fundraising and EC grants is not liable for VAT. I point out that private golf clubs, the GAA and, as Senator Roche mentioned, rugby clubs are fully liable for VAT in respect of their bar and restaurant receipts in common with any other operator. A clubhouse is a separate activity. I am aware of concerns about possible distortion in relation to private golf clubs and I am fully prepared to keep the matter under review. Senators will appreciate that bringing private golf clubs into the VAT net as suggested will have exactly the opposite effect to what they are seeking and that is my conclusion having examined this matter is some detail.
Recommendation, by leave, withdrawn.
Mr. Norris: I move recommendation No. 23:
In page 136, between lines 10 and 11, to insert the following paragraph:
“(a) so as to ensure that for the purposes of V.A.T. assessment, fitness clubs shall be treated on the same basis as other groups and associations which provide similar services but are deemed by the Revenue Commissioners to be non-taxable.”.
 I am glad of the opportunity to move this recommendation in which I have a personal interest because I am a member of a sports club. There is a substantial difference between this and the previous recommendation although they might superficially appear to be the same. With regard to the question of VAT which the Minister raised, my advice and direct knowledge is that it is not possible for health clubs to claim VAT back because there is one large initial outlay but no continuing outlay. Therefore the question of VAT is irrelevant.
The question of a level playing field has been raised. Health clubs make an important contribution to the health of the community and in my opinion they should be classified as such and therefore exempt. The Government in some of its operations appears to accept this. Health clubs are placed at a substantial discriminatory disadvantage as compared to leisure centres, health complexes, community centres, etc, some of which were paid for with public money, for example Loughlinstown Leisure Centre and Tallaght Sports Complex. I have an advertisement here from the ESB Sportsco, South Lotts Road and it states: “offers open to all — aqua-aerobics, Thursdays 10-11 a.m., ongoing sessions, swimming pool, aqua-aerobics with qualified instruction, £4 per class.” This is plainly and directly a commercial operation advertising in a commercially available newspaper and it does not pay tax. It is using facilities which are supplied by public funds. This seems very unfair to me. There is one group which is described as commercial and yet another group, which is funded by and employs facilities provided by the public and is sometimes a subsidiary of a major company, yet is exempt from tax. I accept that EC Directive No. 6 on VAT states that where non-profit making enterprises put commercial enterprises at a disadvantage they should pay VAT. That is one solution although it is not the one I recommend.
International businesses such as H J Heinz (Ireland) Ltd., which controls  Weightwatchers and Unislim, use community schools, for example, for which they pay about £10 a night. That is a commercial operation in direct competition with health clubs. That is extremely unfair and cannot be morally sustained. I could produce a number of other advertisements and the Minister might be amused and interested to examine this one for aerobics classes. I will not mention the name of the instructress but it states that it costs £2 per class and everyone is welcome. It uses facilities paid for by taxpayers. Of course this person can charge only £2 because she is paying almost nothing for the facilities. This notice appeared in the former Departments of Industry and Commerce and Tourism and Transport and the Department of Finance. This facility is in direct competition with so-called commercial enterprises or health clubs. My initial impression is one of blatant discrimination. I make a strong case for health clubs and gymnasia to be treated as health facilities.
I will not repeat everything I said yesterday on Second Stage but the Minister knows, and I am sure his advisers will have told him, that I read a very serious letter from Professor Risteard Mulcahy, the country's leading expert on cardiovascular disease where he stated quite clearly that there is no question of doubt that these facilities are health facilities and should be exempt. I could not appeal to a higher authority. Professor Mulcahy has also collected the signatures of several colleagues in his field and they have clearly decided that they are prepared to describe these facilities as health services. Why is the description of these clubs as operations that deliver a health service ignored? This is a considerable problem.
The rule about VAT liability on organisations which distribute their profits does not appear to apply to medical, dental, optical services in hospitals, nursing homes, clinics and similar business establishments. In other words these can be profit making but they are not charged VAT because they are regarded as delivering a health service. They remain exempt from VAT, regardless of their  profit description status, if run as personal businesses. The exemptions from VAT of preventative services of a medcial nature and of hospitals, nursing homes and clinics, regardless of the fact that they may distribute their profits to their investors, raises the question of what is the motivation of subscribers to health and fitness clubs? Are they using such establishments as a source of health and fitness or merely as opportunties for sport, relaxation, leisure and so on?
I have suggested Professor Mulcahy ought to know. I am an amateur and I make it clear to the House I have a vested interest because I am a member of such a club. It does not worry me that much in one sense because I have taken out life membership of the club but it would worry me very much if it closed down because my investment would then be terminated in a big way. It would be, as the Minister said, que sera sera.
In case the Minister thinks this is merely a speculative rhetorical gesture on my part, I have a list of 30 clubs in the Dublin area that have closed down, including the Tivoli Health and Leisure Club, Clonliffe Road Club, Chambers of Balfe Street, Grafton Health Club and Barton Health Club. A man who used to own a gymnasium — Al Courtney, who was well known in the fitness world — now has to come to my gymnasium; Mary-Rose Doorley's operation has been closed down by this type of unfair competition. I would hate to see my gymnasium close as well. I am sure the Minister would not like this either because I know his heart is in the right place, it is pumping vigorously and I am sure, looking at him, that he is a member of a health club.
Mr. Roche: We would hate to see the Senator's gymnasium closing down.
Mr. Norris: I am sure the Minister's motivation is the same as 96 per cent of those attending health clubs. A professional survey was commissioned and the reasons given for membership were; health and fitness 72 per cent; weight loss 11 per cent; remedial treatment 13 per  cent; stress release 3 per cent; entertainment 1 per cent — the latter are probably made up of those watching me doing aerobics. Some 96 per cent attending health clubs go for reasons clearly determined by themselves; they describe the issue as one of health, as does Professor Mulcahy, and the Government know this perfectly well. Why else would they have spent £1.8 million promoting this type of activity as beneficial to health? The Government is making the argument for me.
The only reason the Minister could have to oppose this is the traditional Department of Finance one and I applaud them for it; the Department's job is to staunch a haemorrhaging of funds from the Exchequer. This will not happen. If there is a level playing field there will not be an enormous haemorrhage of funds; in fact, the reverse may happen. Unfair competition in this area is now so serious that there are massive job losses. A typical employment profile of a health establishment of this type is as follows: a director manager, two assistant managers, eight instructors, two secretarial staff and one cleaner — 14 people. I have had experience of this with the aerobics class in which I am involved. The young instructor doing it there left because he can hire one of these subsidised facilities for £10 — he could easily make £200 a night. By doing that, they are being driven into the black economy and many of them are also on social welfare. There is a strong argument for a level playing field. It would have a significant impact on employment, is clearly good for people's health and is recommended.
I do not wish to disadvantage health, community and leisure centres. It is marvellous that this development has taken place and I am not antagonistic to them. I wish that they had been around when I was younger, our young people are becoming healthier because of them — it is noticeable. I applaud the development of community centres; they should be supported in every possible way. I do not wish to see them being charged VAT, but it is also clear that a small degree of  movement on the Minister's part would reclassify — I believe it is possible under EC regulations — these establishments as providing a health service. I appeal to the Minister to do so and I know I will be supported by some of my colleagues. Unfortunately, I have a professional engagement elsewhere, so I may not be able to listen to all the debate, but I would be most interested in the Minister's response. If it is not possible to change it immediately — I am not sure if the Minister can help me here — it could be changed by regulation so that it does not have to wait for next year's Finance Bill. I would be happy — if there is not an instant conversion, which I pray for — if the Minister would allow me to meet some of his advisers so that I could discuss the matter with them and bring in some of my colleagues from the health service.
An Cathaoirleach: Could you tell us where your health club is, Senator Norris, because I am sure all Members would love to pay a hefty fee to see you in operation?
Mr. Norris: It is the oldest health club in Dublin. It used to be called the Olympic in Mary Street and was advertised extensively in the cinema. It is now called the Olympus and is situated in Capel Street at the old PMPA garage. It is a wonderful place and all Members are more than welcome——
An Cathaoirleach: I hope all Members have taken note of that.
Dr. Henry: It gives me great pleasure to support this recommendation. I must declare a vested interest too — I am not in the health club with Senator Norris — as a health professional. At the moment doctors are trying to remove the concept of a pill for every ill. The Health Promotion Unit is constantly promoting active participation in some sort of sport or exercise. There is tremendous discrimination, not just in those health clubs being charged VAT, but also on those who cannot avail of facilities in their own  place of work and have to travel to them. The World Health Organisation defines health not just as an absence of disease but as a positive feeling of physical and mental well-being. Great efforts have been made, as several Senators said in speaking on the previous recommendation, to get people involved in public golf clubs, etc.
There is a good cost effective factor involved here as well, which I am sure will interest the Minister from a health point of view. A few weeks ago in The Lancet, there was a major report on a practice consisting of four doctors in East Anglia about six years ago who, instead of prescribing for various ailments, told patients to go to a local health centre and become involved in some form of regular exercise as a therapy. They were to go, for example, three times a week to the aerobics class. Their level of health improved more than the doctors expected and the cost savings in prescribing pills was equally dramatic. There are now over 600 general practice units in England involved in such schemes which are cost effective.
I will briefly refer to the ailments which were positively affected by regular exercise because one often associates it only with weight loss. There was a consistent reduction in high blood pressure, which was so marked in some cases that many patients were able to discontinue treatment. There was also an improvement in asthma sufferers, which was interesting, because it is an expensive disease to treat with medication, as the Minister's colleague in the Department of Health, Deputy Howlin, will tell you. Lowering of blood cholesterol was also evident and this is especially important in reducing cardiovascular and all arteriosclerosis diseases. Senator Norris spoke about what Professor Mulcahy said about the value of exercise in combating heart disease. There is a tremendous argument currently between the surgeon, Dr. Maurice Nelligan and Professor Mulcahy regarding the best way to treat heart disease, whether it should be by surgical treatment or diet. However, both have agreed that regular exercise is important  in preventing the development of cardiac disease and other forms of arteriosclerosis and on the value of it after a person may have had cardiovascular problems. While they may differ in relation to diet, they are in agreement regarding exercise. People suffering from obesity, a condition which may develop as a result of diabetes, benefit from regular exercise, without medication. Regular exercise helps to prevent osteoporosis in women, in particular, menopausal women. Professor Moira O'Brien, a former member of the Olympic Council of Ireland, has been to the forefront in promoting regular exercise as a means of preventing osteoporosis. She has carried out a lot of research in this area.
Regular exercise benefits those suffering from psychiatric illnesses, insomnia, stress-related conditions such as irritable bowel syndrome, spastic colon and conditions of a psychosomatic nature. Furthermore, there has been a decrease in the number of injuries among those who are physically fit. That is why Senator Norris is able to race about from appointment to appointment.
Professor Gerald Tomkin, a specialist in diabetes, believes that large companies, hospitals, etc., should be obliged to have recreational and exercise facilities, thus enabling employees to take regular exercise. One must encourage any form of regular exercise. I emphasise the benefit of the clubs referred to in this recommendation. Senator Norris pointed out that a number of health clubs have closed. Therefore, they will be unable to generate revenue. Perhaps the Minister will accept this recommendation today or in the near future.
Mr. Cregan: I am aware of the closure of a club located on the Dublin Road which cost a considerable sum of money to build. Yet, we receive EC funding for facilities such as private golf clubs and this is unfair. We seem to be digging our own grave. In County Cork one such facility closed because of increased VAT charges. Fitness clubs should be excluded for the purpose of VAT assessment.
Mr. Roche: I will be brief because Senator Norris wants to run away to put on his leotard and spring into action.
Mr. Norris: I will only exercise my fingers as I will be playing the piano.
Mr. Roche: The Minister and Members of this side of the House are anxious that Senator Norris's gym does not close, not least because it would spare the population of this fair city the sight of Senator Norris exercising in the street. However, it is unlikely that the Minister will accede to his cri de coeur. Senator Norris's description of the Olympus Health and Leisure Club was such that even if all health and fitness clubs are zero rated, that club will be rated as one of commercial entertainment at 12.5 per cent.
Mr. Quinn: I was undecided as to whether to support Senator Norris's recommendation. However, I have decided to support it because of the valid case made by Senator Norris and Senator Henry. I do not belong to the health club, as a grocer I must look well-fed. I do not wish to repeat the strong arguments made by Senator Norris and Senator Henry. However, Senator Norris has been moderate in his remarks, he has asked for permission to speak to the Minister's advisers and this request should be granted.
Mrs. McGennis: I am a member of a health club and I support what the Senator said. However, I would be cautious when dealing with this matter. Aerobics classes, etc., are available in my area for people who may be unable to pay £300 or £400 in health club membership fees. One is not comparing like with like. A fitness club which was established in my area, and presumably registered for VAT, closed down. Its closure was not caused by a VAT imposition or the tax rate. It closed overnight, having collected subscriptions from a number of people.
One must err on the side of caution. If such clubs are obliged to register for taxation purposes, fly-by-night operators would be eliminated. Often those  involved in these clubs are not suitably qualified. Perhaps this issue could be addressed by another Minister. This VAT imposition must remain until safeguards are introduced.
Mr. B. Ahern: I will be brief because Senator Norris has waited for some time to move this recommendation.
An Cathoirleach: At this stage it is a case of roll over Beethoven.
Mr. B. Ahern: I admire Senator Norris. He is a good supporter of his club. Over the past few months I have had representations from almost all commercial clubs. However, I cannot defend the advertisement which Senator Norris highlighted because they advertise as a sporting club for family members and associates. They are not the only club which advertises in such an open way and they are attracting paying members from genuine commercial sporting clubs.
Health clubs which provide a medical service are exempt. The type of club referred to by Senator Norris and Senator McGennis is a fitness club. One must then ask whether it is commercial or non-commercial. Many clubs which appear to be non-commercial are attracting members from commercial clubs and this affects the viability of some clubs.
The location of a club does not alter the situation. School facilities are often used for this purpose. I agree with Senator Henry regarding the importance of fitness. Members of football teams, weight watchers or other groups may attend aerobic or general exercise classes in schools and community halls. A school hall, for example, might be exempt but the provider of the service is taxable if his or her income exceeds the limit of £15,000. That is an important factor because a person could hire several halls in different locations and perhaps take in £25,000 a year. They are liable for VAT and the income tax issue must also be taken into account.
I have already said that I will review the position of some of the fitness clubs  during the course of the year to see if so-called distortions of competition are being made by what are considered non-profit making institutions, which seems to be the position in some areas. I do not wish to act like a bull in a china shop. I cannot make fitness clubs exempt from VAT under the EC directive on VAT. The alternative is to put VAT on them all which would create great difficulties for community and sports organisations and the various clubs which probably pay a fitness teacher a few pounds but not over the £15,000 limit. Charging them VAT would do more harm than good.
We must identify the target, the so-called non-profit making club, which is meant to benefit its own members or workers and is clearly ignoring that rule. Organisations such as Unislim and Weight Watchers are registered for VAT so we can have no argument with those. Their instructors are in the PAYE net. A number of these clubs are closing down for other reasons. It would be wrong to accuse clubs such as ALSAA and the ESB I am just mentioning their names because they are well known, of defying the rules but their advertisements are breaching the spirit. They have large memberships, money and resources and can buy the best equipment. The other side of the argument is that they do not pay VAT so they are not claiming it.
I have a vested interest as I am a life member of a club, which I do not think will close down as it is in a university complex. Clubs must buy expensive equipment to survive in the business as Professor Mulcahy and others advance new theories about exercise in relation to health. Senator Norris mentioned several clubs. In my earlier days in this House when I was extremely fit and played football I used them but they closed down because they did not have the proper equipment. They were still using 1950s equipment when people wanted 1980s equipment. However, I am giving a clear indication to the House that we will examine this and deal with the distortions in the months ahead.
Mr. Norris: I am grateful to the Minister  for his reasonable attitude. I made it clear that I do not want to disadvantage community centres. With regard to what was said about some of these £2 classes and so on, I do not wish to see people from disadvantaged areas penalised. With regard to the argument that there are some fly-by-night operations, that is true of businesses everywhere. I know it may be true of one or two health clubs but I do not think that one can generalise and penalise the entire operation, which would be very unfair.
I am also interested in the Minister's comment about bodies such as Unislim, which are part of gigantic multinational organisations. He seems to suggest that since they are in a VAT net in a certain sense, it is a level playing field, I do not believe it is. They are able to hire, for £10, a facility which is subsidised by the State, whereas the so-called commercial enterprises must build their own which places them at a disadvantage with regard to these small operators.
While I do not want to see school halls, community centres and so on penalised, perhaps one way of establishing the facts would be to require them to make third party VAT returns on the activities in their businesses. I apologise to the House for having to leave. I am most grateful to the Minister for his contribution.
Recommendation, by leave, withdrawn.
Mr. Enright: I move recommendation No. 24:
In page 139, between lines 9 and 10, to insert the following subsection:
“(2) The following rates of VAT shall be applied to the following items:
|Adult Clothing and Footwear||12.5%|
|Farm Accountancy Fees||12.5%|
|Solicitors Fees in relation to Agricultural land||12.5%|
I spoke on this recommendation yesterday and we will have to push it to the limit because we feel strongly about it. We are at a crossroads in regard to industries such as clothing and footwear. There  has been a large number of closures in the clothing industry in the last 20 years leading to extensive job losses. Ireland in the past had quite an international reputation in the footwear industry, in Offaly, Athlone and right across the country. We also had a proud history in regard to clothing but there has been a big reduction in the numbers employed in both these industries. Many of the bigger stores import large amounts of clothing which affects many of the smaller businesses.
The Irish Business and Employers' Confederation has the details of the number of job losses, which I outlined here yesterday. From the end of 1989-92 there were 2,800 job losses in the clothing industry and an extensive number of closures. I will not delay the House by outlining them to the Minister but he is aware of them. These proposals came in on 1 March and there have been further job losses since then — two firms closed in the intervening period. The Minister suggests these proposals will increase revenue. I believe if they do not kill the golden goose, they will certainly seriously wound it. These proposals will cause job losses which I realise is not the Minister's or the Government's intention.
At an Oireachtas golf outing to Donegal last year I heard the managing director of Magee commend Government efforts to increase employment. I do not know the man's political allegiance but he is a fine person. When speaking about creating jobs he made the point that the maintenance of existing jobs is equally important. We will not maintain jobs if we increase VAT to 21 per cent. In 1991 VAT on clothes and footwear was fixed at 12.5 per cent. In 1992 it was increased to 16 per cent and this year's increase to 21 per cent is the final straw to break the camel's back. I cannot see why it has been proposed.
The figures for jobs losses are usually announced on television each Friday and I am sure such announcements are upsetting for the Minister, the Government and the civil servants working in that area. Tax increases of this magnitude will  cause further job losses and company closures. The Minister should re-examine this proposed increase.
The recommendation also includes farm accountancy fees which are an annual charge must be paid; 12.5 per cent of farm accounts plus VAT each year is a lot of money. Some farmers earn substantial sums of money but there are other farmers who do not and many of those must pay an accountant up to £500 per annum to explain to the Revenue Commissioners that they are not making any money. It is wrong to oblige these farmers to pay the VAT increase.
Solicitors fees for transfers of agricultural land would account for a smaller portion of tax revenue because people do not regularly buy land and land transfers may occur just once in a lifetime. The Minister has spoken about the need for mobility in the transfer of lands and to achieve that he should restore the solicitor's 12.5 per cent VAT rate on such transactions.
The proposed VAT increases will result in people travelling, as they did previously, to Northern Ireland to purchase clothes. We should aim to protect our own industries and shops. The VAT increase is a retrograde step and I ask the Minister to accept the recommendation.
Mr. Cregan: I was amazed at the VAT increases in the budget, particularly those in the service sector after hearing so much before that about job creation. I am a strong supporter of job creation measures and, as the managing director of Magee said, of measures to maintain existing jobs. I thought there would be an emphasis on job creation in the budget but there is not.
Sadly, the Department of Finance concentrates on securing funds for the Exchequer to fund services which, unfortunately, are not adequately funded because of insufficient numbers of employed people. I can understand that attitude as about 900,000 employed people support the State's population of 3.5 million. Three-fifths of the population in Britain supports the other two-fifths  and it is not done as well there as here. We are a good people who are prepared to pay our fair share of taxes. We ensure that Irish people get a good education, proper health care services and, most importantly, adequate social welfare services. I realise what that costs although I never thought that I would see the day when we would have to pay £10 million every day in social welfare payments.
Unfortunately, some of the provisions in the Finance Bill contribute to that situation. People have already lost their jobs because of VAT increases on clothes. I am proud of the Irish clothing industry and its products which I believe are of good quality. The industry is losing many of its best personnel, particularly those who are well connected in the international clothing industry. That is a sad reflection on us. We are not giving them the chance to continue in the industry. It annoys me that the Minister is on one hand prepared to increase this tax and on the other hand — I realise this issue is not part of the current discussion — charging only 15 per cent tax to people who were not prepared to keep their money in the country. Has the Minister any idea of the reaction of businesspeople to that?
In Cork city I regularly visit The Man's Shop in Patrick Street, a long established shop, the owner of which is also proprietor of another shop, Con Murphy's, nearby. Once, these two small shops employed 14 people. The number is now reduced to 10 and the proprietor needs only six employees. Such businesses are a dying breed and we are creating a situation in which the small business person will no longer feel they have a place. Yet small businesses are the backbone of the Irish economy. The small business sector is important even to an economy as large as America where it is readily admitted that an improvement in the circumstances of its small businesses results in an improvement in the country's general economy.
I can readily understand the need to secure funds through the 1 per cent levy and other taxes. However, I do not see the logic of imposing taxes that eliminate jobs. I would go to any lengths, or “gut  you” as they say, to create just one job. That is how important it is to me. We implemented charges at local authority level to maintain existing jobs and I make no apologies to the electorate for that. Yet the opposite attitude is taken in the VAT increase on clothes.
What is the Government doing? The Department of Finance is trying to find money on a short term basis and I cannot understand why we allow that. Imported shoes sell very cheaply in Ireland. Irish made shoes cannot compete with imports because the Irish made product is more expensive. Irish people have good taste in clothes and Irish people produce excellent clothes. I try not to be political, but it is a very sad reflection on both parties in Government that it is not prepared to admit this decision is a bad one. Jobs have already been lost, and more will be lost. Ministers talk about saving jobs but do we really know what it means to lose one job?
When I speak to small businessmen around my city and tell them a person is going to lose his job, I am told both the employee and the employer will be better off when the employee has been made redundant. I am told the employer will get 60 per cent back from the State for making an employee redundant. That is not the way to encourage job creation, most importantly for young people. I am amazed to think we are prepared to tolerate a situation where people lose jobs because of Government policy when over 300,000 people are already idle. Over 300,000 people are idle and we want more to lose their jobs. The decision makers do not seem to know what is happening around them. I understand money is needed urgently, but when I hear of all the changes of direction taken by Government in the Greencore issue, the devaluation issue, and now in the amnesty issue, I question whether the Government is serious.
Mr. B. Ahern: The effect of these recommendations would be to apply a 12.5 per cent VAT rate to adult clothing and footwear, precluding the increase from 16 per cent to 21 per cent provided  for in the Bill. The cost would be £77 million for the year. I have already given the reasons why I am unwilling to reduce the VAT rate on adult clothing and footwear. It may be useful to outline some of the background to this decision for Senators again. The primary reason for the increase in the rate was to raise revenue. I have made that absolutely clear. The increase will raise £28 million in 1993, and £45 million in a full year. This revenue was part of the overall budgetary strategy which was framed with the intention firmly in mind of providing industry with the conditions in which jobs could be protected. This strategy has been successful in creating an environment of currency stability and lower interest rates, and I have not heard any alternative suggestion during the debates on this matter as to how to raise the additional revenue required in order to keep the budget on target.
Every member state of the EC imposes the standard rate of VAT on clothing and footwear. Different member states have different standard rates of VAT. Under the European Community directive, changes which come into operation this year must be complied with, and only one rate of VAT over 15 per cent may be applied. In Ireland's case the standard rate is 21 per cent, in some countries it is less, in others more. A rate of 19 per cent or 20 per cent would have been desirable, but every 1 per cent reduction in VAT from 21 per cent costs £85 million, and it was not possible to come up with that kind of money. We have seen in other areas just how difficult it was to try and make up £80 million or £90 million on the income levy.
The necessity to impose this increase had been signalled very clearly to the clothing and footwear industry and over the last few years, and it was made absolutely clear last year in the budget statement. There was no ambiguity when I said footwear and clothing had to move to the standard rate of 21 per cent in the next budget, and this is what we have done. Sections of the clothing industry have made the argument that when taking the overall changes in VAT into  account, it should have been possible to bring the 21 per cent rate down to 18 per cent, but that was not possible. To do that it would have been necessary to consider imposing VAT on the zero rated items, food and children's clothing, and perhaps that is a desirable thing to consider on another occasion, but it was not on the Government's agenda this year. Savings in other areas would have been necessary to offset this, particularly in the welfare area, because the proportion of the pay or welfare packet which less well off people spend on clothing and children's footwear is high. To abolish the zero rating would not just account for reductions in the top rate of VAT. It is generally accepted social welfare recipients would need substantial amounts of money in compensation so the possibility of reducing the figure to 12.5 per cent does not arise.
We look at proposals from the bakery and the confectionery industries which made cases for reducing the VAT rates imposed on them; we looked also at the motor repair service and at general personal services. Somebody over the weekend made a statement in this regard about hairdressing. Hairdressers are included in the personal services sector in which there are thousands of jobs in this country. The VAT rate on personal services has been reduced from 16 per cent to 12.5 per cent, and VAT on confectionery has been reduced from 21 per cent to 12.5 per cent. The personal services sector provides much employment.
We need to protect existing jobs. By reducing the rate we substantially helped those industries, and they were pleased with it. Unfortunately we had to consider the position in the clothing and footwear area and move rates there up from 16 per cent to 21 per cent.
Why, one would ask, was the VAT rate on footwear and clothing not reduced from 16 per cent to 12.5 per cent and left at 21 per cent for all other goods and services? It was as complicated or as simple as this: we could not bring the VAT rate for all goods and services down to 12.5 per cent — the figures made that  decision for us. We then looked at where the balance of employment lay, and we saw that in terms of jobs, the clothing industry represented 24,000 jobs, with around 12,000 in retail, 12,000 in manufacturing, and in the personal services and garage repairs area the number was double that, so the first consideration was the number of jobs. The second reason was the fact that 80 per cent of all clothing sold in Irish shops is imported, and in the shoe sector the percentage is higher. All ladies shoes sold in the country are imported. This means there is no trade distortion there as far as we are concerned. If businesses wish to sell foreign products only that is their decision — I am not responsible for their competitive advantage.
About two-thirds of goods manufactured here are exported at zero VAT, so there is no difficulty there. There is a difficulty in regard to the difference between what Irish manufacturers produce and what they export. These goods are sold in the Irish market. Manufacturers have a difficulty because of the lower PRSI in the UK and they are concerned about imports being dumped in this market. I have had positive discussions with the industry about this, identifying the sector affected and seeing what can be done to assist it.
We have agreed on three measures. The first is that temporary assistance will be directed to manufacturing firms in the sector who can demonstrate that their viability and employment levels are threatened by the effect of the application of the standard rate of VAT to their domestic sales. The details of the assistance and the criteria for granting it will be announced shortly by the Minister for Enterprise and Employment with whom I discussed this at a meeting early this morning.
The fund will be similar to the market development fund used during the currency crisis. If manufacturers can show that their competitive advantage has suffered and, as Senator Cregan argued, that the viability of employment is threatened due to VAT — and not to competition from Third World countries,  dumping and other difficulties — they will receive assistance.
Secondly, my Department has already commenced an urgent review in consultation with the Department of Social Welfare of the impact on low paid manufacturing firms of the operation of the employers' PRSI system. This would not only apply to the rag trade, but to other industries as well. The firms in question sell their products at the standard rate of VAT, work on small margins and are labour intensive. It is worth looking at the levels of PRSI, in particular at the distortion created by the lower levels in the UK and the disadvantage that creates for some manufacturers.
Thirdly, a working group was set up under IBEC to include the manufacturers of footwear and clothing and those in fashions, because of the controversy surrounding this matter. I thank them for being constructive in trying to find resolutions to the real problems as distinct from those hyped up in the media. They have asked us to examine the criteria under which the IDA assists technological development in the clothing and footwear sector. These will be reviewed and in the meantime the advice and assistance of the relevant State agencies will be focused on the firms identified as at risk. The Department of Enterprise and Employment, in consultation with the IDA, is drawing up the eligibility criteria and the terms of the scheme and I know that consultations are taking place this week with IBEC. It is intended to announce that scheme as soon as those discussions have been completed.
I hope that, arising out of this, we will move to a position where many of the shops in this city that sell exclusively imported goods and have had no interest in Irish made goods will change their attitude. If they used as much energy in trying to promote Irish products as they spend protesting they would do more good for their cause and convince me of the merit of their case. I hope they will change their attitude in that regard. I am not referring to dumped products but to retail shops that go to great lengths to source products from all over the world  and ignore many Irish products. I hope that when it comes to considering these matters again that exclusive dealing in foreign goods will have gone.
I not only have sympathy for, but will give grant-aid and assistance to, manufacturing firms affected by this. I look forward to assisting them as soon as possible; the fund will be available as soon as the scheme is worked out.
I appreciate the effort various representatives of the industry put into the discussions after the controversy had blown over. I believe that if we continue to have discussions we will be able to exchange views meaningfully: the views of the Government and those of the trade will be listened to. That can only be of value to the industry.
Somebody listening to this speech might argue it is obvious that as the VAT rate has gone up from 10 per cent to 12.5 per cent, then to 16 per cent and now to 21 per cent, retailers have begun importing more and more foreign products. That is not the case, regardless of whether clothes come from Northern Ireland or the UK they are sold at a VAT rate of 21 per cent. The distortion between here and the UK is not big in real terms. However, if difficulties arise we will discuss them with the working group and try to tease them out.
Mr. Enright: I listened carefully to the Minister. He has done something in relation to manufacturing, which is important, and I look forward to his proposal and that of the Minister for Enterprise and Employment. However, we are pushing our recommendation.
Mr. Cregan: The Minister is obviously concerned about the level of imports and I agree with him. The service sector has not helped the ordinary manufacturer. Two thirds of goods manufactured are exported. That shows what we could do with proper facilities. I congratulate the Minister on talking to the industry to see what assistance can be given, because that is vital.
We must learn from Britain's shoe trade — and I believe we learned from  the UK about devaluation. They use high technology in the manufacture of shoes. We no longer have to go to Taiwan for cheap shoes — they can be got just 60 miles away. We can learn from these people and keep the manufacture of footwear at home.
Mr. Roche: I have been listening to this animated debate with interest. We have to be realistic — if one adds up the cost of the tax changes proposed in various Opposition recommendations it comes to several hundred million pounds. We all accept that, given this country's finances, the State is in a powerless position. Virtually every one of the proposals has great merit, but we are again torn between the desire to make concessions and the reality of having to balance the nation's finances.
We discussed the cost of one project this morning. It did not matter whether it cost £10 million, £15 million or £20 million as long as you said it very fast. I suspect the proposals in this recommendation would cost a significant amount — in the order of £80 million. Two recommendations were moved  which, between them, would have cost in excess of £100 million.
Mr. Enright: On a point of order, this part of the Bill is to conclude at 4.30 p.m. and we would like to push this recommendation.
Acting Chairman (Mr. Fitzgerald): Senator Roche has the floor at the moment.
Mr. Roche: The merit of the argument put forward is also evident to Senators on this side of the House. I suspect that the logic of the state of the nation's finances is as evident to people on that side of the House as it is to people on this side of the House. We are all familiar with the two sides of the argument and the dilemma in which the Minister inevitably finds himself.
Acting Chairman: In accordance with the Order of Business, I must put the following question: “That the sections of Part III of the Bill not disposed of are hereby agreed to.”
The Committee divided: Tá, 27; Níl, 16.
|Belton, Louis J.
Cregan, Denis (Dino).
Doyle, Joe. O'Toole, Joe.
Ross, Shane P.N.
|Enright, Thomas W.
Farrelly, John V.
Neville, Daniel. Sherlock, Joe.
Tellers: Tá, Senators Mullooly and Wall; Níl, Senators Cosgrave and Neville.
Question declared carried.
Mr. Dardis: I move recommendation No. 25:
In page 139, before section 100, but in Part III, to insert the following new section:
100.—A Value-Added Tax (Refund of Tax) Order shall be made in respect of gifts or donations of equipment by individual parents, parents associations or other charitable benefactors, to schools where such equipment is based and used wholly and exclusively within the school, is verified by the school principal and is subject to the approval of the Minister for Education.
I congratulate the Minister on his stamina. This recommendation deals with a case well known to the Minister concerning televisions in schools being liable to VAT. Obviously, there has to be some regulatory system, otherwise it might be open to individuals to use this as a cover for buying equipment for themselves and not paying tax. In such cases in several years' time we might have to operate another amnesty. The point is that where such equipment is being used in school it does not make sense for the State to levy VAT on it. This is a clear-cut case, unlike some of those we argued about earlier concerning health and golf clubs.
Mr. Enright: I agree with Senator Dardis and I support this recommendation.
Mr. B. Ahern: This was discussed at some length in the Dáil and I gave the matter careful consideration, particularly with regard to — and I think this is what Senator Dardis is really talking about — the fund-raising efforts undertaken by parents' committees and others for schools. We all, including members of the Government, acknowledge how hard and important that work is. The mechanism proposed may not be an appropriate method for the State to fund education because, apart from the general question of the appropriateness of using the tax system in this way, it is unlikely that such a scheme would be of significant benefit to the schools most in need since many would not benefit from the tax system.
It was argued in the Dáil that the children of the better off would be likely to benefit most. The criticism of being unable to focus the benefit on those most in need is not one that could be levelled, to any significant extent, at the refund scheme which currently operates for medical equipment. The State must direct its scarce resources to meeting the basic needs of schools, this can best be done through the capitation grants system. Senators are aware that capitation grants were increased significantly this year because I accepted the argument put forward by the Minister for Education.
The cost of such a refund scheme would be significant and if the concession is granted it would be difficult to confine it to particular areas of education, or indeed to education alone. Charitable bodies generally would, undoubtedly, press for similar treatment. I said in the House that we would examine the matter further, we do not need to change the legislation because it already provides for medical equipment. Therefore, it could be extended if we could see the merits of the case, and taking into account what I said about not applying just to the richest schools. I do not want to make too much of that argument because one could say that if people are prepared to pursue that, the best of luck to them. That point was argued in the other House by Senator Dardis's colleague, Deputy Cox, and is  obviously supported by their parliamentary party. That was the first time it was raised, and I will look at it to see if it can be targeted in some way.
Mr. Dardis: I am encouraged by the substance of the Minister's reply in which he offered to look at the matter and stated that it does not require an amendment to the legislation to do something about it. The Minister anticipated a point I intended to make, which was that I am prepared to accept that well off people should not get undue benefits from this provision but voluntary fund-raising activities should be helped. I am a member of a board of management of a national school and I know what parents contribute. It would be difficult to provide the services we do in the school were it not for the generosity of parents. The Minister has kindly accepted that point also.
In the case that attracted attention, the public did not understand why a concession of this nature could not be made, and their incomprehension was reasonable. The Minister's statement has helped considerably and I will not be pressing the amendment.
Recommendation, by leave, withdrawn.
Recommendation No. 26 not moved.
Section 100 agreed to.
Sections 101 to 106, inclusive, agreed to.
Question proposed: “That section 107 stand part of the Bill.”
Mr. Enright: On the issue of property tax, I presume this relates only to residential property tax and would not affect an individual's tax audits?
Mr. B. Ahern: Yes, they are totally separate.
 Question put and agreed to.
Section 108 agreed to.
Acting Chairman: Recommendation No 27; recommendation No. 28 is an alternative and both may be discussed together.
Mr. Enright: I move recommendation No. 27:
In page 149, subsection (1), line 17, to delete “£10,000” and substitute “£50,000”.
I am opposed in principle to the introduction of the probate tax. The Minister expressed his news on this issue in this House and in the Dáil. I hope he will be flexible and extend the £10,000 threshold to £50,000. I say that bearing in mind that I am against the proposal and will be speaking at length when the section is opposed by my party. Our recommendation suggests the limit be £50,000; Senator Dardis suggests £100,000. both figures are realistic, even if the Minister made this small concession it would be a gesture of good will. Nonetheless this principle is dangerous.
Mr. Dardis: Like Senator Enright my party is totally opposed to every section of this Chapter. I do not accept the principle of the tax. Even if that were accepted, to strike the level at £10,000 is unbelievable. This means that, leaving the residence out of the calculation if the person has a decent car and a few possessions, the heirs become liable for this tax. That is unacceptable and it is particularly unacceptable where one spouse is the property owner that the surviving spouse should be subject to this tax at a time of extreme distress. This is revisiting death duties on us. Those were seen to be inequitable and were rightly abolished in the 1970s to be replaced by capital acquisitions tax. I cannot believe this measure is being introduced.
Mr. Quinn: I draw the Minister's attention to a serious problem with this tax. I hope he will address it in the interests of removing a discrimination which is inherent in the measure.
I must first declare an interest, as Senator Norris did earlier. This problem applies to family businesses, and my company is in that position. However it is not a special case; it is typical of large and small family businesses right across the State covering the whole spectrum of the Irish economy.
Family businesses must compete in the marketplace with companies that are not family owned, say public companies, and companies that may be family owned but outside the State. In the grocery business in the 1970s a man called Albert Gubay opened a chain of shops in Ireland. The chain threatened every Irish family grocery business; that is fair, but what would happen if that occurred today, as it may do with public companies or companies owned privately outside the State?
If a family owned business wishes to ensure survival into the next generation, it protects against a probate tax by insuring against it. The money to pay the premium will be taken out of the company. That is an annual premium an Irish family business must take from its income. It is competing in the marketplace with companies that are not family owned and do not have to pay that money. It is intolerable that an Irish Government should introduce a tax that only attracts money from Irish owned businesses.
It is suggested that this is a one-off tax only payable on the death of the owner. That is not what actually happens. If one makes that decision it means the family business does not survive because the money must be found somewhere. The only way to protect oneself is to insure against it. Every Irish family owned business will take money from the business every year to pay a premium to ensure that when the owner dies and the probate tax falls due, an insurance policy can meet it. That makes such companies uncompetitive. That is not a one-off expense; it will be an annual payment.  These companies will have to pay this cost but their competitors will not.
The Minister may be advised that someone who lives abroad, such as Albert Gubay who lives in the Isle of Man, will have the taxes levied on his assets when he dies, but that is not what happens, because the person in the Isle of Man will arrange for a holding company to control the Irish operation. The State will never get probate tax because a holding company cannot die.
This measure has not been thought through. It seems impossible that any Government could introduce a tax which will sound the death knell for family businesses while ensuring the survival of their competitors in the manufacturing and retail trades, hotels, catering and so on. It is almost impossible in a competitive modern market-place for a company to survive with its hands tied behind its back.
When I was elected to the Seanad I made it a policy that I would not criticise without making constructive proposals. When this tax was devised I am sure this side-effect was not anticipated. I am sure the Minister knows that family businesses are critically important to our economy and that it would be folly to put them at a competitive disadvantage. In view of this I recommend that the annual premiums for insurance against the probate tax be allowed against income tax, whether by the company or the individual family owner. In addition, it should be allowed at double the premium paid, which would be the same arrangement as for the double rent allowance in the urban renewal area.
This would not be a big change but if the Government finds it impossible at this stage to remove the probate tax, the measure would at least ensure that it is not levied on family businesses competing with non-family businesses. If the owners of family businesses were allowed a double tax allowance against their premiums for probate tax purposes, that would put them on a level with companies, with whom they have to compete in the open market-place.
 My second recommendation is that the assets should be valued in the same way as the family farm for capital acquisitions purposes. The family farm should have a benefit against all family businesses for capital acquisitions tax purposes. This double valuation does not appear to apply in the case of probate tax. The family farm is recognised as a worthy, stabilising influence in our community and it is being allowed at double the rates for capital acquisitions tax purposes.
If the Government insists on maintaining the probate tax, I suggest a form of positive discrimination as an alternative. This is not outrageous as there are many cases of positive discrimination, an example is a company tax on manufacturing as against company tax on the services sector. If the owner of a business employing 500 people — the kind of business we are encouraging — died and the probate tax was levied on it what will happen? The measures are so broad in regard to the probate tax that, effectively, the asset will be valued in exactly the same way as if the owner had decided to invest in one or two works of art.
It seems senseless for the Government not to discriminate, in the application of the probate tax, between an active company creating employment and those who do not put their money to productive uses, who invest in works of art or leave their money in a financial institution. This failure to discriminate is anti-enterprise and anti-job creation.
The probate tax cannot last as it means that family businesses will be handicapped and unable to survive if they are Irish owned. However, if they are not Irish owned they have a much better chance of surviving. If the Minister finds it impossible to abolish the tax, my recommendations should be taken into consideration.
Mr. Dardis: Recommendation No. 35 deals with proposals in regard to family businesses qualifying as assets in accordance with the capital gains acquisitions tax.
It is extraordinary that in the case of  agricultural property, effectively, a double taxation applies. An individual could be liable for capital acquisitions tax in addition to probate tax where the probate tax is not allowable against the capital acquisitions tax.
There was a reference to the use of section 60 policies which extract the money from the business and are, effectively, a way of paying the tax by instalment. An individual or a modest business might not have cash but could be liable for probate tax, they would then have to seek help from the bank. I recall distinctly at the time of death duties the agony caused to people when banks refused the funding to pay the tax, such people were effectively put out on the road.
The premises of the small business is virtually its stock and trade. The State now proposes to strip the assets of such businesses. It is inequitable and unjustifiable. It could be argued that it is a temporary measure like the 1 per cent income levy. However, such measures have a tendency to become permanent.
Where agricultural relief operates for capital acquisitions tax purposes, it should also operate for probate tax if it is to be consistent. The Minister made exemptions, for example, charitable bequests. It would be far better if people left property to their heirs rather than to charities. While we should not interfere with people's discretion as to how their property should be disposed of after their death, including bequests to charity, it should not be made easier to give to charity than to the succeeding generation.
Welcome measures were introduced to try to increase the mobility of land and to ensure that succeeding generations become the owners of land at an earlier stage. It is important from the point of view of energy and productivity in the industry that young people should be encouraged into agriculture. However, I can see no sense in this measure and we are, therefore, opposing each section and the chapter.
Mr. Enright: Senator Quinn made the  point that it was likely this matter was not fully thought through before it was introduced. I am not aware if that is the position but the repercussions of the proposal outlined are long term and severe.
I pointed out last night that when a person dies a schedule of assets must be furnished to the Revenue Commissioners and the money paid in advance, as the Minister is aware. When a person dies and when the grant of probate or letters of administration are being extracted all the assets of the deceased are frozen. In other words no person can interfere with those assets. The bank cannot pay the assets, nobody can touch them until the probate issues from the central office. A deceased businessman may have assets in a current account which is frozen, with interest of a limited amount accruing, or may have a debt or overdraft but, one way or another, the executor or executrix must borrow to pay the probate fees in advance. That is difficult to accept.
I understand the opposition of people to this proposal. To take it a stage further, let us consider the death of a person living in a modest home. The Minister has exempted “normal” furniture but a definition of “normal” furniture would baffle Solomon because it varies from house to house. A person may be asked to furnish his or her fire insurance policy. It may state that one has insurance on furniture valued at £200,000 because the average clause values furniture at double its value. Will the Minister allow exemption of a specific amount for “normal” furniture? How will it be assessed? This is a very wide area.
The Revenue Commissioners have power to inspect property. Will they have power to inspect furniture? After the death of a person, will the Revenue Commissioners have power to visit that person's house and inspect the furniture? As the Bill is now worded they will. There will be a grave danger of an invasion of the privacy of the homes of many individuals. Added to the existing extensive powers of the Revenue Commissioners, this new power is unwise. It will go on the Statute Book and remain  there because, as Senator Dardis pointed out, many laws are only intended to be temporary but they are never repealed.
This probate tax is a handy mechanism and will yield £1 million a month to the Exchequer. If the Government requires £18 million next year it could increase the tax by a further 1 or 2 per cent or if it wants it to yield £24 million it could double it to 4 per cent. The Minister will say that is scaremongering but if I had said before the election that Fianna Fáil and Labour would impose a probate tax on widows and poor farmers, those parties would have severely criticised me for scaremongering and would have said they would never impose such a tax. They probably did not intend to implement such a tax but they are doing it now. Maybe they will increase it to 4 per cent.
Proponents of this tax seem to of the view that it will be the saviour of the PAYE sector because it will affect wealthy people. The Minister will agree that the vast source of income from this tax will be from widows and deceased PAYE taxpayers. It will affect people who, from the day they start work are taxed. They are also taxed on their savings and pensions when they retire and will now be taxed when they die. It is taxation on taxation.
Mr. B. Ahern: PAYE people who have property in joint ownership will not pay anything. Joint ownership is excluded. I take Senator Quinn's point. That is why the yield from the tax is so small.
Mr. Enright: For 20 years I have been advising people to have property in joint ownership.
Mr. B. Ahern: Most of it is.
Mr. Enright: Many people have property in joint ownership but many others do not. Section 108 allows the Revenue Commissioners to grant exemptions in cases of insufficient liquid assets. That shows how serious this situation is. The Explanatory Memorandum states that:
Section 108 allows the payment of  the tax to be postponed in situations of illiquidity. The payment may be postponed for such period, to such extent and on such conditions as the Revenue Commissioners think fit.
If the Revenue Commissioners think that it is time one paid up will they seize assets? I was pleased to see death duties being abolished. Many farms and shops had to be sold, the same situation will again arise and it is wrong. Senator Quinn proposed that payments made by business people to an insurance policy to cover their probate tax liability should be allowed against income tax. However, many small business people, for one reason or another, are not able to meet the capital value. If the Minister wanted to raise money a good alternative would have been to increase the duty on cigarettes, which would have been better for people's health and peace of mind.
Mr. B. Ahern: Because we had a debate on this recently in the House we covered many of the points. I will reply to about five of the recommendations and probably all the sections. Do Senators wish me to reply to them individually?
Mr. Enright: We can take them together.
Mr. B. Ahern: I covered about six recommendations so I will reply to the points.
Acting Chairman: Recommendation Nos. 27 and 28 may be discussed together.
Mr. B. Ahern: We will take the sections together because the same issue applies. We had a recent debate on it.
Mr. Dardis: The House is agreeable to allowing the Minister to range over the topic as he requires, there will be no difficulty about that.
Acting Chairman: You can range over  them but they must be agreed individually.
Mr. B. Ahern: I will go through some of the points made. Deputy Enright referred to the payments made before a grant of probate.
At present, it is normal for the person represented to open the executor's account and to pay certain expenses before the grant of probate issues. Examples of this are funeral expenses, as Senator Enright said, probate fees and other small liabilities. As a general rule, this executor's account will be used to pay the probate tax.
As the vast majority of estates lodge the Inland Revenue affidavit with the Revenue Commissioners within nine months of the date of death, the discount will be available to offset any costs of borrowing to pay the tax. At present, it is estimated that approximately 75 per cent of cases apply for probate by lodging the Inland Revenue affidavit with the Revenue Commissioners within nine months of the date of death. It is estimated that this figure will increase as a result of the discount offered to finalise the matter. The vast majority of estates qualify for the discount and this is an estimate which the Revenue Commissioners have made.
The Revenue Commissioners may use their discretion about deferring payment if the assets of the estate are liquid assets and it is difficult to raise money to pay the probate tax. As a rule, it would be sufficient to defer payment until after the grant has been taken out. However, a further extension will be available if it is necessary. This should be satisfactory.
Senator Enright also made a point about furniture. The value of the furniture is exempt. Common sense will be applied and the vast amount of furniture will qualify as normal contents. Items such as valuable paintings will not qualify because this is the definition used in other legislation. Antiques and expensive pieces of art are not considered normal contents for insurance purposes under other legislation. The Revenue Commissioners do not anticipate any practical  problems because this is the same definition as the wealth tax which has been used for years. There will not be furniture inspections.
Senator Dardis asked about the family home and exemptions on contents where a spouse survives or where they are taken by the dependant's child. They are exempt.
I will consider the point Senator Quinn made about family business. I gave the figures on the Second Stage debate, therefore I will not repeat them. The estimates and calculations carried out in urban and rural areas suggest that the vast majority of people will pay small amounts of money. Indeed a large proportion of people will not pay any money; some people will pay under £500; 75 per cent of people will pay £1,000 or less; and the vast majority of the remaining 25 per cent will be able to avail of the section 60 policies which are well marketed and published and are widely used by people, including insurance companies.
In relation to lifetime transfers and joint accounts, Senator Enright said that 25 years ago he advised people to have property in joint ownership. Perhaps the Senator was ahead of his time. Properties in joint names are excluded from probate tax and that is why there is a low return from the probate tax. Some 2 per cent of the inter-generational transfer of assets would yield a higher return. I could not include the exemptions put forward by Senator Dardis because there would be nothing left if I did. I know that Senator Enright is worried that someone, more ruthless than I am, would increase this tax. I do not believe that this will happen or that we will return to the days of the death duties when the top rate was 55 per cent.
Inter-generational transfers give a substantial boost to the recipient. I am referring to the exemption of the house, the contents and the first £10,000. Senator Enright has expressed the real fears in this regard, that the figures will double. If that was the case I would not be happy putting this legislation on the Statute Book. We are merely trying to obtain a  small contribution from inter-generational transfers.
Senator Quinn made a good point about the small number of people who do not make lifetime transfers. I met an elderly gentleman recently who gave me a good reason for not doing so. He is a successful businessman with seven children who are all involved in the business. It is better for him to make the decision later, when he will not have to suffer the consequences. I understand his point. There would be no point in telling him to make a lifetime transfer now because he would be worried about the consequences of dividing his property between seven children. I am not sure if Senator Quinn was raising the point for this reason, but many people are like this man.
Senator Quinn mentioned the payment of the section 60 policy. If I recall correctly, a person would not be allowed to claim this as a business expense. However, I will consider this point. The argument is that an individual who did not avail of the lifetime transfer could be subjected to a large tax. Part of their business would then have to be sold. I will also consider this point.
I looked at the figures in section 60 — not in relation to Senator Quinn's point — but generally. A business must be worth £2 million to be liable for a probate tax bill of £40,000. Depending on the age of a person, it would cost a relatively small amount to insure against this. I looked at the figures for an individual the same age as myself, although I do not have £2 million worth of property. It would cost £30 per month to insure this and not many would be affected. It is possible to provide for the payment of gift tax, inheritance tax and probate tax by section 60 policies. Their attraction is that their proceeds are exempt from these taxes. Obviously a wise person who is thinking about the future is going to use them.
I have seen one other instance where the payment of £74 per month, or £18 per week, will enable a person of my own age with a business worth £600,000 to pass that business to their children when  they reach the age of 65. The attraction of the section 60 policies is that they allow people to provide for the payment of the capital acquisitions tax or the probate tax in an ordered and structured way. In practice this means a lump sum will be available to pay the eventual tax liability without the need to dispose of any assets. Senator Quinn asked for that to be allowed as a business expense and I will look at that.
The comparisons Senator Enright made with the estate duty are entirely unfair, as I said last night. Estate duty was levied at a maximum rate of 55 per cent before it was abolished in the early 1980s, and we are talking now about a tax of 2 per cent. The top rate of capital acquisitions tax has been reduced from 55 per cent to 40 per cent. This top rate only becomes effective in the case of a child who inherits a benefit exceeding £270,000. For a child, the capital acquisitions tax position is that a threshold of £171,750 applies before any tax becomes payable. In addition to that threshold, if an inheritance is made up of agricultural land the value of the land is discounted by 55 per cent subject to an attractive ceiling of £200,000. In practice, therefore, where a benefit is made up of agricultural property no tax will become payable by a child until a figure of £370,000 is exceeded. The present rates of capital acquisitions tax on the amount over the threshold are: the first £10,000 at 20 per cent, the next £40,000 at 30 per cent, the next £50,000 at 35 per cent and the balance at 40 per cent.
It is difficult to sustain the argument that the application of a charge of 2 per cent can have anything but the most minimal impact on the transmission of a business from on generation to the next. The survival of a family business through successive generations is a function of labour market forces and the aptitudes and capacities of the heirs of the original owners. Providing for inheritance by way of insurance is the correct way and that is why the recommendation put forward by Senator Quinn is one I find hard to  argue against as it is in line with what I have been saying on this matter.
The Bill has a specific provision to deal with situations of illiquidity. Senator Enright referred to this issue and we amended the Bill in the other House to deal with that. There are cases where the assets of an estate are of an illiquid nature and it is not possible to pay the probate tax before the grant of probate is taken out. In cases such as this the Revenue Commissioners will defer the payment until after the grant has been extracted and for a longer period if required. They will have powers to do that. Once the eventual payment is made within the period of nine months from the date of death no interest will arise as a result of the deferment.
I was careful from the outset that in hardship cases the provisions of the capital acquisitions tax legislation which are extensive and never complained about — I think everyone is used to them now and Senator Enright in his own practice will no doubt have found them useful — will allow the Revenue Commissioners to postpone payment indefinitely in such cases. In ordinary constituency cases I have seen this done on numerous occasions. An example of hardship would be where a person inherits a house and has no liquid assets or sufficient income with which to pay the tax. In such a case the payment of the tax would be deferred either until the individual's circumstances improve or they eventually die, at which stage the tax comes out of the estate. An example of that was put to me in the other House, taking the case of an unemployed son who, for one reason or another, has no income other than unemployment assistance or invalidity allowance, and whose parents are deceased. In that case evidently, the Revenue Commissioners forget about the tax until the individual is deceased and that is a fair way of dealing with it.
I will again go over the elements excluded from probate tax. The biggest is joint property which comprises an enormous amount of intergenerational transfers, gifts made in the lifetime of the deceased, the proceeds of insurance  policies passing directly to the beneficiary, pension entitlements transferring to the dependants under the terms of the pensions scheme and property held in trust which transfers under the terms of the trust. Only assets passing under the will or intestacy of the deceased are liable for the probate tax. It is estimated, and Senator Enright asked me for these figures last night, that these assets amount to about to £700 million per annum. Of this £700 million about £150 million worth of these assets will be exempted, mainly as a result of the dwelling house exemption and the exemption for estates under £10,000. Therefore, the tax is estimated to apply to about £550 million worth of assets each year. The degree of base broadening can be seen by the fact that the tax will apply to assets of £550 million as opposed to the capital acquisitions tax which only applies to assets of £100 million each year due to the exemptions I have already outlined.
I know my reply ranges across a great number of the recommendations, but I think it covers some of the main points made. If there are any other points I will be glad to answer them.
Mr. Dardis: From the point of view of neatness it is helpful that we discuss several of these matters together as it avoids having to repeat things over and over again. I am prepared to accept some of the things the Minister has said about the impact of the tax. However, from my point of view, that is not the issue. This issue is the principle of the idea, not its impact, marginal or not. People of what I and most other would call modest means, are being asked to pay this tax and the most objectional aspect of it is that, in the event arrangements are not made to have tenants in common or joint ownership, the surviving spouse becomes liable. That is contrary to everything that has been done in the past 20 years about capital acquisition tax and other taxes. If this tax is to be consistent the spouse should also be excluded and recommendations relating to that have been put down.
An element of the Minister's reply  which I was not clear about, and I would be grateful if he would clarify it for me, has to do with ordinary funeral and testamentary expenses which would be excluded from the value of the estate. I am assuming the Minister said they were also excluded in the case of probate tax. It is not actually clear from the legislation that this is the case. Section 109 (1) (ii) says: “‘the estate of the deceased’ means the real and personal estate of the deceased as defined by section 10 (4) of the Act of 1965.” I am not familiar with section 10 (4) so maybe it is included there but I want to be clear about that aspect. Are the funeral and testamentary expenses and other expenses associated with the deceased's estate, deductible?
Mr. B. Ahern: That is covered in section 111 (g) (i).
Mr. Dardis: I am reassured on that count.
What would be the effect of raising the threshold proposed in both recommendations 27 and 28? If we raise the threshold from £10,000 to £50,000 or to £100,000, by how much would that reduce the take? My point is that if it greatly reduces the take that supports my argument that it is the people of no great property who are being hit by this measure. Something which strikes me about the arguments put forward by the Minister is that once again we are into systems of devising procedures whereby ordinary people with a modest estate have to get expert advice from accountants, solicitors and estate agents to try and avoid the tax. That is another reason the principle is wrong. Are we creating another benefit fund for the professional classes so that they can move money out of the State and be offered an amnesty to bring it back? It keeps coming back to the topic we started off with this morning.
Another point is that there should be indexation. In recent budgets at least some effort was made at equity through indexation of capital acquisitions tax. Of course if the indexation were back dated to the original 1974 legislation there would be an estate value of approximately  £800,000 rather than the current approximate £170,000 but at least indexation is there for now and the future. It is important to take into account the value of money over time by relating it to an independent arbiter of the nation's wealth and economy.
My mother is 86 years of age and she has certain investments. People of that age really believe should they have to go to hospital or should anything happen to them that they must have a nest egg to ensure they are not a burden on their families or the community. Many people do not want to be a burden on the State or on anybody else and have saved over a lifetime to avoid that. They should not be told they have to devise ingenious systems to dispose of their savings to avoid a tax that should not exist in the first place. Successive Governments have encouraged saving. For example a civil servant who, over a lifetime of hard work on behalf of the State, has put some money aside to ensure he or she will have some degree of comfort in retirement is now being told they should not have bothered. People are being told not to put money aside because if they do the State will take it away. Those are the people with whom we are concerned. We are not concerned about the people who have £2 million estates.
I am prepared to accept that capital acquisitions tax, as it was originally framed, was designed to catch people with very large amounts of property. Much of that property was not being used for productive purposes but it had got to the point where the inheritors of a relatively modest farm that was well-stocked and had no borrowings from the bank were going to find themselves in very serious financial trouble. It is one thing to tax cash in an estate where there is cash in the bank. It may well also be the same thing to tax the Benidorm villa that was mentioned this morning and which we could not decide was an asset or a liability. That may be acceptable but there is no sense in demanding tax from somebody who has a country pub or grocery — or even Senator Quinn's grocery — or a farm where they must dispose of part of their assets in order to pay this tax. This is not good legislation and should not be tolerated.
Mr. B. Ahern: Senator Dardis raised two questions. The relevant threshold is covered in section 109, page 149, lines 15-20. Regarding the other question, if it was £50,000, £4 million would be lost and if it was £100,000, £8 million would be lost. That is the effect of increasing the exemptions.
Mrs. Taylor-Quinn: I listened to the Minister on this issue in the House and on the monitor in my office. The more I listen to him the less I am convinced he is fully in favour of this section and I wonder who has almost managed to convince him it should be included.
The Minister stated only inter-generational transfers are involved and that joint property is excluded. The fact that it is an inter-generational transfer and only happens once in every generation is not a justification for the tax. Any business, farm or operation on which tax due is paid should not be subject to this type of tax. It should be possible to transfer it from one generation to the next without penalty. This is nothing but a penalising tax on a younger generation when it attempts to take over operations such as small pubs, groceries or farms. I believe it is unconstitutional and the Minister may yet be presented with a constitutional case in relation to this section of the Finance Bill. The Minister referred to the fact that the tax does not apply to joint properties but the State is simply delaying the payment by waiting for the last joint owner to die so that the property will automatically be subject to this tax.
Another important issue which will arise relates to taking out probate, whether in the case of a testate or an intestate estate. Many young people will delay taking out probate on an estate for as long as possible because they will foresee this penal tax which many of them will not be in a position to pay except by incurring borrowings or selling off a  portion of the estate. It is most unsatisfactory and businesses and the farming sector will be stifled. People will proceed without having proper title to their property established and will stall on taking out loans for developments. This factor should be examined, particularly by a Government which is anxious to create jobs. This measure is another noose around the neck of enterprising or potentially enterprising people. The Minister should examine it in that regard.
The Minister said there is an option to take out insurance but why should any person be forced to take out insurance so that their successors can afford to pay a penalty tax after their death? That bureaucratic approach to people who are trying to make a decent, honest living on the land or behind a counter is unfair and stifling and will not do anything to boost this country's economy. This tax fundamentally attacks the people who held this country together from generation to generation in the business and farming sectors and is being imposed at a time when many of them are finding it extremely difficult to survive and are attempting to encourage a younger generation to remain in the family business. The tax is a further disincentive to maintaining farms and small businesses and it will affect small towns and rural communities that do not have lucrative businesses with high turnovers or high populations. Yesterday we met the Vintners' Federation of Ireland who say more nooses have been put around publicans' necks.
Enterprising people in this country, rather than being encouraged and given opportunities, are being told they have to put an amount of money aside each year to pay insurance to meet a payment due after their death. The constant drain on them is becoming so great that ordinary people will say they have had enough and would be better off applying for social welfare. The Minister is putting down another layer of bureaucracy and another noose around the necks of decent people. He is doing nothing to generate enthusiasm to expand businesses and to create employment. The Minister's  actions are contrary to everything that is recommended in the Culliton report and everything that was laid down in the Programme for a Partnership Government. That is extremely unfortunate.
The myth that these people can afford to pay because they own property is farcical and I suggest to the Minister that, rather than proceeding with this penal tax, he should look again at what he is proposing in the tax amnesty. Those with money invested illegally outside the country can get off with a 15 per cent tax and be welcomed home — I know I may be deviating slightly, a Chathaoirigh — while the honest are penalised. It is unfortunate that the Government has taken this stand. I know the Minister is a decent and genuine man and I ask him to look again at the section; it is unfair, unjust and a constitutional case could arise from it in the long term.
Mr. Quinn: For fear of repeating myself, may I say I agree with much of what Senator Taylor-Quinn has said. This tax was first imposed in certain other countries in the 1970s. It was a predecessor of the Minister, ex-Deputy Colley, who abolished the wealth tax at that stage but the world has since moved away from this form of taxation. The Minister agreed to look at some of the proposals made and I welcome that. The Minister claims the 2 per cent probate tax is not much and compared it with the death duties of the 1970s. However, one must consider this tax in conjunction with the inheritance tax and capital acquisitions tax, which are now in force.
The main challenge facing this country is the creation of employment and the main solution to this is enterprise. I have listened to Senators Dardis, Enright and others speak about the difficulty this presents. I am only wearing one hat today, not the hardship hat which I understand, but that of job creation and enterprise. If the Minister looks at trends around the world, he will see this is a misdirected tax if we wish to create jobs, because I am assuming all businesses will insure against this. Therefore, it is not a once off tax but a permanent one which  will be paid by Irish owned family businesses only and not by public companies and foreign owned family businesses. If enterprise and jobs are to increase here, we cannot go in that direction. I urge the Minister to give serious thought to this objective.
Mr. B. Ahern: I will briefly answer the Senators' questions. Senator Taylor-Quinn wondered why this was not raised under section 60 — I know you were not in the Chamber at the time, a Chathaoirligh — but that was a direct reply to a question asked by the Senator. There is no force being imposed here; if people do not do it, the State may get more out of it.
Before we get carried away with this matter, I have to say we pay little in capital taxes in this country. We are one of the lowest in the OECD with .5 per cent capital tax and for Senator Quinn's information, this figure is decreasing in real terms every year. Of the total tax take only .5 per cent comes from capital tax against what is in all the programmes about reducing taxes and extending capital taxes.
Mr. Quinn: It is a 0.7 per cent.
Mr. B. Ahern: I just looked up the figures. I was not going to do this because the tax is so small and irrelevent——
Mr. Dardis: We should get rid of it then.
Mr. B. Ahern: Revenue comes from the following: corporation tax, £738 million; capital gains tax, £58 million; income tax, £3,414 million; value added tax, £2,011 million; residential property tax, £7.2 million; capital acquisition tax, £33 million. We are defying the Programme for a Partnership Government, the Programme for Economic and Social Progress, the Programme for National Recovery and the OECD guidelines by going downwards. Stamp duty is £256 million, which combines many areas and the probate tax will be £11 million, and  insurance agents selling policies against it will reduce it further.
The farmers convinced me this year the one thing I can do to meet what Senator Taylor-Quinn asked for, which is to get older farmers to transfer their lands, is for me to do something about the capital taxation code to favour lifetime transfers of agricultural assets. There is no probate tax on these transfers and I have changed the value of the land transferred by way of gift; it is reduced from 75 per cent for tax purposes, subject to a ceiling of £250,000 and agricultural relief in respect of probate tax will be allowed. All of these are helping the present Finance Bill as adjusted. Agricultural relief in respect of CAT is as follows; relief is being increased from 55 per cent to 75 per cent, the ceiling is also being increased from £200,000 to £250,000 and this increase applies only to gifts. I agree that this will not affect farmers. They pay approximately 10 per cent of the annual CAT yield and in 1992, this amounted to £3 million. It has declined from 19 per cent ten years ago to 10 per cent and is decreasing rapidly. With the changes I have introduced, it will decrease further. In 1990, £33 million was got from the CAT yield and we will get between £30-£35 million this year. I know we have an hour for debate, a Chathaoirligh, but I would like to talk about a more relevant section.
Mr. Dardis: I do not wish to try either your patience or that of the Minister, a Chathaoirligh; it has been a long day, but I would like to respond to him. In relation to the amount of capital taxes being collected — I am sure the figures the Minister produced are correct — but we have to ask ourselves how much wealth is here when compared to other countries and how many procedures we have in place. Are these taxes benefiting solicitors, accountants and insurance companies — which may explain why the take is less than it might be. We have already made the point that section 60 policies being an instalment system of paying the tax. Despite the Minister's figures, I am not  convinced of the merit of the agreement in favour of probate tax. At the conclusion of Second Stage, the Minister spoke about lobby groups. In my experience, this is the first time there has been an alliance across the board between farmer, solicitors and other groups to resist this measure.
Mr. B. Ahern: We discussed this in the Dáil for a number of weeks and came to the conclusion that some one should be lobbying about this. I received many letters on different issues in the Finance Bill and this was not even on the miscellaneous list. Deputy Yates said they should be lobbied. Various interest groups were contacted to attend a meeting that evening. There were 25 of them packed into a room designed for ten people and they then launched a campaign. There is a lobby group.
An Cathaoirleach: It is like Oklahoma. The farmers and the solicitors must be friends.
Mrs. Taylor-Quinn: I return to a point made by the Minister in relation to the IFA and other agricultural groups, who asked him to encourage farmers to make lifetime transfers as they are reluctant to do so.
Mr. B. Ahern: I support the IFA and the ICMSA.
Mrs. Taylor-Quinn: I am aware of that. Wishful thinking is one thing, but reality is another. People die, often intestate, without completing their business. Furthermore,  people do not always die at 80 years of age. Young men and women may die in car accidents, suffer heart attacks, etc. In many cases, these people die intestate and because of this their families experience great hardship. Will the Minister consider exemptions in cases of sudden death under the age of 55, either intestate or testate? I am familiar with cases, particularly in the 1970s, where people experienced hardship. However, the situation today is not as bad as it was then.
Mr. B. Ahern: It is a new tax and we will monitor its progress to see if change is necessary. Senator Quinn made a good argument in relation to this matter under section 60. If amendments, restrictions or improvements are needed, we will consider them. However, the only way it could improved is to increase the tax, which would be undesirable.
Senator Dardis was correct when he referred to OECD figures; it depends on the criteria, the relationship and the ratios. However, inheritance tax represents only 3 per cent of the total assets passed in inheritance and is only a small proportion of wealth transfer in the State. This totals approximately £30 million out of £1 billion per annum. I will consider the implications of this issue.
Recommendation, by leave, withdrawn.
Recommendation No. 28 not moved.
Question put: “That section 109 stand part of the Bill.”
The Committee divided: Tá, 23; Níl, 16.
Hillery, Brian. Roche, Dick.
Ormonde, Ann. Wright, G.V.
Cregan, Denis (Dino).
Enright, Thomas W.
Ross, Shane P.N.
Tellers: Tá, Senators Mullooly and Wall; Níl, Senators Cosgrave and Neville.
Question declared carried.
Question, “That section 110 stand part of the Bill”, put and declared carried.
Mr. Dardis: I move recommendation No. 29:
In page 151, line 18, to delete “19.”.
This recommendation concerns applying agricultural relief to probate tax in addition to capital acquisitions tax. I will await the Minister's comments.
Mr. B. Ahern: The intention of the proposal appears to be to extend agricultural relief along the lines of the capital acquisitions tax code, as Senator Dardis outlined. However, as the probate tax has been designed as a base broadening measure which will apply a small charge to the majority of estates, it would be inconsistent with this approach to exempt whole categories of assets from the charge. The granting of extra relief to farms, as opposed to other forms of inheritance, would be inequitable. I do not believe that it could be justified to those who inherit other assets, especially family businesses, to which we referred earlier. The aim of the Government to encourage the life time transfer of farms is far better and is given tangible expression in this Bill by the increase in the rate of agricultural relief in respect of gifts from 55 per cent with a ceiling of £200,000 to 75 per cent with a ceiling of £250,000. The ongoing cost of the proposal to the Exchequer would be about £2 million. On those grounds, I cannot accept it.
Recommendation, by leave, withdrawn.
Question, “That section 111 stand part of the Bill”, put and declared carried.
Mr. Enright: I move recommendation No. 30:
In page 153, lines 13 and 14, to delete paragraph (c), and substitute the following:
“(c) the entire estate of the deceased in the case where the deceased's estate is transferred by will or intestacy to the surviving spouse of the deceased;”.
This recommendation is a proposed exemption. I ask the Minister for his views.
Mr. B. Ahern: The proposal fails to have regard to the basis of the tax, which is to apply a small charge to a majority of estates. In devising the tax the Government has had regard to the position of spouses. Where a spouse survives, the dwelling house will be exempt irrespective of the share left to the spouse.  However, as the tax is applicable only to the property passing under the will or intestacy, all joint property including joint life insurance policies would fall outside the ambit of the tax. In addition, benefits payable under superannuation schemes will not attract the charge to probate. In both joint ownership cases and those where the spouse is the beneficiary of the property, there is no probate tax.
This is a reasonable balance to achieve the objective of a small broad-based charge while safeguarding the surviving spouse. In addition, where individual situations of hardship arise the Bill specifically empowers the Revenue Commissioners to address them. The ongoing cost to the Exchequer of the exemption proposal would be estimated at £3 million, so I oppose this recommendation.
Mr. Dardis: It should not be necessary for people to make joint ownership arrangements. The legislation should be consistent. There are procedures under the capital acquisitions tax and the agricultural relief on capital acquisitions tax whereby spouses are exempt. There should be the same procedures in regard to the probate tax and that is why I approve of recommendation No. 30.
Question, “That the words proposed to be deleted stand”, put and declared carried.
Recommendation declared lost.
Mr. Dardis: I move recommendation No. 31:
In page 153, between lines 13 and 14, to insert the following paragraph:
“(d) where any property is jointly held by husband and wife or is deemed to be jointly held by law under any enactment, whether passed before or after the passing of this Act, any transference to a spouse or increase in the value of a spouse's interest in any such property shall be exempt from  the taxation of assets passing on inheritance (Probate Tax);”.
I ask the Minister to comment.
Mr. B. Ahern: The intention of the proposal appears to be that where property is held by a husband and wife under a joint tenancy the share of the property belonging to the first of them to die should be exempt from probate tax. Property passing on a death does not become subject to a relevant trust as defined by section 108 of the Bill unless it passes under the will or intestacy of the deceased. Unless the law relates to joint tenancy the share of the joint tenant does not pass on his death under his will or intestacy, it passes to the surviving joint tenant by right of survivorship. The recommendation does not achieve any purpose and I accordingly oppose it.
Recommendation, by leave, withdrawn.
Question, “That section 112 stand part of the Bill”, put and declared carried.
Section 113 agreed to.
Recommendation No. 32 not moved.
Question proposed: “That section 114 stand part of the Bill.”
Mr. Enright: Is the Minister satisfied with the periods outlined in cases of quick succession?
Mr. B. Ahern: This is an improvement on the original proposal.
Question put and agreed to.
Question, “That section 115 stand part of the Bill”, put and declared carried.
 SECTION 116.
Question proposed: “That section 116 stand part of the Bill.”
Mr. Enright: The payment of the probate tax when a person submits a schedule of assets to the Revenue Commissioners is wrong. If the person has no assets available they may have to borrow. Money should not have to be paid up front.
Mr. B. Ahern: We have already provided that in the case of hardship the nine-month period can be extended. The Revenue Commissioners are permitted to be flexible in their interpretation of hardship cases.
Question put and agreed to.
Sections 117 and 118 agreed to.
Question, “That section 119 stand part of the Bill”, put and declared carried.
Mr. Burke: I move recommendation No. 33:
In page 155, before section 120, but in Chapter II to insert the following new section:
“120.—That section 245 of the Finance Act, 1992 be amended so as to exclude Directors or other officers of Companies which are formed for charitable or community purposes and which are exempt from Corporation Tax.”.
I welcome the Minister to the House. I am sure he is aware that this section affects every councillor or public representative who is co-opted to sporting or charitable boards. If those boards operate as companies and do not file their tax returns by a certain date, the representatives would be liable for 10 per cent of the tax although they would have  already paid their PAYE or other taxes. That problem should be addressed in this Bill.
It also affects people from the community who are involved in running credit unions. Those who run credit unions provide a great service to the least well off. They are at risk. It can also affect their spouse as either spouse can be subject to a 10 per cent levy. The Minister should remedy this by accepting this recommendation.
Mr. Enright: This importnat section was introduced in the 1992 Finance Act. Directors of credit unions which fail to submit returns can become liable. If a limited company formed for a charitable or community purpose fails to submit accounts as they are obliged under the 1992 Finance Act, the directors become liable for the 10 per cent surcharge for failing to submit the returns on time. This can cause many problems in that they may have to prepare and pay for an audit, for which they may not claim tax exemptions. Many people are unaware of these rules. As far as I am aware, the Revenue Commissioners have not taken any action to date on this, but the principle is there.
Many people in voluntary organisations become members of organisations to help out, and they can find themselves involved in something they do not understand. I try to see the Revenue Comissioners' point of view. I can see the necessity on occasion of making sure that returns are submitted on time, but this can cause many problems for people who work in a voluntary capacity. I ask the Minister for his opinion on this.
Dr. Henry: It has been worthwhile to discuss Senator Burke's recommendation, even if the Minister cannot accept it. I am a director of two charitable organisations, and a large number of directors of charitable organisations to not understand these rules at all. It is necessary to publicise these rules because very often those who are involved in the organisation do not understand the liabilities for which they are accountable to the State. While I do not think the Minister can  do much about this, I would be glad if he would publicise the Revenue Commissioners' requirements in this area and urge those who are involved in charitable organisations to be sure that the charities keep themselves up to date with PRSI and PAYE, as otherwise they could end up with a very large financial liability.
Mr. Roche: Senator Enright was quite correct in saying that a balance must be struck and the whole purpose of having a board is to ensure that the rules are observed. Like other Members, I have been press-ganged onto the board of such bodies. I recall that on one occasion a group of us were sued because somebody had tripped and fallen. A statement of practice is issued at regular intervals by the Revenue Commissioners. The one which issued in April addresses this problems. It limits the responsibilities of companies formed for a charitable or community purpose in respect of filing tax returns. It would deal with the objective of Senator Burke's proposal.
Senator Henry's point is valid. Too many people go on to the board of bodies because they are good things to be associated with, but do not see that there is a disadvantage, a contingent liability which must lie there.
Mr. B. Ahern: The purpose of the recommendation has been outlined by Seantor Burke. I thank him for raising it because it gives me an opportunity to clarify this matter. I did not get the chance to do so in the other House. Senator Henry rightly said it is worth highlighting the position. The purpose of the recommendation is effectively to exclude directors or other officers of companies which are formed for charitable or community purposes and which are exempt from corporation tax from the requirement to file timely returns without a notice from an inspector of tax. Failure to file such returns under the self-assessment system gives rise to a 10 per cent surcharge on the tax liability. The recommendation would ensure that the surcharge would not apply in the cases envisaged in the recommendation.
 The objective in bringing all directors fully into the self-assessment system and subjecting them to its procedures was to ensure the effective auditing of close companies and the early detection of tax avoidance schemes. The affairs of the close companies and their directors are often intermingled, and being in a position to audit the affairs of the company without having a return of income from its directors left the audit picture incomplete. Without returns of income, which are the cornerstone of the self-assessment system, it would not be possible to implement effective auditing of close companies, or speedily to pursue tax avoidance schemes. That point has been made by Senator Enright.
Bearing in mind the purpose behind the inclusion of directors in the self-assessment system which I have just outlined, the Revenue Commissioners have accepted that the tax returns of certain non-proprietary directors, including unpaid directors of voluntary bodies or charitable organisations such as those which are the subject of Senator Burke's recommendation, are not critical to the audit process and would not give rise to the detection of any additional tax liability. Accordingly, in administering the new provisions, the Revenue Commissioners have recently issued a statement of practice indicating that returns need not be filed automatically, and the surcharge will not, therefore, apply in the case of non-proprietary directors who are not otherwise within the self-assessment system, and all of whose income, including fees, benefits and distributions, have been subject to tax directly under the the PAYE system. I am sure that this approach by the Revenue Commissioners will deal administratively with the concerns raised by Senator Burke. This debate will help to publish this statement of practice, and I will ask my colleagues in the Revenue Commissioners to circulate the statement to Members of the Seanad.
Mr. Enright: Will the Minister notify the companies concerned? I am not clear about what he is saying.
Mr. B. Ahern: In the case of charitable organisations and voluntary bodies, where non-proprietary directors are helping out in a voluntary capacity, the Revenue Commissioners are accepting that they are not critical to the audit process, so they have no reason to worry about additional tax liability. They are excluded. The Revenue Commissioners have indicated that returns need not be filed automatically, and the surcharge will not apply in their case.
Mr. Enright: My understanding is that under the Finance Act, 1992, it is obligatory to make a tax return. The Minister made a concession when that Act was being debated and exempted shelf companies. In this instance I understand what the Minister is doing but under the legislation these people are still obliged to make a tax return. If he cannot accept this recommendation, it is important that he should specifically exclude voluntary, charitable and non-profit making organisations. In the case of normal companies it is important that returns be made on time, so that the Companies Office would know exactly what the situation is and that tax returns would be filled in. Under this legislation a person in the PAYE system paying £10,000 tax could perhaps be held liable for another £1,000. That is serious, but the Minister is going a long way towards meeting our concerns. There is a serious difficulty but the Minister is doing much to resolve it.
Mr. B. Ahern: I appreciate Senator Enright's remarks. To make the position absolutely clear I will quote from the Statement of Practice SP-IT/1/93, Finance Act, 1992 and directed to the Revenue Commissioners. It deals with section 3, exclusions in the 1992 Act:
3.1. The 1992 Act excludes certain types of directors from the new provisions, for example, directors of shelf companies, directors of genuinely dormant companies and those who take up temporary directorships in the period prior to a company commencing activity.
 3.2. These examples are covered by the exceptions listed in the Act. The exceptions are directors of a body corporate which during the three years ending 5 April in the year of assessment:
were not entitled to any assets other than cash on hands or a sum of money on deposit within the meaning of section 230 of the Finance Act, 1992, not exceeding £100, and
did not carry on a trade, business or other activity, including the making of investments, and did not pay charges on income within the meaning of section 10 of the Corporation Tax Act, 1976.
That is what the Senator said about the shelf companies. Section 4 deals with special provisions in relation to certain non-proprietary directors and states:
4.1 The Revenue Commissioners also accept that the returns of certain non-proprietary directors, including unpaid directors, directors of voluntary bodies or charitable organisations are not critical to the audit process and would not give rise to the detection of any additional tax liability. Accordingly, in administering the new provisions they decided that, until further notice, returns need not be filed automatically and that surcharges will not, therefore, apply in the case of non-proprietary directors:
(i) who are not otherwise chargeable persons, and
(ii) all of whose income including fees, benefits, distributions etc, have been subject to tax directly or indirectly under PAYE.
4.2 In the case of benefits, distributions, etc., it is sufficient for this purpose that such directors supply up-to-date details to the inspector of taxes so that the tax is collected by the restriction of tax free allowances, by reference to reasonable estimates of the benefits, distributions, etc. Details  of benefits and disbursements can be supplied either in the form inserted with the annual notice of determination of tax free allowances, in a letter or in a tax return, as appropriate.
4.3 The term “proprietary director” means a director of a company who is the beneficial owner or is able, either directly or indirectly, to control more than 15 per cent of the ordinary share capital of the company.
Mr. Burke: Although I am aware of the Statement of Practice and was delighted to see it introduced with the last Finance Act, section 224 of the Finance Act, 1992, is still on the Statute Book and should be amended.
A number of people within this ambit have received letters from the Revenue Commissioners in the past three years. Will the Minister guarantee that no further proceedings will be taken against people in this predicament? People involved with voluntary bodies or appointed to the boards of companies by local authorities have received letters from the Revenue Commissioners in relation to tax liabilities. Will the Minister ensure that no further proceedings will be taken against them?
Mr. B. Ahern: Proceedings will not be taken against them if they fulfil the position as outlined in the statement of practice: if they do not, naturally they cannot be ignored. In response to Senator Burke's second point, statements of practice are always accepted as the criteria under which the Revenue Commissioners operate. I cannot give a carte blanche exclusion to everyone who got a letter, but if they are within the criteria they should be exempt.
Mr. Burke: Does the statement of practice cover periods prior to when it came into being?
Mr. B. Ahern: I am not sure why the Senator has raised cases that may be three years old. The statement of practice  was introduced following last year's Finance Act and only applies to cases since 1992-93. The first forms relating to them will only come out on 31 January 1994. If the Senator wants to bring an individual case to my attention I will examine it.
An Cathaoirleach: That may be the best way forward — if you have a specific case mention it to the Minister.
Recommendation put and declared lost.
Sections 120 to 127, inclusive, agreed to.
Mr. Dardis: I move recommendation No. 34:
In page 159, line 6, after “gift” to insert “or inheritance”.
We already partly dealt with this matter when we discussed recommendation No. 29. This recommendation is also about the question of agricultural relief. I note we are returning to our earlier discussion of the word “relation”. It says: “Section 19 of the Principal Act shall, in so far as it relates to a gift”. What is wrong with saying: “section 19 of the principal Act shall, for a gift”? We had some discussion of this earlier, but perhaps the parliamentary draftsman was not here.
In section 109 there was the absurdity of “a dependent child in relation to the deceased”. There are two relations there: “the child” is, by definition, related to the deceased. I do not believe, however, that the wording in this case means consanguinity. Why can the Bill not read “the dependent child of the deceased”? Senator Quinn and I share a secondary education which, although not outstanding in respect of grammar, included some grounding in basic English which is not in the legislation.
Mr. B. Ahern: In framing section 128 the Government was conscious of the impact of capital acquisitions tax on the  farming sector. It has frequently been suggested that the existence of the gift tax has been a deterrent to older farmers in making decisions to pass on land to a new generation. After lengthy meetings with the farming organisations, I am acutely aware that it is in the interests of the economy that there are no more impediments to the vesting of land in younger and more vigorous owners.
Section 128 will mean that in future agricultural land will have its value discounted for purposes of capital acquisitions tax by a factor of 75 per cent, subject to an overall ceiling of £250,000. This represents a dramatic improvement in the existing regime applicable to gifts which was identical to that in respect of inheritances and restricted relief to 55 per cent of the value, subject to the ceiling of £200,000.
The approach of treating gifts more favourably than inheritances has been a feature of the CAT code for some years. As matters stand a gift is taxed at 75 per cent of the rate applicable to an inheritance. Section 128 goes further in respect of agricultural land and is a fair and forward looking approach on the part of the Government to try to improve the situation. To adopt the proposed recommendation would negate the thrust of the section and put the transmission of land by gift on precisely the same basis as an inheritance. This would encourage land owners to wait until death before transmitting land to the next of kin who would have to pay probate tax. This would be a great injustice to the many young farmers whose interests are best served by early gifting of land holdings. Senator Taylor-Quinn made that argument earlier and it is certainly worth a try. Macra na Feirme and other groups have lobbied for a number of years for this measure and I hope it works.
Mr. Quinn: Recognition of family farms is a worthy objective, it highlights the need for strong continuation on the family farm. However, the Minister should give serious attention to family businesses because as larger employers  than farms in general they at least deserve equal treatment. It would be in the interest of the community that any benefits or discriminations in favour of family farms should also be considered for family businesses.
Mr. Enright: I made that specific point earlier, the same exemptions should be granted to businesses because most of them are having difficulties with cash flow. The double allowance granted for agricultural relief should also be granted to businesses. I ask the Minister to fully consider it in the long term.
Mr. Dardis: Recommendation No. 35 in my name and that of Senator Honan deals with this matter. It recommends that family businesses are treated equally so that it would be possible to pass them on in the same way agricultural property is passed on.
Recommendation, by leave, withdrawn.
Mr. Dardis: I move recommendation No. 35:
In page 159, between lines 11 and 12, to insert the following paragraph:
“(c) the definition of ‘agricultural relief contained in section 83 of the Finance Act, 1980, were extended to include family business transfers which qualify as ‘qualifying assets’ in accordance with section 26 of the Capital Gains Tax Act, 1975.”.
Senator Quinn and Senator Enright have already outlined the reasons for this recommendation. As a matter of principle, taking into account the reference to employment a country pub or small business should be treated in the same way as the family farm, the relief available to farming should also be available to these businesses. I recognise that there would be a possible loss to the State in revenue, nevertheless it would be worthwhile and I recommend it to the Minister.
Mr. Quinn: Such a broad recommendation  would not be in our best interests in the long term. The practice of regarding all assets on an equal basis needs serious consideration. The assets of one deceased, which is money in a building society, another who has bought a work of art and a third who used the same amount of money to create a business which employs people require different consideration. It would not necessarily have an implication for revenue if it meant increasing the level of taxation on one to reduce the taxation on another. It would be worthy of consideration.
Mr. Roche: Listening to the contributions, we are seeing the rule of creeping exceptions. When you listen to one good case, it opens the door to every other good case. The inevitable response from a Minister for Finance is to close the door to all special pleading. I understand why agriculture was treated specially; I was one of the people who lobbied the previous Minister for a number of years. Everyone accepts that the exemptions introduced were of real value. It would make a nonsense of it if we extended it to the community as a whole. Senator Quinn's last point is valid. We have to look at the whole issue of the transfer of assets but this is not the way to do it. The obvious response from the Minister might be to close off all special cases but I do not think that anybody would like to see that.
Recommendation put and declared lost.
Section 128 agreed to.
Sections 129 to 143, inclusive, agreed to.
First Schedule agreed to.
Second Schedule agreed to.
Third Schedule agreed to.
Fourth Schedule agreed to.
 Fifth Schedule agreed to.
Title agreed to.
Bill reported without recommendation and received for Final Consideration.
Question proposed: “That the Bill be returned to the Dáil.”
Minister for Finance (Mr. B. Ahern): Thank you, a Chathaoirligh, and your staff for the assistance and help in getting this Finance Bill, one of the major Bills of the year, through the Seanad. I thank the Finance spokesmen, Senator Enright and Senator Dardis in Opposition and the Independent group who have been here in great numbers throughout the debate. I also thank my Government colleagues from Fianna Fáil and the Labour Party, I appreciate their efforts. I thank the staff in the Department of Finance, the Revenue Commissioners and the Bills Office.
Much work and effort go into the Finance Bill every year. One has to be a Minister for Finance to see and understand the number of groups and bodies involved. I thank them, particularly the Bills Office. Last night staff from the Department of Finance, the Revenue Commissioners and the Bills Office worked most of the night to complete the work and they have done that most nights during all Stages of the Finance Bill. Amendments come in at 11.30 p.m. because the debate always goes on late. It is a tradition — not a very good one — but that is what happens. I thank the Seanad and everyone associated with it for the assistance in passing the Finance Bill, 1993.
Mr. Enright: I thank the Minister for his courtesy throughout this debate. In the Lower House, he accepted quite a few amendments, which is important. He was most attentive and interested and was here most of the time, a good record for a busy Minister for Finance, which is appreciated. I would also, a Chathaoirligh, through you like to express a word of thanks to your staff for their courtesy,  co-operation, assistance and continuous good humour since I came to this House.
Mr. Dardis: I agree with Senator Enright's remarks. We appreciate the fact that the Minister has attended throughout the day and has dealt so comprehensively with all the points raised. He and his officials are to be congratulated on the way in which they have dealt with the debate. I also agree with the remarks made about the staff in your office, a Chathaoirligh because they  received some amendments quite late in the day and were very understanding and co-operative. I thank the Minister for attending and for the way he has dealt with the debate.
Mr. Quinn: On behalf of the Independent Senators I express our appreciation of the Minister's attention and obvious interest. I would also like to thank your staff.
The Seanad divided: Tá, 22; Níl, 16.
Cregan, Denis (Dino).
Enright, Thomas W.
Ross, Shane P.N.
Tellers: Tá, Senators Mullooly and Wall; Níl, Senators Cosgrave and Neville.
Question declared carried.
An Cathaoirleach: When is it proposed to sit again?
Mr. Mullooly: At 10.30 a.m. tomorrow, Friday 11 June.
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