The Gazette 1974

letting any element of retrospection be introduced, we should have a specific date in the current year, either budget date or the date of the passing of this Act. Mr. Alexis FitzGerald: I think Senator Lenihan raised this point of retrospection before. I found myself driven to disagree with him because I really do not see that there is anything retrospective about a section which provides that in relation to the year in which it is enacted the particular yardstick is to measure the income to be assessed. If people did things before that date, they did them wisely or unwisely, virtuously or viciously. They formed a view of what was likely to happen. They did not correctly or wisely assess or even know that when a like section was introduced in Britain it too caught, without anyone charging retrospection, income arising from assets that were transferred abroad. I should have thought of all the tax avoidance opera- tions that people have been engaged in and of all the persons least entitled to engage in these tax operations, being for the large part, entirely comfortable gentlemen, this particular type of tax avoidance is the least meri- torious. Mr. B. Lenihan: I fully agree. I hold no brief for the type of operation that this section is seek- ing to cure. As Senator FitzGerald has just said, it is certainly not a meritorious type of operation. It should be sought to be cured as is sought to be done in the section. I am only talking about the danger of importing this type of phraseology into tax avoidance measures. It is a very dangerous thing to import into any legislation phraseology of this kind, which is unneces- sary in this case. There is a danger of it being used again in regard to far less serious and less harmful types of tax avoidance. It is a very dangerous tax power to start giving to the Revenue Commissioners that they can deal with an operation of this kind irrespective of when the operation was carried out by the people concerned at any stage before the commencement of the Act. That is a very global sort of provision to import into a section of a Finance Act. I agree with Senator Fitz- Gerald that if anybody merits draconian treatment it is the people that the Revenue Commissioners are trying to get to. I am not pressing my recommendation. Recommenation, by leave, withdrawn. Question proposed : "That Section 57 stand as part of the Bill." Mr. A. FitzGerald: The section we have—I have not the UK section before me—is modelled on Section 470 of the British Taxes Act, 1970. Subsection (1) of this section is applied to a resident individual who has "power to enjoy" the income of a non-resident person. In a case on this language, Lord Greene MR in Howard de Walden v IRC (1942 I KB 39 at p. 395) said that the section does not limit the income of a non-resident in respect of which the taxpayer is charged to the actual benefit which the taxpayer draws from the non-resident. In another case, Congreve v IRC (1947 30 TG 192) Gohen L.J. rejected the view that tax was only charge- able on the income from the assets transferred. This point was left open in the House of Lords. There are, therefore, two possibilities with regard to the meaning of this section. I desire to know what the Minister's view is as to what is the correct possibility. The two possibi- lities are : First, that the resident individual is charge- able on the whole of the non-resident's income, or secondly, that tax is chargeable only on the income arising from the assets transferred. If the Minister does not have a view with which he wishes to burden the 239

Mr. Alexis FitzGerald: Except we might not have a foreigner here and it might not be desirable to have him. Mr. E. Ryan: There is the type of person I men- tioned who would have transferred some of his assets here on coming to live here and might then at a certain stage wish to transfer them back to the country of his origin which would seem a perfectly legitimate thing to do and he could be caught in a way which would not be intended by the Minister in the circumstances set out in this section. Mr. R. Ryan: I will take a look at it. We do not wish to be unfair and if it operates unfairly I would be willing to correct it. Recommendation No. 24, by leave, withdrawn. Mr. Lenihan: I move recommendation No. 25 : In subsection (9), page 35, lines 14 and 15, delete "whether carried out before or after the commence- ment of this Act" and to substitute "carried out on or after the 4th day of April, 1974." We know the purpose of this section and this part of the Bill. The part of the Bill deals entirely with tax avoid- ance. The section is concerned with tax avoidance in the case of transfer of assets abroad by persons ordin- arily resident in the State who benefit by way of ihcome increases from assets which are transferred abroad. This is a broad outline of what is contained in Section 57. We all go along with that. In principle this is an un- desirable form of transfer of assets, particularly when such a transfer benefits by way of income people resi- dent abroad. In order to benefit such people, those resident in this State are doing harm to the community as a whole. My recommendation is designed to deal with the very draconian provision which is imported into subsection (9) which, if established as a precedent for other areas of tax dealings with the Revenue Commis- sioners, could establish a dangerous precedent. For this reason I put down the recommendation. As subsection (9) now reads, it relates to the provi- sions of the section in the earlier part and then it states "and shall apply in relation to the transfer of assets . . .". Then we have the draconian words "whether carried out before or after the commencement of this Act". This means that in regard to these particular transfers it applies at any stage or at any time in the past. There is no limitation involved in that phraseology. This phraseology is highly undesirable having regard to the tenor of tax legislation. In substitution for the words "whether carried out before or after the com- mencement of this Act" I suggest the substitution for that very draconian phraseology the phrase "carried out on or after the 4th day of April, 1974". That fits in much better with the whole tenor of what tax and finance legislation should be. Indeed, it goes back to the point I was talking about yesterday "retrospection". We may argue about what is retrospective and what is not retrospective. This is blatantly retrospection without any limitation whatever. People who engaged in this particular procedure, which it is now proposed to try to prevent—with which I agree—at any stage before the commencement of the Act can, as the phraseology now stands, be caught. That is retrospection with a vengeance. I am not making any case whatever for the people concerned in Section 57. I do think in the interest of keeping the tax legislation in a normal manner and, above all else, not