It is self-explanatory. The explanatory memorandum explains the import of all sections. I think the best thing might be to handle questions as they may arise.

In subsection (1), what is the justification for the rate of 50 per cent?

The justification for that rate is that it is a rate which corresponds to the mixture of the two taxes which we have, on the income of corporations which are income tax at the standard rate of 35 per cent and corporation tax on top of that, which together produce a tax of 49.96 per cent.

What is it in Britain?

It is 52 per cent.

Has the Minister any information about what it is like in other EEC countries?

I understand it is about 50 per cent. It is 50 per cent in France but it may vary somewhat.

The practical point is that if you leave out certain very big companies and certain very small companies, whose figures are issued later on the average of manufacturing, producing, grading, trading companies with their current rate of taxation, how does it compare—will it mean collecting more or less in taxation from these companies? The present tax is going and this is replaced——

The tax load will be similar.

Will it be seriously increased or will it remain more or less as it is or will it be decreased?

It will remain more or less as it is, maybe a small fraction of 1 per cent additional. That is all. Then, on the other hand, there are increased allowances—some adjustments which in certain cases will lead to a smaller amount of tax being paid but the overall load will be similar to what is levied at present.

Is it possible to have information on company tax in the EEC countries? There is an appalling lack of information on this for some reason.

The difficulty is that it is forever changing. The last collection of information tends to be out of date by the time you come to present it.

There is no wealth tax involved.

There is a summary in the report of 1972, Company Taxation in Ireland, that deals with the subject of taxation in Ireland.

Is it possible to get the allowances for smaller companies, the £2,500 allowance that has no corporation profits tax at all? The position in Ireland at the moment on the various taxations and allowances, sample incomes and so forth, is such that we can compare it with what is coming in. In other words, we can do a mental calculation.

There is the White Paper, not the explanatory memorandum, but the original White Paper for the years 1972 and 1974.

Would a smaller company get £2,500 allowance without corporation profits tax, once you have the first £2,500 in income?

That is right. We are increasing the threshold to £5,000 from £2,500.

In regard to sub-section (2), companies who pay this tax, first of all those resident in the State—that is clear enough. Then is it whether a company is resident in the State or not the profits arising are, broadly speaking, included?

Yes. A branch or agency here will pay our corporation tax on such profits arising here. They may, of course, depending on the existence of double taxation agreements, obtain credit in their country in respect of such payments, and vice versa. Irish companies who may earn profits from abroad will get corresponding relief.

If the profits are remitted from abroad to a resident company they are chargeable?

Yes.

Are there exclusions here? A company means any body corporate but does not include health boards, vocational education committees, committees of agriculture or a local authority. I would be more interested in discovering who is in now, who are chargeable companies or companies which are chargeable?

Such a company would be in but in so far as the law gives exemptions in respect of certain charitable activities, those exemptions will continue to apply. In so far as the entity is concerned, it is a taxable entity subject to whatever exemption applies.

What is meant in this context by the words in parenthesis: " not arising to it in a fiduciary or representative capacity "?

This would be trustee companies?

What it means is that it applies to the income of a company unless income which it nominally is receiving, belongs to another person.

It would not be extended to charities in certain cases?

I think it might. What Deputy de Valera is thinking of is something like the diocesan trustee companies but I think they hold them for various terms and purposes. It is a method of providing continuity of trustees.

Is that affected seriously by this?

They might be excluded, in actual fact.

It excludes income which a person receives. You would look to the beneficiary of such income rather than to the person who receives it.

That only applies to the year 1975-76 just to ease out income tax.

In the years afterwards also——

It is only the year.

" The years of assessment after the year 1975-76." The provisions of income tax relating to this shall not apply to companies.

I am concerned with a charitable organisation who, for a variety of reasons, form themselves into a company or a corporation. The Minister indicated that they would be brought within the ambit of the provisions of the Bill. How will they stand in regard, first of all to their non-trading activities, anything of that sort? Secondly, how will they stand in regard to trading income? If the charity, as a corporation, carry out a trade will they come within the Bill and be subject to this tax?

Broadly, their position will not be changed. Various sections throughout the Bill will provide exemptions. For instance, I would refer the Deputy to section 11 (6) which states:

Without prejudice to the generality of subsection (1) any provision of the Income Tax Acts (excluding the provisions of Part XXV of the Income Tax Act, 1967 (Temporary Relief from Taxation), or of any other statute, which confers an exemption from income tax, or which provides for the disregarding of a loss, or which provides for a person to be charged to income tax on any amount (whether expressed to be income or not, and whether an actual amount or not) shall, except as otherwise provided, have the like effect for purposes of corporation tax.

That is the section which captures the exemptions to which all such charities are at present entitled. I have an amendment down to section 10 which ensures that donations for research purposes will themselves escape liability to corporation tax. That preserves the existing position. We are not proposing to amend it. We might be tempted to do so but not here.

Your approach really is that by and large all corporations are in but then you deal with them in an individual capacity later on.

That is the only safe course because we must retain the right to look at corporations to satisfy ourselves that the exemptions which they may claim are justified.

There was a Body Corporate Bill which the Department of Health got into—the corporations which were formed under the aegis of the Department of Health.

The Deputy's question I understand is whether any of these statutory bodies which were set up by the Minister for Health for specific purposes are included.

In regard to section 10 (5) (b) of the Bill, on the question of research, will it cover a field wider than research—charities in general? Is that so?

The Deputy may have a particular company in mind. If it receives donations under existing law to do research and which at present are exempt from income tax and corporation profits tax that exemption will continue.

For instance, the Central Bank would be brought in under that.

The law already provides that the Central Bank is exempt from such taxes for all operations.

The Minister's definition of " company " has been fairly sweeping. Everyone practically is in except the very limited number whom he has excluded.

I genuinely believe, and I am so advised, that the position is not as Deputy Haughey has described it. I will look at that aspect for Report Stage to ensure that such statutory bodies which are obviously not trading corporations would not be intended to be caught. Whatever benefits they have are for the public good and they do not make profit.

The Minister's approach in this seems to be to capture in definition all companies and then to provide exemption or relief in suitable cases, which is understandable. The difficulty in that approach is that there is no definition of whether a company is resident or non-resident. There has been a body of law on this, it is not the first time this question has arisen, but can the Minister say why he did not attempt to make such a definition here?

For the simple reason that residence has always been a matter of interpretation, looking at the intentions of the parties and in relation to corporations looking at the place at which they manage or control their affairs, and it is really impossible to arrive at a statutory definition of control without, perhaps, generating possibilities of avoidance which legislators would not intend.

A large number of the provisions of this Bill will be specific only in relation to resident companies. Am I to take it from that that the Minister will lean heavily on double or mutual taxation agreements with other Governments so as to get a balance where there are international or non-resident companies?

I shall be very anxious to improve the double taxation arrangements. I would be very interested in improving the existing situation between ourselves and the United Kingdom to try to achieve a situation where to our Exchequer there would be a net gain, because their corporation tax has been in operation for the last ten years. The position in regard to our corporation tax is that there is a vacuum which resulted in a net gain to Britain.

My point here is not so much a specific as a general indication of policy approach to the Bill as a whole. In case I did not make my point clear, let me repeat that it seems to me, looking at this Bill with the emphasis on Irish resident company, for instance, in the marginal note on section 2, the specific provisions of the Bill are geared, they are naturally so, to companies resident in Ireland but there will be problems arising where there are multi-national or foreign companies and I wanted to know whether the policy approach is to deal with them through reciprocal taxation arrangements with the jurisdiction in which the company would then be held to be resident?

Section 8 deals specifically with countries of residence. It says:

A company not resident in the State shall not be within the charge to corporation tax unless it carries on a trade in the State through a branch or agency but, if it does so, it shall, subject to any exceptions provided for by this Act, be chargeable to corporation tax on all its chargeable profits wherever arising.

To the extent that they trade here?

Yes—to the extent that they would pay tax here on the profits generated here by the branch or agency here. Whether it receives from Britain, or wherever its home may be, an allowance is really a matter for itself. An Irish company generating taxes abroad would be liable here but would get credit here in respect of a corporation tax which it would pay on profits generated elsewhere.

The corporation tax is 52 per cent in Britain.

Yes, and 50 per cent here——

Section 1 excludes profits which are chargeable to capital gains from corporation tax.

We are dealing with corporation tax. This is essentially a tax on income. Capital gains is treated as being in the nature of income; the wealth tax is a tax on capital.

If we left capital gains in——

We convert capital gains tax in such a way to give a credit of 48 per cent of a capital gain and then take 50 per cent of the residue of 52 per cent so that the tax ends up by being 26 per cent tax on capital gains tax which is the equivalent to the rate 26 per cent chargeble on capital gains. The capital gain made by a corporation is taxed in such a way that it will pay only 26 per cent of it and not 50 per cent. It will pay 50 per cent on its current income and 26 per cent on its capital gains.

It is equivalent, more or less, to the existing liability.

The company will pay their 50 per cent on their gains and they will also be liable for capital gains tax and wealth tax.

They will pay 50 per cent on capital gains—as reduced.

I understand capital gains attract 26 per cent on their profits under this corporation tax and will also be liable for wealth tax.

If it is a non-trading corporation it will be liable for wealth tax but if the company is already paying wealth tax—it would also be liable to corporation tax on profits.

But all corporations are in.

Not the trading corporations.

Are we going to try to take this section by section?

It might be better.

My point is that capital gains seems to be excluded here.

It is sufficient to see that there is not double accounting in so far as capital gains is concerned.

There is not double accounting. We have taken care to ensure that.