241 / 300
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 Recommendation, by leave, withdrawn.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Recommendation, by leave, withdrawn.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
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