This section is to the effect that a company is to be assessed and charged to corporation tax for every accounting period on all profits arising in that period. The section also contains rules for determining when an accounting period begins and ends.

Could the Minister give us an example of what is envisaged under subsection (6)?

Subsection (6) deals with the exceptional case of a dormant company which on or after April 6th 1976, makes a chargeable gain or incurs an allowable loss. In such a case an accounting period is to begin at the time of the gain or loss and the gain or loss is to accrue in that accounting period. A chargeable gain accruing to a company before the 6th April, 1976, will be within the charge to capital gains tax. Allowable capital losses incurred before that date may be carried forward under section 175.

Would they be allowable against capital gains tax?

The losses to be carried forward would be allowable against corporation tax.

Which includes the capital gains tax?

Yes.

The subsection applies only to dormant companies?

Yes, companies that have no income.

How are they identified?

The companies have no income.

Not otherwise within an accounting period? In other words the company has not been submitting accounts.

It has not been operating but it is still the holder of property incurring a loss or gain.

That is how its dormancy would be judged.

Its non-activity.

But if it phoenix-like resurrects itself out of its ashes and makes a sudden profit, an accounting period starts?

Yes.

Subsection (8) says:

Where it appears to the inspector that the beginning or end of any accounting period of a company is uncertain . . .

Is that wording not a bit uncertain? Should there not be some ground? If it appears to the inspector for good and valid reasons——

Again because of the principle the courts will reply that the Revenue Commissioners must act reasonably. It is not necessary to put in the words " for good and sufficient reason ". The kind of situation which we intend to deal with in this sub-section is where a corporation fails to furnish the information to the inspector which would enable the inspector to determine what was the accounting period. If there are no returns at all, clearly the inspector would have a need to make a determination.

That eventuality would be covered if the subsection said " if the company failed to furnish information which would enable the inspector to determine". Here the wording is simply " where it appears to the inspector". It is not that he cannot ascertain it, but that it appears in itself uncertain.

If he gets satisfactory information the situation will be certain. If the supply of information is unsatisfactory I think the committee will accept that it would be uncertain. Deputy Haughey is suggesting that we should limit this power to a situation where satisfactory returns had not been made.

No, I am suggesting some qualifying words rather than the totally subjective " it appears to the inspector", for instance " for good and valid reasons". We are dealing with the beginning or end being uncertain per se not that the inspector should not be able to find out but because of some particular circumstances it is not quite clear either to the inspector or perhaps even to the company when the period should or should not begin or end.

It seems to throw the whole thing into the inspector's mind. He only has to say: " I thought that ". It may have no substance. Does it not look like that?

It is open to that interpretation, but as I say the inspector must act reasonably.

With due respect, that is not the way we should legislate with regard to the taxpayer.

Some thoughts occurred to me on this. A company if incorporated starts on a certain date. Most companies work on a 12-month period. They make returns in relation to annual periods. They have to under statute. The real worry of this committee is what date the inspector will start from. It is left a little bit in the air. Is there any guideline where you can start arguing from?

Under subsection 6 there is nothing certain about when the accounting day will begin or end. It is not in relation to any fixed period. It is related to the arising of a transaction. In subsection (2) (a) when a company is incorporated it has no source of income until it commences to trade. That could be ambiguous.

In fairness to the Minister——

Let the Minister answer himself. There should be some guideline laid down in this passage which would enable the inspector to come to this decision.

Before the Minister starts I just want to highlight one matter. When the Corporations Tax Bill of 1970 came in in England there were many companies changing their accounting period. We must leave that liberty to the company. Equally so, we must leave a certain discretion to the inspector to deal with the situation. I am just going back on the history of what did happen after the passing of the English Act of 1970. Nearly every single company's return was changed. I think you will recollect that Deputy Haughey. It was in all the financial papers. Deputy Colley will recollect that too. I do not think any of the English companies' reports was for the same period as before that. I do not know if this is what the Minister has in mind on this section.

I think we should look at the section as a whole. The section defines the accounting period. Subsection (2) says when it shall begin. Subsection (3) says when it shall end. It then goes on to deal with a number of other matters including carrying on more than one trade and so on. It is as specific as possible. Everything has not been covered by the previous seven sub-sections. Section 8 allows the inspector to make this determination. If he gets further facts after he has made his determination, he may revise it. I accept Deputy Haughey's view that it is undesirable that an inspector should have unlimited discretion, but it is not a discretion he can exercise unless there is uncertainty——

No, it is not where there is uncertainty, but where there appears to an inspector to be uncertainty.

If an inspector is unreasonable in adjudicating that the appearances are uncertain, then there are remedies open to us. Again, Deputy Haughey can say, very properly, the onus should not be thrown on the taxpayer to show that the inspector is unreasonable. But in practice, partly because of this restraint, they have a natural inclination to be reasonable. That inclination is strengthened by the knowledge that his assessment can be challenged if he is not reasonable. We have had some wonderful exhortations from Deputy de Valera—the Committee is not bound by those exhortations any more than the Minister is—that discretion should be left to the Revenue Commissioners. They have discretion in the absence of information which would enable the inspector to make a determination.

I refer to the wording here which says: " where the beginning or end of an accounting period is uncertain" because then it would be a question of fact for someone to determine, but as the section is worded, nobody will ever be able to argue about it because it would simply be a question of whether it was clear to the inspector.

Let us take the wording suggested by Deputy Haughey. How would you establish a situation was uncertain, unless an inspector were to come forward and refer to the absence of information——

He would have to give his reasons for deciding it was uncertain. But under these provisions he does not have to give any reasons, it just " appears " to him. He is sitting watching television one night and he just decides that the beginning of company A's trading period is uncertain, and that is the end of the matter.

It is only in the making of the assessment. It is not a final thing; it is subject to appeal.

No.

He could not run away from the constraints of the earlier subsections.

The earlier sub-sections particularly subsection (6), deal with an uncertain kind of situation. In the dormant company a situation arises where it is suddenly deemed to be trading again. Now we are confronted with the question: when did that begin? When did that trading situation start or end? Nobody seems to have any say in that matter except the inspector and his subjective thought process.

The Corporation Tax Bill sets out clearly when losses or profits are made. If there should be an area of uncertainty there must be some instrument by which a determination is made, even though that determination may be open to challenge.

I am not objecting to a determination being made. I accept that it must be made, particularly in the sort of circumstances that can arise under subsection (6). Somebody must make a determination of an accounting period and the person to make it is an inspector. But what I say is that there should be some limit on the inspector, preferably by some specific wording. The section could say, " where there is uncertainty", then it would be a question of fact.

I do not disagree strongly with much of what Deputy Haughey argues. It comes down to a matter of drafting.

If we took out the words " to the inspector" would that help the situation?

Then the question arises " to whom?" I think you would make greater difficulties. The inspector would have to act on the appearances as presented to him. Before a person would be in a position to query or challenge him, an assessment would have to be made based upon some particular accounting period. But if a company furnishes the information that its accounting period was such and such, the inspector will have to accept that assuming of course that the information supplied is in keeping with information previously supplied. If there was conflict, obviously the matter would have to be decided afresh. Are any Members of the Committee in a position to recall offhand any cases where the uncertainty has not been identified by the Revenue Commissioners or one of their agents first? There may be some, but I cannot think of any of them offhand.

We are not objecting to the determination being made by the Revenue Commissioners; we are only objecting to the grounds or the absence of any grounds on which they should move. If the Minister accepts it is a matter of drafting, I am quite happy about it. Perhaps the Minister can see my difficulty and would consider redrafting it?

Is the Deputy suggesting the words " where, in the light of the foregoing provisions of this section it appears . . ."

No. I would prefer " where it appears for good or valid reasons" or "where it appears for any particular reason "—or something like that. We must be specific.

I do not wish to spoil the reasonable atmosphere of this discussion, but I must inform Deputy Haughey that we have been through this many times with the Minister on many aspects of many Bills and we have not got anywhere. Perhaps Deputy Haughey will be more persuasive.

Deputy Colley is trying to get the Minister not to let him down by giving way to somebody else.

If Deputy Haughey can persuade the Minister, more power to him.

Somebody has to make the assessment. Who makes it? The person charged, in law, is the inspector. Surely a factor in making the assessment is the accounting period.

The Minister has moved a step beyond what I suggested. He is presuming circumstances. I would like a stipulation as to how this uncertainty should be determined to be there. If these special committees are to be the valuable instruments the Government wants, this is precisely the kind of drafting point that would be capable of being accepted by the Minister in Special Committee while he might not accept it from my relentless colleague, Deputy Colley, in full flight of a debate.

In the light of this discussion I shall be able to give it further consideration. I am not saying that at Report Stage I will bring in an amendment which will cover all the points raised nor do I think it necessary to do this. I can understand the hesitation about giving too great a discretion to inspectors. I will look at it again.

Perhaps the Minister could tie in subsections (2) and (3). If there is an element absent from those sections, surely it is the inspector who would have to decide?

Without throwing too much cold water on the discussion, what does the inspector do when there are no returns or no accounts?

What he always does.

The point being made by Deputy Haughey is that where the determination has to be made it is made by the inspector but, having made it, he should be prepared to stand over it on the basis of the facts as known to him, and not merely as it appears to him. As it stands, that is all he has to do.

What Deputy Colley and Deputy Haughey are saying is that if the Minister gives a reason, he can go ahead; that he must give a reason for saying it.

He certainly arrives at his own specific reason. It must not be just a subjective thought process of the inspectors, admirable men though they all are.

I will have a look at it. I will look at Deputy Kavanagh's suggestion. My only fear is that if we do not give the inspector discretion of this kind and he has to have regard to specific facts, and nothing else, some tax consultant is bound to devise a way out. This kind of situation is bound to arise in the absence of accounts.

Then there is no question of there appearing to be uncertainty, there is uncertainty.

Is the Deputy suggesting that he should say that?

I am quite happy if the Bill would say " where it is uncertain" because then that leaves it to somebody to decide if it is a question of fact. Where the Bill says: " Where it appears to the inspector to be uncertain", that leaves it to nobody but the inspector.

He is the person to make the assessment, then there is an appeal and it can be rectified.

What you are appealing against then is whether it appeared to the inspector, rather than whether it was.

It goes further than that. After the word " unless ":

the inspector, on further facts coming to his knowledge, sees fit to revise it, or on appeal against the assessment in respect of some other matter, the company shows the true accounting period.

It is basically making the company come up for air.

I should like to say what would have to occur if the suggested amendment were to be accepted. If we delete the words " appears to the inspector" and if the corporation were dissatisfied with the accounting period fixed by the inspector, or if there was dissatisfaction because the corporation felt the inspector's opinion was not correct, then there would have to be a challenge. All that is provided for in the section here. It makes no difference in practice, whether we leave the words in or out because the right of appeal against the assessment would still arise and, no doubt, would still be exercised.

When a person is appealing in the circumstances of the wording of this subsection, he is appealing against whether it appeared to the inspector that it was uncertain. If those words are deleted, what he is appealing against is whether it was uncertain.

I accept that is a good debating point, but the practice of the courts is to decide whether the Revenue Commissioners are reasonable in exercising a particular discretion. If they were not reasonable in allowing certain things, the courts would overrule them.

I suggest that if the Minister has any doubts or is even prepared to concede that we have a good debating point, in the interest of Special Committee procedures he should accept our amendment. We are only wasting our time here, if, after reasonable argument our amendments are never accepted.

Would the Minister have a look at this, particularly in the light of how it has worked in relation to section 247 of the English Act? I do not have that section here, but I think there is something of the same machinery in their Corporation Tax Act.

If the position is that this is a perfect Bill, beautifully drafted and is incapable of any improvement whatsoever in the process of this Committee, then I, for one, will not waste my time coming here any more. I am prepared to accept that it is beautiful and perfect legislation and leave it at that.

Or if it so appears to the Minister.

I do not accept for one minute that I am defending this Bill because it is perfect and cannot be improved. We have had a reasonable discussion on this subsection, but I will certainly look at it before the Report Stage.

Under section 8, if the inspector had to give a reason or reasons, it might cut out a lot of waste of time in relation to a company furnishing accounts for the assessments an inspector may make. I can foresee cases being strung out, by virtually fighting two cases, one in relation to the period of assessment and then for how much should the assessment be. It would be in ease both of the Revenue Commissioners and the taxpayer if there was some provision to the effect suggested by Deputy Haughey, that a reason be given why the assessment was taken in that period. The Minister, as Minister for Finance, will find that he will get his money a little quicker. That is the real strength of the argument Deputy Haughey suggested. I am only speaking as a lawyer because I have had to deal with matters like this before. I see great merit behind Deputy Haughey's suggestion on a practical basis.

I will bear this in mind.