The Gazette 1974

tax-avoidance d.vice. We want to stop it. I think we will stop it because people will not bother to engage in the complication of issuing dividends in lieu of salary if there is no advantage flowing from the operation of that device. But if people decide to continue to operate that device, they have to carry whatever disad- vantages go with it. This will be a further encourage- ment to them to stop it. It would be quite wrong to legislate in such a way as to give tax concessions which are intended for legitimate operations to what are, in fact, tax-avoidance operations. Recommendation, by leave, withdrawn. Section 54 agreed to. Sections 55 and 56 agreed to. Section 57 Mr. E. Ryan: I move recommendation No. 24 : In page 33, line 13, after "individuals" to insert "domiciled and". This is merely to ask the Minister why "domiciled" is not included for the purpose of preventing the wording "by individuals domiciled and ordinarily resident in the State". It is conceivable that there might be people ordinarily resident in the State for a long period who would not regard it as their domicile. Executives of multi-national firms who would be stationed in this country for a three- year period could argue that they were "ordinarily resident" but they would not regard it as their "domi- cile". Further down in this section the word "domicile" is used. It states : . . . either alone or in conjunction with associated operations, income becomes payable to persons resi- dent or domiciled out of the State, it is hereby enacted as follows : It is difficult to understand why the word is used in that part of the section but not in the earlier part. On the surface it would appear necessary to include "domiciled" as well as "ordinarily resident" to make a distinction between people who are living here for a long time but who would not regard it as their domicile. Mr. M. J. O'Higgins: Senator Ryan's recommenda- tion refers to the words "domiciled and". It would seem there might be some greater force in his argument if he had worded the recommendation "ordinarily resident or domiciled" rather than "domiciled and". We all know that a person may be resident abroad for twenty years but is still of Irish domicile. Mr. R. Ryan: Persons who are resident but not domiciled in the State are chargeable to Irish tax in respect of income arising outside Ireland or Britain only on the income which is actually remitted to or received in the Republic of Ireland. It is likely, therefore, that it could be shown that the purpose of avoiding liability to taxation was not one of the purposes for which the transfer of assets giving rise to such income was effected by subsection (3) (a). A person resident but not domi- ciled in the State might have substantial assets in the State or in Britain from investments in industries and Government loans, thus having an income far in excess of the person's requirements for spending in the State. It would be illogical and unfair to the general body oi taxpayers, and in particular to Irish domiciled tax- payers affected by these provisions, if a foreigner were left with an advantage over them in relation to his Irish and British assets. 238

Mr. E. Ryan: It is moving a little into judicial func- tion and anything of that nature should be queried, to say the least. Recommendation, by leave, withdrawn. Mr. E. Ryan: I move recommendation No. 21. In page 30, between lines 43 and 44, to add the following proviso : "Provided that the amount of any dividends which are deemed to be emoluments of any person when added to the other emoluments paid to that person by the company and by any person connected with that company shall not exceed an amount equal to the amount of the remuneration which is deductable for corporation profits tax purposes under the provi- sions of Section 53 (2) (c) of the Finance Act, 1920 (as amended), as at the date of commencement of this section and as increased on 5th April 1975 and on each subsequent 5th April by the percentage increase in the Consumer Price Index in the period since the date of commencement of this section." This is merely to deal with the situation where a man is being paid an emolument of, let us say, £1,000 a year and the Revenue Commissioners form the opinion that it is not adequate for the services which he is rendering. I am suggesting that as the Revenue Com- missioners have decided that a reasonable emolument for a director for CPT purposes is £4,000, he should certainly opt for another £3,000, that he should be allowed to take that tax free in these circumstances. Mr. R. Ryan: Perhaps Senator Ryan would accept that a figure of £4,000 is not realistic in 1974 for limi- tation purposes, considering that the remuneration paid to top executives in many companies including export companies is very much higher than £4,000. Mr. E. Ryan: I am merely relying on the figure which, apparently, has been accepted. Mr. R. Ryan: I agree that it has been accepted for corporation profits tax purposes. I do not think it is an appropriate figure today for the purposes Senator Ryan has in mind. If we were to accept it, it would leave open to abuse the very operation that we are trying to stop at present. Four thousand pounds can hardly be a sufficient limitation considering that some remunera- tions can be in five figures. Recommendation, by leave, withdrawn. Mr. E. Ryan: I move recommendation No. 23 : In page 31, between lines 35 and 36, to insert a new subsection as follows : "(8) Any dividend deemed to be emoluments under the foregoing provision of this section shall be : (a) allowable as a deduction in computing for the purposes of Schedule D profits or gains or losses of the trade of the person to whom the services have been rendered; and (b) deemed to be emoluments of the person for all the purposes of Part XII of the Income Tax Act, 1967, and Chapter 2 of Part I of the Finance Act, 1972." This is merely to ensure that, where the Revenue Commissioners do not accept that the emoluments are sufficient and where they insist on regarding dividends paid as emoluments and taxing them where that is appropriate, the com- pany should be allowed that for Schedule D purposes, in other words, that the Revenue Commissioners do not have it both ways, that if the individual is taxed on the emoluments, then the company should be allowed it free of tax. Mr. R. Ryan: Our object here is to discourage the