This section replace in the appropriate form the existing requirements to provide information when distribution of company profits is taking place. The section provides that a statement giving information as to the amount of the distribution the tax credit in respect of it and the period in which it was paid is to accompany every warrant or cheque in payment of distribution made by the relevant company. This is for the purpose of enabling the person receiving the money to furnish an appropriate account.

Is this not in operation at the moment?

It is, but the form of the information will be somewhat different.

There is a thing I am not clear on. A company paying dividends will deduct income tax at source. I am speaking of a private person now. The company paying dividends will deduct income tax at the standard rate and the information is set out here. There is usually a reference to the 20 per cent relief for private persons. What changes are being made here?

It is changed because income tax will no longer be deducted from the dividends. The dividend will be paid to the recipient. The gross profits of the company are subject to the corporation tax charge, say £100 profit means £50 for distribution. We are saying that the distribution must be accompanied by a statement which gives this information. It must set out the period in respect of which the money is paid and the tax credit that will flow to the recipient.

But the recipient must claim for the difference?

Yes.

That much is clear.

The recipient will have imputed to him a certain credit which will be 7/13ths of what is distributed and that is equivalent to the existing standard rate of credit which is given.

Say there is a £100 dividend——

Shall we take £100 profit first? Let me go right back. In calculating the profit of a company under the new arrangement, the profit is before payment of dividend. Therefore the first thing to be ascertained, as the Minister said, is the profit. In the old days profit would be profit after deduction of taxation. There is a complication here. The company in declaring a dividend would normally measure a profit after taxation as being the available fund. So, the first question is, are we to treat the profit on which we are to do all our calculations as profit before or after taxation? It is after taxation in this case. There will be a gross trading profit for the company and then the new tax will be deducted?

That is right.

When the dividend is declared and there is a distribution it is a distribution of profit which has been already taxed. Therefore, the profit distributed to the recipient is taxed, therefore the recipient is entitled to be in the position that that tax is paid. But then in individual cases there would be adjustments because the individual could be taxed on a scale from standard rate up to 80 per cent. In that case, from the point of view of the Revenue Commissioners, an individual might have tax due to be paid or he might be entitled to a rebate. The Minister is saying that a claim must be made for a rebate and the Revenue Commissioners will ensure that a proper return is made and that there will be no defaulters.

Likewise, if a person was not subject to any tax, he would get a rebate.

He would not be liable to tax, therefore he would get a repayment.

What is the difference in the position between now and under the Bill? Is the position not the same?

I will give two illustrations, one old and one new. Take £100 profit. Under the old system corporation profits tax would be charged at 23 per cent and income tax at 27 per cent. That would be 50 per cent. You would distribute the profit less the corporation profits tax and also less the income tax at 27 per cent, so you distribute 50 per cent. That is the old system. Under the new system the same amount would be distributed. You would have corporation tax which includes the two elements of corporation profits tax and income tax, leaving them with your 50 per cent. You would impute to the recipient that he has paid £27 in income tax out of the £100.

I see no difference. It is exactly the same position as far as the dividend recipient is concerned. He can claim back whatever he is entitled to claim.

Is he in quite the same position? What is the position under the section—I cannot lay my hands on it—under which there is a 20 per cent relief to an individual? There is a provision in the Finance Acts for personal relief where a married citizen——

I think the Deputy may be confusing the position in regard to distribution of profits.

No, I am not. At present if a company pay the dividend and there is a deduction, there is a 20 per cent rebate available under the Finance Acts and you are entitled to get a rebate. If you apply to the Revenue Commissioners you will get a certificate. I take it we would be informed if the intention was otherwise. I want to be careful that the wording would not automatically or accidentally exclude it.

It is not intended to exclude it.

We would be told that, I am sure, if it was. There is no danger in the change since that specifically refers to income tax?

We are a long way off page 226 in the Bill. There is provision there amending section 329 of the Income Tax Act, 1967.

As I see it in the existing arrangement, you pay 77 per cent. What is the present arrangement?

You take £100 gross profit. You deduct the corporation profits tax. You take off the income tax, which is at the rate of 27 per cent.

Do you take off the income tax also? Do you take that off before distributing it or do you distribute it first and then the recipient pays it?

No. At the moment you take off the income tax which is charged on the net profit after you have removed the corporation profits tax. That means that the amount for distribution there is actually 50 per cent. The little dockets that go out with the warrent give these details. In future it will be £100 gross, less corporation tax of 50 per cent, which leaves £50 which is the net for distribution.

I notice in paragraph (a):

. . . the amount of the dividend (distinguishing a dividend or any part of it which is paid out of capital profits of the company) or interest paid . . .

What is the situation in relation to profits?

What we are dealing with there is the capital distribution as distinct from a distribution out of income.

Bonus shares.

Capital profits are profits earned by the company on disposal of some capital, and would be caught by capital gains tax.

What is the position in relation to the shareholder who gets part of that in his dividend in the year's profits? Is there any distinction made and how is that dealt with?

In section 90.

Section 90 deals with it. In relation to subsection (1), I take that covers interest on debenture I know there are certain tax avoidance provisions here that that could possibly cover.

There is a separate provision for that.

That is not dealt with under this section. I am talking about payment to a debenture holder.

Payment to a debenture holder is not treated as a distribution. There is an amendment to section 458 of the Income Tax Act, 1967, on page 233, which covers debentures. It is capital distribution which is dealt with under section 90 and not capital acquisitions.

What I was getting at were profits attributable to capital.

I regretfully would ask that we do not proceed any further because Deputy Colley is not here and I am the lone representative of the Opposition here. As we are coming to the substance of the Bill I think we should adjourn now.

There is a natural inclination to facilitate people.