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DISCUSSION ON THE FINANCE BILL 1974
Dail Eireann—Second State (12th July 1974)
Introductory speech by Minister (Mr. R. Ryan)
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
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.
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