Dáil Éireann - Volume 282 - 12 June, 1975

Wealth Tax Bill, 1975: Committee Stage (Resumed).


Question again proposed: “That section 2 stand part of the Bill.”

Mr. J. O'Leary: Last night I was explaining to the House the impact which section 2 of this Bill has had on industry since it was introduced and also the impact which the Bill in general is having and will have. There is no incentive for persons with capital to invest in ailing industries or for persons with money to expand [228] and improve their industries. Industrialists who might now plan to expand and provide additional or improved plant and equipment in order to meet demands in the home and foreign markets in respect of quality and quantity and to create employment, will be very slow to take such progressive steps because they know that even in lean periods they will be taxed at the rate of 1 per cent on the market value of their assets.

I believe there are people who, were it not for this wealth tax, would assist the footwear and textile industries and would inject the necessary capital to get these industries back to where they were a few years ago. We must bear in mind that it is the assets that are taxable. Whether business is viable or not, functioning or not, whether it shows a profit or not in any year the owner is liable for 1 per cent on the net market value. There is no guarantee that this 1 per cent will not be increased to 2 per cent by a simple statement from the Minister for Finance. I could see some sense in a capital gains tax system directed against speculators but none in such a system directed against persons who, by their own initiative, business acumen and hard work have built up assets in an industry, created numerous jobs and generally helped the welfare of the State. I cannot see why these people should be taxed under a capital gains tax system or under a wealth tax code.

Money has been moving rapidly out of the country ever since the Government announced its intention to bring in this Bill, and particularly since the effect of section 2 of this Bill became widely known. It is paracticaly impossible for people to get bank loans now. The public know this. The reason for the banks not having money is that it is being taken out of the country by devious means. Rather than hustling through this Bill the Government would be better employed in devising ways and means of preventing this flow of money from the country. There is a grave shortage of money for agriculture as well as for housing and sanitary services, for roads and for the development of industrial projects. Every [229] section of the community will be affected adversely if this section is implemented but none will suffer more than the hotel industry. A clear picture of their plight is painted on the front page of this morning's Irish Independent. The vast majority of hotels are being operated on a non-profit basis at present. This is true, in particular, of the family or the ordinary-sized business. In the good years of the sixties the hoteliers ploughed back their profits into the development of their concerns —into building additional accommodation and improving facilities and amenities. Now, when they are in serious difficulty the Government are proposing to tax them at a rate of 1 per cent per annum on the value of their hotels and we know that, because of the extra bedrooms and the additional facilities that hoteliers provided during the booming days of tourism, their valuations are high. One of the prime reasons for the failure of the tourist industry is inflation and the fact that we have priced ourselves out of the tourist market.

An Ceann Comhairle: The Chair has allowed wide discretion during the debate on this section but it would not be in order to have a debate on tourism.

Mr. J. O'Leary: I was endeavouring merely to convey to the Government the impact which section 2 of this Bill will have on the tourist industry. We know, too, that there is a grave shortage of money for housing. It is very difficult for people building their own homes to get bridging loans.

This section, too, will result in reduced investment by individuals or companies in the fishing industry. By 1983 our terms of accession to the EEC must be renegotiated in respect of fishing. At that time the 50-mile limit will be a matter for discussion, but unless we have the big factory ships and the big fleets to go out and fish to that limit we will have a very poor case at EEC level for retaining that limit. We might find a situation in which the other EEC countries would be allowed fish right into our estuaries.

[230] An Ceann Comhairle: It is very difficult to see the relationship between what the Deputy is saying now and the section under discussion. He must relate his remarks more closely to section 2. He is ranging far too wide on the section.

Mr. J. O'Leary: I am conveying to the Minister that this section, instead of helping our fishing industry, will hinder it greatly because people will be afraid to invest in industry or to increase their assets to a level above the threshold. We are experiencing a no-growth situation in our economy. Our national wealth may be reducing. There are 103,000 people unemployed. This section of the Bill will do nothing to help provide employment for those people.

The effects of the section will be marked clearly in so far as the construction industry is concerned. It is clear that there is a fall off in the industry. Yesterday we were told by the Minister for Industry and Commerce that a number of proposed industries were postponed. I suggest that one of the main reasons for this situation is that the proposers became afraid of the effects of this section of the Wealth Tax Bill especially when there is no guarantee that the rate will remain at 1 per cent per annum. This measure is being introduced at the wrong time, especially when one considers that 31 per cent of our population are under the age of 14. This is a very important statistic. Having regard to the fact that one in three of the population is under the age of 14 years, instead of discouraging investment as this section will undoubtedly do, the Government should use all possible means to encourage home and foreign investment.

I would invite any member of the Coalition parties to explain in what way the wealth tax will aid economic growth or increase the national wealth. I would ask any member of the Government parties to spell out clearly how it will help any of the 103,000 at present unemployed to get jobs. I forecast that the number of unemployed will be increased between now and Christmas unless the Bill is withdrawn.

[231] Mr. Colley: Yesterday evening the Minister intervened in the debate to talk about a few matters, including a letter which I read into the record and some comments I made on it. I was not in the House at the time but I was listening to the Minister on the monitor upstairs. I want to say one or two things in regard to what the Minister said on that occasion.

First, the Minister was mistaken in saying that either I or the writer of the letter was under the impression that wealth tax would be payable by a trading company. If he examines the record he will find that neither the writer of the letter nor I said that. Each of us referred to the position of shareholders, and that is the crucial point. On that occasion we were referring to shareholders resident in the United States of America. Of course, the position is the same for a shareholder resident outside the jurisdiction of the State.

The Minister said that in the case of shareholders resident outside the State if they were shareholders—the case he took following the letter I quoted was in an American company, which company controlled an Irish trading company—in that case the American shareholders would not be liable to wealth tax. In order to establish that that is so—the Minister did not in fact spell this out but I think he will not disagree with what I am about to say—it is necessary to interpret the phrase in section 3 (2) “of property situate in the State” as not meaning the shares which such people own in the circumstances described by the Minister. In other words, the ownership by, say, American residents of shares in an American company through which assets in this country are owned and controlled is not deemed to be, according to the Minister, property situate in the State.

That interpretation of section 3 subsection (2) is, I would suggest, contrary to the whole line that has been taken by the Minister for Finance in this capital legislation, where the tendency has been to look through transactions of various kinds and get to the actual situation. However, we are not discussing section 3 [232] at the moment. When we are discussing it we will tease this matter out further.

Minister for Lands (Mr. T.J. Fitzpatrick, Cavan): I am ready to discuss it immediately if the Deputy would like to get to it.

Mr. Colley: It would probably be more appropriate if we discuss it in detail, but for the moment let us assume that what the Minister says is correct. I wonder does the Minister realise the implications of what he was saying, because I regard these implications as extremely serious. The two major implications of what the Minister said are these: first, although we all on this side of the House and many people outside the House knew and said that this Bill discriminated against Irish people and encouraged foreign investment, nobody realised until the Minister expounded his interpretation of section 3 subsection (2) just what gross discrimination against Irish people was intended. I use the term “gross discrimination” advisedly because if what the Minister said is true then, quite clearly, a non-resident even though effectively owning and controlling property in this country will not pay wealth tax whereas a resident will pay wealth tax on property owned and controlled not only here but anywhere in the world.

The implications of that are very clearly a direct encouragement and incentive for the foreign take-over of Irish industry, of Irish business, distribution, supermarkets, everything else. There is a built-in incentive in this Bill, if what the Minister says is true, for foreign takeover. That is the first implication, but there is another and perhaps from the Minister's point of view almost equally serious implication, and it is this: again if what the Minister said is true, he is providing a coach and four for driving right through the wealth tax because anybody who is going to be liable to any substantial extent for wealth tax can very simply, if the Minister's interpretation is right, have a set-up whereby his control and ownership of property in this country [233] will be deemed not to be property situate in the State and therefore he will not be liable for wealth tax.

I do not know if the Minister realised or intended the situation to be as I have outlined it, but I do not think he can deny that if what he has said in regard to the position of foreign shareholders is correct, the implications I have just outlined follow. They are serious implications. Until we get to section 3 and discuss in detail the implications and meaning of subsection (2) I do not accept that what the Minister says is correct, but I am saying that if what the Minister says is correct then these serious implications follow.

Any discussion of section 2 must take place in the light of what the Minister says is the meaning of section 3 and in the belief, until it is proved otherwise, that the implications are that there is a direct incentive for foreign takeover of Irish business and that a coach and four for driving through liability for wealth tax is being provided. It is only on that basis that we can discuss section 2 until or unless it is shown that section 3 subsection (2) means something other than what the Minister said.

Mr. O'Kennedy: The matter to which Deputy Colley has referred will allow the Minister to clarify the position when we come to discuss section 3 in detail. May I offer some comment on section 2? The section says that there shall be a wealth tax levied as of April of this year. In effect that decision was taken in February, 1973. The decision that we should have a wealth tax was taken in economic circumstances that might at the time have appeared to justify a wealth tax or a capital gains tax or any other tax, for that matter. The economic circumstances have changed considerably since that time. The phrase was coined in the peculiar circumstances of the political attraction it would have in the run into a general election. The notion was born in the hasty and, I presume, the heated atmosphere of the rooms of this House in the days of the birth of the 14-point programme. Now [234] those hasty, ill-conceived decisions, plans or promises are the basis of our taxation legislation, apart from being to a considerable extent allegedly the basis of our economic and social planning.

There may be many aspects in the social area where people have a common concern. Fianna Fáil acknowledge the need for advancement in the social area but it must be firmly based on secure planning in the overall economic area. This is what is lacking and what we find extraordinary in the approach to this legislation. We have a Minister who repeated in the last few days that this is no time for fashioning an overall economic plan. This is not the time and 12 months ago was not the time. At that time, to quote the Minister for Industry and Commerce, we were “living in a tempest of raging international inflation”. Six months ago the Central Bank apparently found that the eye of the hurricane was centred somewhat closer to home and the Taoiseach acknowledged that it was here in this country.

A recent published report from the EEC acknowledged the very serious economic condition of this country but, equally, they acknowledged the control effected on the inflationary tendencies in most of the other member States. In the face of all of this we are proceeding with taxation packages without knowing where they fit into the structure of an overall economic plan, without even having an overall economic plan. This is on the admission of the Minister.

This hardly seems the way to run the affairs of the nation. We accept that a taxation policy is central to the control and direction of the economy and to the provision of the appropriate services through the various arms of the Executive. Nevertheless, a government cannot introduce legislation of this kind, particularly as it is in principle a new tax in this and other countries. We do not have the benefit we usually have of seeing how this proposal has worked, or has failed to work, in the United Kingdom. Even the wording of our taxation and finance provisions for a considerable time have been based on the precedent [235] and experience of the United Kingdom. That position does not exist here but for some reason the Government are determined to press ahead with this legislation. Of course they can present the Opposition as irresponsible, preventing them from pressing ahead with what they say is a highly desirable, equitable and necessary piece of taxation.

Our party are not opposed to the principle of a wealth tax. We have said that clearly and I repeat it now. However, until such time as our economy and nation have reached a stage of development that will justify the introduction of new taxes of this nature, until taxation proposals of this kind fit into their proper place in our economic planning, we are opposed very firmly to it. We are particularly opposed to it in the present unplanned, irregular and ill-controlled condition of the economy.

Very few Ministers have spoken on this Bill. The attitude taken by Government speakers is that Fianna Fáil are defending the wealthy minority, that only a small number of people will be affected and, obviously, the big business interests have got at Fianna Fáil. They say that Fianna Fáil Deputies are coming into this House at the behest of these people to protect their interests. That is a nice presentation to make and, from the Government's point of view, it might seem to have political advantages. Even if such nonsense were true— which it is not—the real question is not so much what Fianna Fáil are about but what the Government are about.

Our response to this or any legislation can only be a response. It is the Government who initiated this discussion. They did it at a time when their own Minister said that there is no overall economic plan. The Government have the National Economic and Social Council to advise them and through the council they can consult with those who are responsible for the various sectors, the trade unions, the Federated Union of Employers and the farming associations. Apparently the Government are more concerned [236] about appearances than actions and they have instituted a new process of consultation. There have been new meetings with the trade unions and the employer organisations on a separate basis and with the farming organisations. Why is it necessary to have this new process in addition to what is already in existence? It is simply to hide the fact that the Government have neither the capacity, guts nor commitment to see where they want to go and to make decisions. They want to involve others in what they see will be the opprobrium and severe criticism which may follow some of the measures they consider may have to be taken.

They should learn that this is the responsibility of the Government. The IFA are responsible to the farmers, the trade unions are responsible to the workers and the Federated Union of Employers to the employers. They have not been elected by the people to do the job of the Government. There have been consultations and we are waiting for the Government to come up with some clear and firm proposals. We are told they are monitoring, surveying and projecting. Certainly they are projecting at a great rate. There is the activity of constant Cabinet meetings. This has been going on for the last 12 months—they are the most over-worked Government in the history of the State. To what effect? Each apparently is so concerned with the other person's Department that he has no time to be concerned with his own. In the light of all this we are asked to accept new taxation of this nature, the yield from which we have not been clearly told by the Minister. Does that make any sense? Are we to satisfy the doctrinaire theory without having any idea of where this new tax will fit into our overall economic plan? If that is it then let us recognise that this is apparently simply an exercise in political theorising, and not just in political theorising but in political manipulation, because a wealth tax, as I said, is one that of its very nature may commend itself to the vast majority of people; it could be a popular idea and go down well since the vast [237] majority would not be concerned. Was that the idea? Perhaps when it was first mooted it did go down well. Perhaps the chickens are now coming home to roost.

We are being labelled as irresponsible. How can we approve of this taxation package when we do not know how it will fit into our general investment climate and what effect it will have on employment conditions and job security? Can the Government prove it will not adversely affect these? They are the people who have the responsibility. I have a fair idea that there are Ministers in the Government, particularly the Minister sitting in the House at the moment, a mature, experienced member of the Government, who would not have a hang-up on a doctrinaire position, as so many others seem to have. He is a Minister who can judge cause and effect. I have an idea that he and a few others may think differently. It seems to be the persuaders who are dictating policy. I know the silent members of the Government recognise that there is such a thing as confidence. No matter how one tries to rationalise, analyse or justify the presence or the absence of confidence, the reality is that, given a certain investment climate and a certain climate of opinion and a certain attitude on the part of the public, particularly where the business sector and agriculture are concerned, where the Government or certain spokesmen in the Government are concerned, one can have a situation in which confidence is undermined. It is not for us no these benches to say why that is so. It is for the Government to recognise why it is so.

It was the Minister for Defence who, some months ago, said this proposal was a civil service idea; that was his statement on the White Paper. Apparently he believed the Government really had no responsibility. It is no wonder there is a lack of confidence now in the investment and business sector when a senior Minister, like the Minister for Defence, a man of some business and commercial experience himself, who possibly might be personally concerned, which is [238] more than I will ever be, could make a statement like that. Is it any wonder there was an undermining then of business confidence?

The Government now accuse the Opposition of doing a national disservice in trying to undermine confidence. The reality is that it is the Government who have done the undermining through their doctrinaire speeches, through the statement of the Minister for Defence and by the silence of the leader of the Government on this particular matter. Surely, from the point of view of economic planning and of where taxation fits in, we should have a clear statement from the Taoiseach so that we would know where he at least sees the country going, if he sees it going anywhere. We should know what his views are about what the Minister for Finance, the Minister for Industry and Commerce, the Minister for Foreign Affairs and the Minister for Posts and Telegraphs are hatching for our economy and for the future of industry. What is the Taoiseach's view?

An Ceann Comhairle: I hesitate to interrupt the Deputy. He has been granted a good deal of latitude on the section but he is now ranging very wide of the section.

Mr. O'Kennedy: The section itself is very wide and I am simply placing this wealth tax innovation, which is what it is, in context and asking that the Government responsible for introducing it would tell us what its place is in the overall national plan, if such a plan exists, and I am particularly asking that the leader of the Government would let us know where he sees these proposals fitting in. That is what I am asking.

We recognise taxation is necessary, but when one comes to new taxation of this nature one is entitled to analyse it. Fifty years on, or even ten years on, we will be looking back and seeing the effect for good or ill of this proposal on economic developments and not just on individuals who were caught by it. We will wonder then did we analyse sufficiently what the position would be. I am simply asking for a clear analysis. I am simply asking [239] that the Minister responsible for bringing in this tax will tell how much it is expected to yield so that we can strike a reasonable balance in regard to what we are being asked to support and make a reasonable assessment and analysis of what the Government are attempting to do. We have had nothing so far which would enable us to do that. We are simply asked to support a commitment given two years ago as part of an overall national economic plan, a plan we do not have.

I sympathise with the officials who will be asked to give effect to this commitment. I sympathise with the reluctance many of them must have had in accepting this decision of the Government. But that is not their business. They must accept it. I am sure many believe that this is not the time to introduce this tax. These are the people who will have to implement this legislation. Revenue is a busy section and a great many experienced people are doing very important work there to maintain the Government's position. They are also advising people as to their tax liability. By and large, we all recognise the Revenue Commissioners are a very necessary part of our society; though we may not like meeting up with them too often, we recognise they are doing a very necessary job. We also appreciate the assistance we get from them.

I do not know what the personnel complement within the Department of Finance is but I wonder how many of them will now be delegated full-time implementing this particular piece of legislation? I am sure the Minister for the Public Service can advise the Minister on the number of personnel who were taken off normal duties to deal with a particular piece of legislation some years ago. How many will now be taken away from dealing with the normal, traditional areas of taxation to deal with this particular element of taxation? What effect will that have on the overall tax revenue?

Many people are asking those questions. Will we, for the sake of a principle, lose more than we will gain? We do not know how much we will gain. A lot of people are afraid they will be [240] involved in this. The Fianna Fáil Party feel that this has had a significant effect on the investment climate of the country. We do not know what the yield from this tax will be by comparison with the loss which we feel is there and by the fact that so many personnel will be taken from other duties to deal with this tax.

When indirect taxation was introduced for the first time a major debate took place. I believe most people now recognise that it was a very necessary tax innovation. Although it was not very popular when it was introduced the Fianna Fáil Government thought it was necessary. The experience at the time was, and with VAT subsequently, that those delegated from normal functions to deal with those taxes had to spend a lot of time in those new areas, to the detriment, to a certain extent, of the areas they normally supervised. At least, in those areas they dealt with considerable tax yields from the new proposals, whether it was VAT, turnover tax or wholesale tax, and it was worthwhile.

We are told that only a small number of people will be affected by this tax. In determining what that small number will be a lot of people will spend a lot of time in seeing that those people will pay according to the assessments under this legislation. They will have to spend a lot of time coping with the advisers, which the people who have to pay this tax will employ. I do not know if Deputy Desmond speaks on behalf of the Government but he spoke about a person who had less than £1 million who will pay approximately £2,000 per annum. Is the purpose of this exercise to get that much tax from a person with less than £1 million? Will the confidence of the people be undermined for that? The Minister should tell us that this is true.

We have rampant inflation at the moment. Our figure is much higher than many of our European partners. We have turned the tables on them over the last few years. At this time should we even run the risk of scaring needed capital out of the country, which could be generated domestically or attracted from abroad? As a consequence of doing that we will be forced to borrow more money from [241] abroad at high interest rates thereby injecting massive doses of inflation into the economy.

This Bill should play a central part in our overall economic plan. If we frighten away capital that is already in the country out of it or frighten capital from coming into the country the consequence is that we must get that money from somewhere, which is the money markets abroad at high interest rates.

The Government do not see this wealth tax related to our inflationary problem and they do not see it any way related to our unemployment situation. They say that when Fianna Fáil say it they are raising scare tactics. During all this time unemployment figures are increasing. Normally at this time of the year unemployment figures go down, but this year the figures remain the same so that is actually an increase. The Government do not see that this wealth tax makes Ireland less attractive when a country as developed as France and as economically progressive as she is, having gone through difficulties, does not see the need to have legislation of this nature.

Are we really interested in development in this country? It is a strange coincidence that almost every country in Europe was expanding and developing in the fifties while we were going downwards at a very high rate. The Government should acknowledge, without stating specifically, that at a certain stage, from about the late 1950s—by coincidence Fianna Fáil came back to Government at that stage—confidence was restored and the Irish economy developed. At that time we were doing the opposite to every other country and we are now going through the same experience. Inflation has been contained in most other European countries who experienced more severe problems than us. They have been able to deal with this problem but we find ourselves running against the tide and we are not prepared to acknowledge the obvious.

I know it is difficult to reconcile the views of, for instance, the Taoiseach and the Minister for Industry [242] and Commerce, because they start from two entirely different bases. It is difficult to reconcile the views of, for instance, the Minister for Lands and Deputy Barry Desmond because they also start from two different bases. They thought they reconciled their views when they produced their 14-point plan but these views have not been reconciled. That is why all this confusion is rampant, why unemployment and inflation are such serious problems, and why we are being asked to vote on a new principle of taxation without having an indication of what it represents in a Government plan. Until such time as we get such an indication we can only treat this with the ridicule it deserves. If this country gets back to the point at which we left it—that will take a few years—and if we can restore confidence maybe in ten years time when we have reached a similar stage of development as France has, Fianna Fáil may introduce, with effect from 5th April, 1985, a wealth tax. This is not the time to introduce such a tax having regard to the condition of our economy.

Mr. Wilson: Section 2 states:

2. Subject to the provisions of this Act and any regulations thereunder, with effect on and from the 5th day of April, 1975, a tax, to be called wealth tax, shall be charged, levied and paid annually.

We are of the opinion that this wealth tax should not be charged, levied and paid annually as and from 5th April, 1975. We are basing our arguments mainly on the effect this has and will have on capital formation to be used for industrial development here. We are not talking about it in terms of the 1 per cent but in terms of a universal discourse being established backed up by stupid antiquated arguments from Deputies such as Deputy Barry Desmond about wealth and Fianna Fáil being the party of privilege.

We maintain that this tax will create an atmosphere of distrust among people who have capital which can be used for development here. That kind of person knows that 1 per cent in [243] 1975 can, if we have the particularly vicious type of approach we got from some Government speakers, become 5 per cent within a few years. This is more our reason for opposing it. There is a schizophrenia on the Government side of the House about this—Labour Deputies claiming that it is a marvellous thing, Fine Gael Deputies playing it down and trying to convey the impression that it does not matter very much.

This indicates the lines of propaganda which suit either party. Wealthy men have been attracted to live here by many factors. Because a man has wealth it does not necessarily mean that he has exploited somebody to get it. This is part of the mythology of the Left. There has been exploitation in the past but because a man has amassed great wealth does not mean that he has exploited anybody to acquire it. I know a wealthy person who came to live here because he liked our way of life here. He did not come here to exploit. One of the things he claimed took him here was because it was the only country in which he could live without having an armed guard to protect his family lest they be kidnapped. He took his vast wealth here and that can be used for development. If people start looking at his wealth with envious eyes, if the tax people start getting itchy fingers, that man may find some other country to live in and some other community may be able to develop on the strength of his capital.

We have had on this section from Deputy Barry Desmond an economic comment in the jargon of yesteryear, in the jargon of the period when capital was too powerful. We have had an attempt by that Deputy to tie around the necks of Fianna Fáil the millstone that they are in favour of the wealthy and in favour of the exploitation of the weaker sections. It is time to rebut and reject this thesis. I challenge Deputy Barry Desmond to come to my constituency and, in his great wisdom as a social scientist, to assess the type of person who sends me, and the vast majority of the Fianna Fáil Party, to this House. He [244] will then be disillusioned in his fond belief that we, in opposing the tax imposed by section 2, are supporting the people of privilege in our community. Far more of the fat cats of society in Dún Laoghaire-Rathdown support him than support me in my constituency. The trade unions, generally, are far more sophisticated in their approach than the maidenauntish approach of Deputy Barry Desmond and others like him. Industrial development needs technology, time and capital, and capital is very important. If capital is used now the fruits will not be available for a considerable time.

In our society the most powerful system ever devised is used to persuade people to consume. People are being assaulted day and night in all the media with pleas to consume. The average man puts a very small input into the capital that can be used for industrial development. He is seen primarily as a consumer and by consuming he keeps factories and industries going. A certain small percentage of his earnings would be saved by way of pension schemes and so on, but he is fulfilling his role in society by being a consumer, and judging by our few years of affluence he has fulfilled that role very willingly. As you know, consumer spending has been very high over the few years of affluence we had until this disastrous Administration put the economy on the wrong track, disastrous because I do not think they can make up their mind between right and left, between grabbing all the capital for the Exchequer and leaving something for industrial development, grabbing all the money in such a way that those who have money abroad are scared away and those who have money in this country are trying to get it out as quickly as they can.

Industries and companies in this country should not be scared of forming their own capital by reserving a substantial percentage of their profits for capital formation in their company. If the kind of taxation that is envisaged here and the other taxation we have been dealing with since Christmas is proceeded with, companies [245] will have no incentive to do this and consequently development will suffer.

I made the point that the ordinary, average man will not supply a significant percentage of the money through his personal savings for development of industries and companies. It will have to be done within the company. That is the imperative of modern industrial and commercial development. However much we would like to think we encourage savings, the erosion caused by inflation is shaking people in this regard and, at its best, it is an insignificant percentage of the total money that must be available for the development of industry and commercial life.

I mentioned already the kind of maiden-aunt approach of Deputy Desmond: tut, tut, Fianna Fáil is the party of privilege. Tut, tut, Fianna Fáil are defending the rich. Tut, tut, they do not like the wealth tax because they have sold their souls to a few rich men. His mind boggles and his imagination boggles, and he was in a full state of bogglement for a long time about this side of the House. He knows damn well that sound economic sense is being talked from this side of the House.

We may regret that capital formation must be a matter for the corporations and the large companies. We may regret that man is cast in the role of the consumer. We do regret it philosophically. Theorists thought they would be able to handle it by developing a different philosophy. It does not seem to be on. We must take the economic facts as we see them, and if section 2 scares people from abroad away from this country where they want to invest, or scares people who came to this country for one reason or another, not to exploit, and who have a lot of money, if it scares them out of the country, then the taxation policy is wrong.

There is a different system in the controlled economies of the USSR and the countries in Eastern Europe, where capital formation also has to take place for development. It is done of course in toto by the State. It was done very [246] severely for a long period. Consumer spending was curtailed drastically, and they insisted either centrally or at local factory or business level that a large percentage of profits should be retained for development. So severely was this doctrine applied at one stage that, as you know, in Eastern Europe there was seething unrest, and after the Stalinist period this had to be changed.

We had the Minister for Industry and Commerce, when he was in Opposition, claiming he had the solution to all the problems. He could develop in his own particular controlled way. Now the economic facts of life have been borne in on him since he assumed office. He knows now that he must be as wily as a serpent in order to have enough capital in order to develop mines, oil, gas or anything else. He has learned. An interview he gave to the Editor of the Irish Management Institute Journal indicates that, and it is a good thing that there is somebody in the Government learning as he goes along. I do not think he or the Government learned early enough.

We had a great beating of drums and flourish of trumpets when the White Paper on Capital Taxation was announced, and from that time on there have been signs of modification. This section here, with its statement at the end, that 1 per cent would be the rate of taxation would be a hell of a lot different if it were not for the fact that people were forced to listen to other views, that people were forced to consider the damage they might do to the economy if they did not learn the economic facts of life.

In the west, as it has been developing, commercial companies, manufacturing companies and so on, under the free enterprise system form capital in a certain way. The taxman's job is to collect tax, but he must not be allowed to concentrate on the collection of tax without keeping an eye on the economy generally. This, I am afraid, is the kind of thinking that has been emanating from certain quarters of the Government parties and from the Government. As regards the system in the east—and I am not one who will say: “We have reds here, we have reds there and reds in the other [247] place”—anybody with common sense would assess that system and its feasibility, would assess it as a system which would produce the best results economically for this country. I think everybody at student level or in his young days, or at any particular time, has done this.

Is it possible to have a fully formally controlled economy and to develop it in that way? I do not think it is possible to do it by this kind of legislation which tends to suggest that the panacea is more State control, more absorption of private industries, private concerns. It suggests that is the only way to run the economy. Where this has been done on the grounds of inefficiency, where there has been interference with individual freedom, the system has not been a success. I am not foolish enough to believe that an individual as a worker has any great freedom in the system we have but, properly controlled, properly watched, the free enterprise system we have, coupled with a strong trade union movement, can help the country to be developed and confidence can be reasonably placed in the economy and the people who are running it.

It seems to me that in this administration there is a schizophrenia and an ambivalence about basic things in the economy and the result can be only doubts in the minds of potential investors, fewer new jobs and consequent stagnation in the economy.

Section 2 lays it down that a wealth tax shall be charged, and the percentage is specified. If anything I would say here could do damage to the economy, I would not say, but I must say that the type of approach inherent in this legislation can create an atmosphere of doubt in the minds of foreign investors in the matter of investing their money here in property, capital goods, development and so on. Such investors should not have to look over their shoulders at the administration whose duty it is to promote industrial and economic welfare in the country.

The imperatives of industrialisation [248] are whether in a controlled economy like Eastern Europe or in our type of open economy—what is called free enterprise economy—capital will be available. Of course the incentive to provide capital must be there. We provide it in a certain way and it is the duty of the administration to see that no legislation interferes with that system, with the process of enticing capital investment from abroad and encouraging individual commercial industrial firms at home to put substantial amounts of money aside for development.

The old tear-on-the-cheek approach of Deputy Desmond is out of date because in large companies, commercial concerns, the directors and shareholders have very limited powers. Management structures decide they will keep so many thousands of pounds for further development in capital funds and the directors do not have all that much influence in either stopping or encouraging them. Neither do the shareholders. Here is Deputy Desmond riding out against the wicked, wealthy, exploiting rich man and here we have Fianna Fáil, go bhfóraidh Dia orainn, the party of the wealthy.

As I have said, that approach is out of date and no serious person gives it any heed. The trade unions have their own power and I have a great belief in trade unions, in their far more sophisticated approach than the Labour Party's to a wealth tax and the economy generally. This is the kind of wisdom I always expected from the trade unions and they showed it when they supported us in the EEC campaign despite the fact that the socalled Labour economists advised them not to do so. Trade unions and the people with capital are locked into a system where technology is very important. They have their strengths and their weaknesses: management, investors, boards of directors, the lot, are all locked into a system, and it is incumbent on them to develop the system for the benefit of the economy.

A wealth tax like this is only a part of the make-up of that development and it is the duty of the Government to watch that system in the interests [249] of workers, of investors, of the development of industry generally.

A speaker from the opposite side listed a plethora of countries and compared them with us. If he realised it at all, all those countries, some of them ex-imperial powers, had a huge start on us in capital formation, industrial development, right down from the industrial revolution. A former Taoiseach and Leader of this party, the late Seán Lemass, always watched the opportunity to attract capital here which could be used for development. He saw a trend here or there. He did not encourage hot, in-and-out money. He tried to create an atmosphere which would attract people and capital to the country for the country's betterment.

That is the very important duty of any administration. It is the duty of any administration to produce an atmosphere of confidence. It is difficult if a tail is wagging the dog for the dog to go in any particular direction, and the present administration will have to make up their minds fairly quickly or the people will make up their minds for them about what they want. The economy is in a parlous state at the moment. I submit that the reason for this is this type of legislation. It confuses people.

As I said earlier, I am not excluding the possibility of a totally controlled economy. In fact, I would back it 100 per cent if I thought it were feasible, efficient or that it would not interfere in any way with people's freedom. The administration will have to decide if that is what they want and go for it. This is a free enterprise society with a tendency in the Government to aid the less privileged, to watch the orchestra and make sure that each person in the orchestra plays the appropriate well attuned part.

No tax legislation should be tolerated which would shake the confidence in people who are using capital to develop industry or a commercial concern. No taxation or no atmosphere of going for the jugular vein of the person with money should discourage capital coming from abroad for investment and the purchase of [250] factories, property, and so on. It is the taxman's duty to gather tax, but taxation is too important to leave to a man whose sole duty it is to gather tax. When he does that he is doing his job properly. There must be somebody watching the economy as a whole and the effect that taxation will have on the economy. That is why I submit that section 2, which states that wealth tax shall be charged, levied and paid, is damaging. As Deputy O'Kennedy said, at the moment we are in a period of serious economic troubles. This is no time to be talking about taxing wealth.

Mr. T.J. Fitzpatrick (Cavan): Earlier this morning——

Mr. Dowling: Is the Minister concluding?

Mr. T.J. Fitzpatrick (Cavan): This is a Committee Stage debate although I can understand that the Deputy might be confused.

Earlier this morning Deputy O'Kennedy paid me the compliment of saying that I was regarded as a reasonable man, with a reasonable, common-sense approach to things. I thank him for that compliment and would like to regard myself as falling into that category.

When I came into public life and spent a few years first in the Seanad and subsequently in this Chamber, and with my experience as a practising solicitor for many years, I became concerned about the unjust system of taxation operating here. First, I was struck by how unfair the pay-as-you-earn system of income tax was when it was strictly operated, without any capital gains tax. A lady clerical worker from the country working in the city of Dublin, living in a flat, earning a modest wage of £20 or £25 a week, had to pay a considerable amount of income tax while people engaging in buying and selling, whether on the stock exchange, the property market or elsewhere, could in any one year make several thousand pounds and be exempt from tax. I became very worried and concerned about that. I was concerned about the teacher, the garda, the small businessman in the [251] county, the trade union official, the tradesman and the employee who had their pay packets dealt with to the letter of the law on a Thursday or Friday and the last penny was extracted from him. Of course, that was right but the people operating in the property market on the stock exchange, even in a legitimate way, not to speak of the speculators, could and did enjoy a very considerable income free of tax. I did not like that. I did not think it was fair. I did not think it could go on indefinitely. The introduction of the capital gains tax has done something to rectify that scandal and in years to come it will introduce equity into that system of taxation. Things were not so bad until the pay-as-you-earn system of income tax was introduced because prior to that in many cases people made their own arrangements.

As a rural solicitor in touch with people, I was also shocked and very concerned at the crippling effect of death duties on private enterprise, on the farming community, on the small and moderate farms, on the business people and on people of property in general—small, medium or large property owners. The stage had been reached when people could not sleep at ease at night thinking of what would happen to their wives and families if they were to die.

As I said previously in this debate, my constituency is not made up of people of considerable property. It is a constituency of small and medium farmers and small businessmen. The stage had been reached when, even in Country Cavan, people were showing grave concern about death duties. People who had only reached middle age were very concerned about death duties, and they had a right to be. I am making this point because the tax being introduced now is to replace death duties.

Mr. Wilson: I thought the Capital Acquisitions Tax was replacing death duties.

Mr. T.J. Fitzpatrick (Cavan): I will deal with that in a moment. [252] Before the last election the National Coalition published a 14-point programme.

Mr. Wilson: On a point of order, we are supposed to be dealing with section 2. I confined my remarks to section 2. Already the Minister has spoken about capital gains tax. He is doing everything but talking about section 2.

An Leas-Cheann Comhairle: We are discussing section 2.

Mr. Wilson: Now we are on the 14-point plan.

Mr. T.J. Fitzpatrick (Cavan): Enough has been said about that. I am making the case that one of the objects of section 2 is to raise money in substitution for the money the Exchequer will forego by the abolition of death duties from 1st April, 1975.

Mr. Wilson: It is not.

Mr. T.J. Fitzpatrick (Cavan): Before the last general election the National Coalition published a 14-point programme in which we undertook to abolish death duties and replace them by a small annual payment by the wealthy. I had the privilege of appearing on television to deal with that promise and I am in a position to talk about it.

Mr. Wilson: An inheritance tax is envisaged in a Bill which is not before the House. Surely that is more relevant to death duties than section 2 of this Bill.

Mr. T.J. Fitzpatrick (Cavan): I did not interrupt Deputy Wilson.

Mr. Wilson: Because I stuck to the section.

Mr. T.J. Fitzpatrick (Cavan): He was up in the clouds.

Mr. Wilson: The Minister is talking nonsense. The Leas-Cheann Comhairle knows that, but he is too decent to stop him.

An Leas-Cheann Comhairle: The Chair would prefer if Deputies would keep to the Committee Stage. We are discussing section 2 and we should stick to it.

[253] Mr. T.J. Fitzpatrick (Cavan): I hope I am doing that. I will be leaving this point in a minute. Fianna Fáil do not like to listen to ordinary common sense. You can talk away as long as you like so long as you do not come down to earth and talk practical common sense. On behalf of this party I undertook that death duties would be abolished because people were extremely concerned about them. Indeed, they had a right to be concerned about them, because they ranged from 4 per cent on £11,000 to 55 per cent over £200,000. Death duties are gone. Of course it is necessary to replace them by a system of capital taxation.

Mr. Wilson: Gifts on inheritance.

Mr. T.J. Fitzpatrick (Cavan): The promise mentioned a small annual payment, and this is the small annual payment I am talking about. It has relieved people of the nightmare of death duties. Death duties were invading the home and breaking up the home. As we undertook, we have introduced a wealth tax which will collect a modest annual payment from people owning assets worth over £70,000, if they are single, and £100,000 if they are married.

We should get down to the hard facts and see what is involved in section 2. A married man who owns assets worth £150,000 will be required to contribute the sum of £500 per year in wealth tax. If that man had died on 31st March, 1975, his family would have received a bill for estate duties of £67,500. It may be of interest to learn that, at the rate of £500 per year, it would take that man 135 years to pay the amount his family would be asked to pay in death duties in one sum.

Mr. L. Belton: And no interest.

Mr. T.J. Fitzpatrick (Cavan): I ask the House to be reasonable and to see what is in the section. A man owning assets worth £250,000 will be required under this Bill to pay £1,500 per year. If that man had died in March, 1975, his representatives would have been called upon to pay £137,000 in death duties. It would take 91 years at the rate of £1,500 a year [254] to pay that amount. Let us be reasonable and realistic. A man with £500,000 will be required to pay £4,000 per year in wealth tax. If he had died in March last the death duties demand would have been £275,000. It would take 68 years at £4,000 a year to pay that amount. That is the reality of the matter.

There is no terror in this for people of moderate wealth, or even of great wealth, except the terror which is being driven into them by the Opposition. In arriving at those figures all exemptions are ignored such as agricultural land, hotels, and so on. A man owning assets worth £2 million will be required to pay £19,000 per year. That is the stark reality. What are Fianna Fáil crying about? What are they worried about?

Mr. Wilson: Tell us about the other taxes. They are more relevant.

Mr. T.J. Fitzpatrick (Cavan): Deputy Belton asked whether a man could possibly be made to pay more than his total income between income tax and death duties? The answer to that is that, unless he had practically no income, it could not happen. He would want to have wealth running into £1 million or £2 million and no income for all practical purposes. I do not think anybody could visualise a man with assets of £2 million bringing in an income of only £40,000. If there is such a man he must be asleep. It cannot happen in a genuine case that a man could pay more than his income between income tax and wealth tax. Those are the realities of the situation. But this debate has got very far away from reality. I was not surprised that Deputy Dowling did not know what Stage we were on.

Mr. Dowling: I asked if the Minister were concluding.

Mr. T.J. Fitzpatrick (Cavan): The Deputy is some time in this House and surely knows that one does not conclude on the Committee Stage.

Acting Chairman (Mr. M.E. Dockrell): There is no conclusion.

[255] Mr. T.J. Fitzpatrick (Cavan): It is an ongoing situation, one might say. When we began the debate on this section a couple of days ago the Opposition ran their case on the argument that this section would drive foreign capital out of the country or, to be more precise, that this section would prevent foreign capital from coming into the country to establish businesses here. We have had that argument since the Committee Stage began on Tuesday morning at 10.30. The spokesman for the Opposition, Deputy Colley, laid it on hot and heavy in saying that this Bill would do just that. My namesake, Deputy Fitzpatrick, adopted the same line and so did Deputy Brugha. The more orthodox spokesmen of Fianna Fáil on taxation in general— we had only the filibusterers here yesterday and again today—Deputy Colley, Deputy Brugha and Deputy Fitzpatrick and Deputy de Valera, all went on the basis that it was wrong to have a section which would prevent money coming from the US., Germany or Britain to establish factories here. They were striking terror into Deputy Dowling's members and it was only when Deputy Colley sat down, having been congratulated by all and sundry on his speech and when I drew the attention of the House to the fact that capital introduced into this country by foreign trading companies for the establishment of business here is not subject to wealth tax, that there was a very noticeable silence opposite. I was asked if I were serious and I said of course I was.

Deputy Brugha repeated the question yesterday morning and again I assured him that capital introduced here to establish and own trading companies here is not affected. The Opposition were disturbed but I think it was Deputy G. Collins who went on even to name one company that had been thinking of setting up substantial business here but which changed its plans due to the world economic climate and he said that company was frightened out of this country by section 2 of this Bill. He was either reckless or playing politics because the company which he named—but which I shall not name—was not [256] affected by this Bill. Further, I am in a position to assure the House that that company knew, having gone to the trouble to find out, that it was not affected. That is the sort of argument being put up by the Opposition.

When you set out to keep a debate going pointlessly for a couple of days —a debate which should conclude in a couple of hours—and when you must keep on talking it is not surprising that some outrageous and unfounded statements are made. It would be amusing to listen to such statements if it were not damaging to the country. But, of course, it is damaging to the country to misrepresent this Bill and I deplore the manner in which the Opposition did so.

This morning we have them here, having more or less but not completely accepted my interpretation of the Bill as being benign in regard to foreign trading companies who own trading companies here, and now the Opposition are hollering: “You are discriminating against Irish people.”

Mr. Wilson: That is what Deputy Belton said, and he is a sensible man.

Mr. P. Belton: Deputy Belton did not adopt your arguments at any stage. He had different reasons. You are stupid.

Mr. T.J. Fitzpatrick (Cavan): Now they have changed their feet. Deputy Colley, the Opposition spokesman on finance, changed his feet this morning and said: “You are discriminating against Irishmen.” I am not; and this Bill does no such thing. We have encouraged foreigners to come into this country for many years; we provide large grants and tax free incentives. While in theory it may be said that this was open to Irish people also, the fact is that for many years we have had open house here for foreigners who want to establish industries here. We encourage them by substantial grants and by exemption from corporation profits tax at the rate of 50 per cent—it was over 60 per cent when the Opposition were in office. We reduced that and saw to it that the former Government reduced it. No trading company in this [257] country is subject to wealth tax under this Bill. I have explained how the shareholders in America, no matter what their income is, may be exempt from tax if they are American citizens and shareholders in an American trading company which owns a trading company here.

Let us come to realities and let us look at the position of Irish people. I want to repeat, for the purpose of the record and so that section 2 may be clearly understood, that section 2 does not impose a wealth tax on trading companies. Shares of trading companies in the hands of people who are domiciled or ordinarily resident here will be subject to wealth tax provided that each individual exceeds the threshold which, for a married man, is £100,000. Many Irish family companies are owned by a father and adult children but if five or six people who are not related can enjoy £100,000 worth of shares without any liability for wealth tax there need be no fear nor terror in this measure for the Irish people or for foreigners coming here. To listen to the Opposition one would think that up to now the wealth of the country had been invested and hoarded here. Such information as is available to the Revenue Commissioners does not show that to be the case. I have been trying to explain why there is no fear in this Bill for foreign companies who may wish to establish subsidiaries here, and that neither is there any fear in it for Irish people.

Up to March 31 last those individuals who wished to invest large sums of money here would have been liable for death duties at the rate of at least 41 per cent if they had £100,000 worth of shares in this country. They are now being exempted from that liability. It will take a lot of annual wealth tax payments at the rate of 1 per cent to catch up with the clobbering that a person would suffer in respect of death duties on assets worth £100,000 or £150,000. Those are the realities of the Bill.

Deputy Power concentrated during his contribution on the farming community. Another Deputy expressed surprise [258] that the IFA were not protesting vigorously about the Bill but, as I pointed out at the time, the farmers' organisations are properly advised. They understand the Bill and know there is nothing in it about which they might be worried. I could go further and say that since the Bill was published we had consultations with the IFA as we had with any other sector of the economy which wished to be heard. As a result of those consultations improvements have been made, and further improvements will be made if the Opposition will allow us to get on with the Committee Stage of the Bill. There are amendments which will render the Bill virtually innocuous.

Mr. Moore: If it is innocuous, why bother to bring it in?

Mr. T.J. Fitzpatrick (Cavan): We are bringing it in for the purpose of recouping some of the money that will be released by way of the abolition of death duties.

Mr. Moore: If it is innocuous, what good is it?

Mr. T.J. Fitzpatrick (Cavan): It is innocuous in the sense that it will not do anybody any harm but it will do some good to the Exchequer. I do not know whether Deputy Moore was here when I was dealing with the situation we had when there was a PAYE system that was very severe.

Mr. Moore: We still have PAYE.

Mr. T.J. Fitzpatrick (Cavan): Did the Deputy approve of an arrangement whereby, in the absence of capital gains tax, a girl from the country who was living in a flat in the city and earning £25 per week and who found it necessary to hitch hike home every weekend, paid £5 per week in income tax while somebody operating on the capital gains system was earning thousands of pounds per year but paying no tax?

Mr. Moore: Why bring in a Bill that is innocuous?

Acting Chairman: We cannot have this sort of cross-examination. Perhaps [259] the Minister would get back to section 2 of the Bill.

Mr. T.J. Fitzpatrick (Cavan): Deputy Moore is a God-fearing man and his conscience must have been troubled about that sort of situation. Before a farmer is liable for tax he must have a farm worth £200,000 when stripped of the dwelling house and of every hoof that treads the land because for the purpose of agriculture, a dwelling house and livestock are excluded. This would mean that in order to become liable for wealth tax he would need to have a farm of about 300 acres, assuming that he had no other hoard of wealth. On a farm of that size he would be required to pay £350 per annum—sorry, no tax.

Mr. L. Belton: How much would have had to be paid in death duties in respect of such a farm?

Mr. T.J. Fitzpatrick (Cavan): People are being relieved of the crippling burden of death duties. Forestry is excluded from the Bill, but despite all this we have scaremongering from the Deputies opposite to the effect that the Bill will result in neighbour spying on neighbour because, they say, a man would be penalised for not informing on his neighbour. I suppose that when Deputies are ordered to keep a debate going for a couple of days, they must indulge in a lot of nonsense. I expect that Deputy Dowling, who is no bad operator, will be funny in his contribution but he, too, will be told to keep the debate going.

Mr. L. Belton: A speech for all occasions.

Mr. Dowling: Do not miss the next performance. It will be the social welfare speech.

Mr. T.J. Fitzpatrick (Cavan): There is nothing and never has been anything in the Bill that would compel anybody to spy on anyone else. In order that the country may not be damaged by this sort of wild talk an amendment has been added to put that question beyond yea or nay.

[260] Inflation has been talked about. The Minister for Finance has given an undertaking that he will review the situation periodically to ensure that inflation is taken into account, but even within the Bill as drafted there is machinery to look after inflation because a valuation may be made of property as on 5th April of this year or next year and that valuation lasts for three years even if inflation has artificially increased the valuation of the property. Will the Opposition please note that?

Deputy John O'Leary from Kerry was very concerned about hotels and fishing boats. I am sure Deputy John O'Leary knows that hotels in individual ownership are exempt in respect of bedrooms in the hotel up to a value of £100,000 or half the valuation, whichever is the lesser.

Mr. Wilson: What about companyowned hotels?

Mr. T.J. Fitzpatrick (Cavan): I shall deal with them in the next sentence. Hotels in individual ownership are exempt in respect of bedrooms up to a value of £100,000 or half the valuation, whichever is the lesser. Surely that means a high percentage of the hotels in the country? Somebody will ask me, and we all have had literature from the hotel organisation, about section 10, why it was not drafted in another way to include hotels owned by companies. The fact of the matter is that it is just not possible to confer this exemption on companies owning hotels because if that were to be done there would be avoidance devices and nothing could be done about it. But we have looked after the hotels owned by companies.

Mr. Wilson: I hope so.

Mr. T.J. Fitzpatrick (Cavan): We have indeed. There is a reduction in the share value of 30 per cent. It does not stop at £100,000 or at £200,000; it is right across the board. If I am not careful I will have Deputy Colley in telling me I am treating companies more favourably than hotels owned by individuals.

[261] I have dealt with the argument about capital being discouraged from coming into the country for productive purposes. I hope I have dealt with it fairly and satisfactorily. There is also the argument that capital will be frightened or chased out of the country. There is no point in a person transferring money or assets out of the country unless he goes with it because if he is an Irish citizen or a person domiciled or ordinarily resident here and he transfers his money out of the country he will still be liable for wealth tax in respect of it. If he transfers it to the U.K.—he would need to have his head examined—death duties would be payable. That is the point I want to make.

Capital that is here at the moment and that was here last year was subject to heavy death duties and yet it stayed here. Why then should we expect that people who stayed here and suffered the risk of payment of death duties will suddenly take flight as a result of this nominal charge of 1 per cent in lieu of death duties?

All through the debate the emphasis has been on capital and wealth. Capital and wealth are good things but there does not seem to be any concern about income. There are some people who have no capital, who have only income.

Mr. Wilson: They are the ones who want the jobs.

Mr. T.J. Fitzpatrick (Cavan): Yes. Some of them are people of considerable income. Deputy Wilson, apparently, sees nothing wrong with taxing people through Pay As You Earn——

Mr. Wilson: That is being done.

Mr. T.J. Fitzpatrick (Cavan): ——to the last penny, against their income.

Mr. Wilson: That is being done.

Mr. T.J. Fitzpatrick (Cavan): I know.

Mr. Wilson: Does the Minister intend to change that? Do the tax people attend to change that?

[262] Mr. T.J. Fitzpatrick (Cavan): No, we do not.

Mr. Wilson: Then, what is the Minister talking about?

Mr. T.J. Fitzpatrick (Cavan): Deputy Wilson is not shedding any tears——

Mr. Wilson: The Minister is going to shed tears. Moses struck the rock.

Mr. T.J. Fitzpatrick (Cavan): Deputy Wilson is not shedding any tears for the people who have their pay packets raided at the rate of 26 and 35 per cent.

Mr. Wilson: Shedding tears is no good. How do you improve the position?

Mr. T.J. Fitzpatrick (Cavan): We are talking about a system of taxation. Deputy Wilson has no concern for that.

Mr. Wilson: You made promises to change it. So, you are going to abolish PAYE?

Mr. T.J. Fitzpatrick (Cavan): No, I did not say that.

Mr. Wilson: I thought the tears would issue in action.

Mr. T.J. Fitzpatrick (Cavan): I am talking about Deputy Wilson's tears. It is very significant that not alone am I not going to abolish PAYE but Deputy Wilson is not asking me to abolish it; he approves of it.

Mr. Wilson: I am sure such subtle minds as the Minister's would have evolved a better system over the last two-and-a-half-years, if there were any such thing.

Mr. T.J. Fitzpatrick (Cavan): The Deputy does not like common sense.

Mr. Wilson: I do not like hypocrisy either.

Mr. T.J. Fitzpatrick (Cavan): The Deputy sees nothing wrong with extracting from the pay packets of people of modest income 26 per cent and 35 per cent of their weekly pay but he is shocked and outraged at the [263] idea of collecting £500 a year from a person who enjoys wealth of £150,000 plus income. I only want to be fair with everybody.

Fianna Fáil are not consistent. This morning Deputy O'Kennedy, who always makes a reasonable speech, said that Fianna Fáil were not all that much against the principle of a wealth tax. I was surprised at that because yesterday they were saying that they would not have it, that they did not want it or any part of it. Deputy O'Kennedy this morning was prepared to consider it but only in a state of affairs when the economy is better off than it is now. He explained the sense in having a wealth tax in other European countries but not having it here by saying that the countries who operate a wealth tax are much more developed than we are. That may be so but I want to tell the House and the country when the countries concerned began to operate a wealth tax. It is relevant to this debate because I do not imagine they were always as developed as they are now. Denmark has operated a wealth tax since 1904, Sweden since 1910, Germany since 1922, The Netherlands since 1892, Norway since 1911 and Luxembourg since 1943. The fact is that these countries built up their economies, not in spite of wealth tax, but with the aid and help of wealth tax.

Mr. Wilson: They built up their economies on the fruits of their colonies for the most part.

Mr. T.J. Fitzpatrick (Cavan): I have told the Deputies the dates. They have built up their economies with the aid of wealth tax, not in spite of it.

Mr. P. Belton: Will Deputy Wilson tell the House what colonies Sweden and Norway had?

Mr. T.J. Fitzpatrick (Cavan): Those facts that I have stated have not been taken into consideration. It is well known that when some countries are in difficulties they impose a tax to get out of the difficulties. I am not saying that should be done. I would suggest to the House that the [264] scares being spread about this system of taxation are not well founded. I believe Deputy Colley was wrong to carry on a correspondence with a responsible representative of industry in America on the basis that this country proposed to impose a wealth tax on American trading companies who establish industries here. In effect, that is the meaning of the letter Deputy Colley read out to this House yesterday. He did not contradict that letter, nor did he correct the erroneous impression contained in it. I say that because the Deputy did not say he did so. I believe it would be Deputy Colley's patriotic duty to do that, to write to that man who is apparently on friendly terms with him. He should write a letter on the following lines: “Dear Frank, I am afraid you do not correctly understand the proposals. It is not proposed to tax your companies in America who establish subsidiaries here, and I would be glad if you understood this. I would also be glad if you would give it widespread publicity in your trade and industrial journals.”

All of us like to score political points but there is one thing about most of us, namely, that when we go abroad we do not run down our country or our Government—I say this conscious of the fact that we were in Opposition for a considerable time. I believe Deputy Colley did not correctly understand the implications of this complex Bill because I noticed the considerable surprise of Deputies Fitzpatrick, Colley and Ruairí Brugha. If he accepts that the legal position with regard to trading companies here owned by foreign companies is as I am advised it is, I hope he will correct Mr. Frank O'Reilly's erroneous impression.

This morning Deputy Colley said we were discriminating against Irish people and I told him that was not so. He then said we would be opening the sluice gates to avoidance if the position was as I described it. That is not the case. So far as foreigners are concerned, those people who are prepared to put their money into the country, the position is as I have set out. It is good for the country that they invest [265] the money here. Irish people have exemption up to £150,000 when one takes the dwelling house into account. Ireland is the only country of all countries where a wealth tax is in operation which exempts the private residence.

There is no question of opening the sluice gates to evasion devices. If Irish people domiciled and ordinarily resident here establish a foreign company and own shares in it the shares will be liable. If there is a genius around who is able to use avoidance methods under this section, it will be the duty of the Revenue Commissioners and the Department of Finance to plug the holes and to nullify the devices. They do that every year. It is a case of the tax experts watching Finance Bills and the Department of Finance watching the tax experts. It is an ongoing situation that is dealt with in every Finance Bill.

Notwithstanding the ominous presence of Deputy Dowling, I would appeal to the House to put an end to the discussion on this section. Let us get on with the 70 amendments in the name of the Minister for Finance and the Opposition. I do not believe the country has anything to fear from this Bill. Furthermore, I do not believe the people are taking the Opposition seriously in this filibuster.

Mr. Dowling: I should like some clarification of this Bill. Some time ago a Minister dismissed this Bill as “civil service waffle”. We would like to know if that is the Government's approach to this Bill. Judging by the remarks of the Minister for Lands and the questioning of Deputy Moore some time ago, it appears it is civil service waffle.

The Minister for Lands indicated that certain countries have had a wealth tax for a considerable number of years and he mentioned Denmark. I do not know what he was trying to prove, because Denmark has the worst unemployment figures in the EEC. Between 1974 and 1975 the increase in unemployment was in the region of 236 per cent. This is one of the nations the Minister quotes as having a wealth tax and one would assume, from the argument made, that a wealth tax can save a [266] country. Denmark, the country specifically referred to, has had an increase in unemployment between 1974 and 1975 of the order of 236 per cent while our figure for the same period is 35 per cent. Denmark has an appalling unemployment situation, far worse than ours. I have the figures here produced by the Commission. In 1975 the total number of persons unemployed as against those registered for unemployment insurance was 12.2 per cent while here is was only 8.4 per cent. I do not know why the Minister picked on this example. What was he trying to imply? Was he trying to imply that a wealth tax can save a nation? The figures I have here do not indicate that. They indicate the opposite. Denmark has the worst unemployment problem in Western Europe. Why did the Minister quote these countries that have had wealth taxes since 1890, since 1904 and since 1911? The figures in the book that I have here presumably give the correct figures and, if the implication is that a wealth tax can save a country, then the opposite is the case.

Between 1974 and 1975 unemployment here increased by 35 per cent. Compare that with 236 per cent in Denmark, the country quoted by the Minister.

Mr. T.J. Fitzpatrick (Cavan): The basis is different.

Mr. Dowling: We are dealing with percentages.

Mr. T.J. Fitzpatrick (Cavan): Percentages are funny things.

Mr. Dowling: We are dealing with percentages of the working population. Was the Minister merely giving figures for the benefit of the Press?

Mr. T.J. Fitzpatrick (Cavan): Give us the figures in Denmark as distinct from the percentage.

Mr. Dowling: The increase was 75,700 in that particular year. The figure is based on the register for unemployment insurance and corresponds with our live register. In Germany, another country mentioned as having a wealth tax, unemployment [267] increased by 98 per cent in 1975 as against 1974. The Minister's argument is not logical. The countries with a wealth tax are in a worse situation than we are as far as unemployment is concerned. We have the figures supplied to the EEC in March, 1975. There is an odd discrepancy; the figure supplied is 94,606 while the Central Statistics Office here for the same period to 28th March gives a figure of 103,256. One can see that there must be some fiddling with figures by the Government. The difference between the two figures is 8,650. What was the reason for the falsification or is there a reason? Why the difference in the two sets of figures?

Unless we were familiar with wealth tax legislation in all the countries mentioned by the Minister we could not make a realistic comparison. Is this particular measure identical with wealth tax legislation in these other countries, Luxembourg, Denmark and all the rest of them?

Mr. T.J. Fitzpatrick (Cavan): It is much less severe.

Mr. Dowling: It seems to me the Minister is unable to back up his argument because he has not told us the difference between the systems operating in Europe and the proposed system here. Does he know what benefits have flowed from these systems? A wealth tax does not appear to have improved the employment situation. There is no need for me to go any further.

Mr. T.J. Fitzpatrick (Cavan): The Deputy will put us at the top of the league if he goes on.

Mr. Dowling: The Minister's speech was just a bit of upholstery. It was a prop. We now find that those countries which have no wealth tax are far better off from the point of view of unemployment. One wonders why the Minister presented these examples, if one could so describe them, at all. This Bill could be drafted in any form. It could be drafted in 150 different ways and it [268] could bear no relation at all to the legislation in the countries to which the Minister referred.

Mr. T.J. Fitzpatrick (Cavan): The Deputy never read the Bill but he will be able to talk about it for the next four hours.

Mr. Dowling: I listened to the Minister and I am completely mystified. The Minister has not convinced me and I doubt if he has convinced anyone else. We have exposed the fraud and neither the public nor the Press will be taken in.

I can understand the comments of the Minister for Defence that the white paper was just civil service waffle. The Minister for Lands has failed to make any good argument at all for this and the facts controvert all the suggestions made by the Minister in regard to the beneficial results of the tax. The Minister has not given me the reassurance that the other measures are identical with these and that we can make as reliable comparison. There is no point in presenting statistics here or trying to make comparisons, as has frequently happened in this House, with other European countries unless it is on the basis of like with like. I want to question the presentation of unemployment figures to the European Community in March, 1975 as 94,606, 8.4 per cent of the working population unemployed, when the figure was in fact 103,256 as presented to the Deputies of the House. Which information was false? We would like the Minister to tell us this. We would then know on what basis to assess the arguments from the members of the Government. We must have reliable statistics on which to base arguments. I am sure the Minister will agree that this is logical.

Which set of figures are we to use? I always understood the figures to use were those submitted by the Central Statistics Office, the number on the live register of those unemployed in the various categories. Is there a reason for this deception? This was dismissed by the Minister for Defence as civil service waffle and it has been [269] consolidated by the speech of the Minister for Lands, who told Deputy Moore that the Bill was innocuous. There is, therefore, no necessity to bring in this type of legislation.

I believe the tax structure in this country and others needs constant updating. There must be a realistic assessment of the situation in relation to wealth and in relation to all other forms of taxation. I am not against taxing the rich but we must have a realistic basis on which to work. The position has not been clarified. We got erroneous figures and we got comparisons from the Minister but the figures prove that they are a smokescreen. This Bill has been presented to the House as a smokescreen because Ministers have condemned it as waffle, and innocuous. Supporters of the Government have labelled it in other ways.

This is very like the Contraception Bill which we had some time ago. I hope there will be the same consistency when it comes to voting on this Wealth Tax Bill so that people who have a conscience will back up the views they hold. The Labour Party, no doubt, threatened to withdraw from the Government if a Bill of this nature was not introduced. The Government have yielded and we have various projections of assessment of the Bill by a number of Ministers. We know that the Labour Party have threatened to withdraw from the Government if this Bill is not put through.

The Minister for Industry and Commerce, at a recent meeting of the Parliamentary Labour Party, told them a number of measures would come before the Dáil and they were to keep putting the fires out. By that he meant a dampening down of the situation in relation to unemployment, the building industry and the construction industry. He told them there was no further money available and there would be no further taxation or social welfare increases. Nevertheless, they were not to panic. He told them to hold their political nerve. This is a common term used by that Minister. Now we see the reason for the Bill and the assessment of it by two Minister. We see the political pressures that have been [270] applied to maintain office and also those that have been exercised from outside. The Minister has dealt with some of the pressures. The Government have tried to create erroneous impressions by the hand-outs from the Government Information Services. The national Press seem to be very gullible in accepting Press releases from the Government Information Services.

Mr. T.J. Fitzpatrick (Cavan): There used to be a radio programme called “What Are They Talking About?”.

Mr. Dowling: I am glad the Minister explained to Deputy Moore his views on this Bill because other speakers will no doubt benefit from the views expressed this morning. They will take into consideration the statistics given by the Minister and examine them in relation to the general trend in European countries. As I said, I am not against taxing the rich nor am I against a fair and just tax system. I also believe that the taxation system must be updated to meet current problems and demands in a realistic way. There have been erroneous impressions created that this is a wonderful country and nothing is wrong but very soon there is a rush to meet the captains of industry and other people. Yesterday we saw in the paper a headline: “A secret plan to beat inflation”.

Acting Chairman: I think the Deputy is straying from section 2.

Mr. P. Belton: He is in the wild west.

Mr. Dowling: I am dealing with section 2 in the same general way as the Minister for Lands and other speakers dealt with it.

Acting Chairman: A lot of latitude has been allowed but the Deputy must not go into detail on all matters. He can touch on them in a light and shorter version but the Chair cannot allow him to make a speech on extraneous matters.

Mr. Dowling: The Chair knows well that the capital gains tax and wealth tax are the main cause of our [271] problems and that this has generated through industry to the workers' pay packets. Free enterprise is also affected. The Minister gave some figures in relation to other European countries but, in fact, those countries have been described as “Europe's paupers”. I have already dealt with the smokescreen and the pressures being applied to the Fine Gael members by the members of the Labour Party but we also had the Minister for Industry and Commerce telling a meeting of the Parliamentary Labour Party to damp out all the fires and not to lose their nerve in the present situation.

We all realise that the tax rate will start at 1 per cent but we should remember that only last week a Bill was introduced in the House to increase a levy by 50 per cent. The fact that 1 per cent is mentioned in this Bill does not mean that in a year or two we could not have an escalation of the percentage. We have all seen how other percentages have been increased viciously.

Mr. T.J. Fitzpatrick (Cavan): The Deputy should remember that the betting levy stood at 5 per cent since 1945, 30 years. That is an indication that percentage levels stay for a long time.

Mr. Dowling: We have not been given any guarantee to that effect. Other types of taxation have been increased at an enormous rate since this Government took office. The people also had to pay extra for such things as television licences. There is no doubt but that the Government are broke and bankrupt and that they have now to go to the pawnbroker.

It is important that we restore confidence in our economy. This Bill does not help in that regard. It does not encourage industrialists or those anxious to invest money in development to do anything. Confidence is seriously disturbed in our depressed economy. There is an air of mistrust here because of the conflicting statements by Ministers. However, it is fortunate that the Government can only depress the people for another [272] two years because then they must face the electorate in a general election.

The unfortunate thing is that in that time they can do irreparable damage to our economy. On the last occasion we had a Coalition Government they robbed the widows' and orphans' pension fund and used the money for other purposes. They had their hand in the till all the time. On this occasion they have come up with new schemes. I accept that the tax system needs to be up-dated but the Government must take into consideration our economic situation.

The Minister for Lands has failed miserably in his efforts to put up a valid argument in favour of wealth tax. I am sure he feels miserable having presented statistics about other European countries which have proved to be unreliable. The people can feel confident that when Fianna Fáil return to power they will restore confidence in the economy and generate employment. My hope is that in the meantime the sell-out is not completed. It is possible that some members of the Government want that. I am not defending the wealthy people but if it is a question of examining the entire tax structure it must be done in a realistic way. Comparisons made should compare like with like. Recently we heard of the secret Government plan, but if such a plan exists one would expect the Government to present it to all members for consideration. Two or three papers yesterday carried the story. Could we be told what is the Government's secret plan for saving the nation? Does it involve the wealth tax?

Acting Chairman: I do not think it arises on section 2, strictly speaking.

Mr. Dowling: Strictly speaking, everything revolves around the section 2 at the moment.

Acting Chairman: But not secret plans.

Mr. Dowling: This will be the lifeline we have heard so much about from the Minister for Lands.

Progress reported; Committee to sit again.