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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Recommendation No. 24, by leave, withdrawn.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
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
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