The Gazette 1974

DISCUSSION ON THE FINANCE BILL 1974

Dail Eireann—Second State (12th July 1974)

Introductory speech by Minister (Mr. R. Ryan)

private citizens. I have seen in my time in this House a number of occasions when this issue has been fought out and when the Revenue Commissioners have been refused powers which they sought because in the opinion of the Minis- ter, or the Government or the House, the powers they wer ' seeking were excessive and could not be justified by the extent or the seriousness of the evasion or avoid- ance taking place. If the Minister believes that the measures he has put before us in regard to tax havens abroad are necessary, then he has the full support of every Deputy in taking whatever measures are legiti- mate to deal with that situation. None of us likes to think that somebody else, because he is cleverer or has access to better professional expertise than we have, can, by using foreign tax havens, avoid paying those taxes the rest of us have to pay. We support the Minis- ter in the measures he wishes to take in this regard with the exception of Section 57. It seems to be a clear case where the Minister is affording to the tax-gathering machine powers far in excess of what it is entitled to or really needs. I strongly urge the Minister to drop that provision in regard to solicitors. Mr. R. Ryan: Could I remind Deputy Haughey that he was responsible for Section 176 of the 1967 Income Tax Act which was even more stringent in requiring every person in whatever capacity—not merely a soli- citor or a banker—to disclose a great deal of infor- mation about money, value, profits gained and so on? Mr. Haughey: That is a codification measure. As the Minister knows, a codification measure is not the work of the Minister for Finance of the day. The 1967 Income Tax Act was a codification measure which simply brought together in one composite statute the various income tax measures existing up to them. It put them together and codified them in one statute. In fact, you cannot put any- thing new into a codification measure; you can only include in it something which is already in existing law. The Minister attributed it to me as a proposal. He said I brought it in and I am quite certain that I did not. I was always anxious as a Minister for Finance to try to keep a careful balance between the needs of the situation as seen by the Revenue Commissioners and the rights of the private citizen and the taxpayer. Mr. R. Ryan: But this provision is on the Statute Book since 1918 and was re-enacted in 1958 and 1963 and again in 1967. It is far more stringent than Section 57. Mr. Haughey: The Minister is now putting Section 57 before us and I wish, to draw his atten- tion to certain aspects of it, to ask him to reconsider it and to consider carefully whether these powers are really necessary to combat the tax evasion about which he is worried. On reflection, the Minister might consider abandoning the bulk, if not all, of Section 57. 236

The purpose of Section 54 is to remedy a defect in the existing law whereby a shareholder in a company who accepts additional shares in lieu of a dividend avoids the taxation leviable on the dividend. The sec- tion provides that such shares shall be regarded as income up to the value of the dividend which could have been accepted. Sections 55 to 59 provide for the taxation of income arising from the transfer of assets abroad. I mentioned in my budget statement that tax havens abroad were being used for the avoidance of Irish taxation. The absence of legislation to deal with income arising in these tax havens has been a major deficiency in our tax code for some years and the sections mentioned are designed to ensure that individuals who are ordinarily resident in the State cannot continue to use these tax havens as a means of avoiding their fair share of tax. There is a saver for bona fide commercial transactions and the usual appeals provision is included. Section 57 will enable the Revenue Commissioners, subject to cer- tain safeguards to respect confidential relationships be- tween solicitors and banks and their clients, to obtain necessary information to enable these new measures to be implemented. The next important part of the Bill is that devoted to anti-avoidance and evasion measures. Nobody will quarrel with this in principle. Mr. Haughey Those who devote their minds to these matters develop new ways, new systems of either avoiding or evading tax and it is the duty of the Minister and the Revenue Commissioners to keep a watchful eye on these developments and if they expand to any considerable extent take action in the interests of fair play. But it is always a question of judgment. From time to time the question arises as to whether action should be taken in regard to a particular device or system that has developed. A decision must be taken as to whether the evasion or avoidance is on a sufficient scale or whether the practice is growing sufficiently to merit all that is involved in the provision of counter- vailing measures. In my view the Minister for Finance in the first instance, and this House in the second, have a very important custodial part to play in this regard. The Department of Finance, perhaps, to some extent, but more often the Revenue Commissioners in pursuing their bounden duty seek powers to deal with certain situations which come to their notice and it is here that political judgment must come into play. The Minister is the first line of defence and this House the second line of defence in ensuring that the taxation authorities in wishing to do their job properly and comprehensively do not get excessive powers. It is perfectly legitimate for them to seek these powers, to put forward the case, but it is our job to ensure that the powers they get do not represent an unwarranted intrusion on the rights of the