Direct Taxes 1950-66

Enquiry & Commission on Income Tax

A Committee of Enquiry into the taxation of industry was established in 1953. It was to examine in particular the extent to which income tax might be  a deterrent to the maintenance modernisation or extension of productive capacity and make recommendations. The Committee reported in 1956.

A Commission on Income Tax was established in 1957 once again under the chairmanship of Cearbhall O’Dalaigh, a Supreme Court judge. The Commission supported income tax as a good form of taxation

Seven reports were produced between 1957 and 1962. The Commission recommended the introduction of PAYE on employment income, as h had been introduced in the United Kingdom. This Revenue have relied extensively on the provision whereby they could require an employer to the pat the shortfall in income tax due by deduction.

It recommended an allowance for industrial buildings of 10% initially and two percent thereafter on reducing balance basis  The recommended higher capital allowances for the shipping industry. It recommended increased annual wear and tear allowances.

Agriculture & Property

All income tax in agriculture was based on the schedule A and B based on rateable valuation. Those valuations had been carried out between 1852 and 1860 , the Griffith Valuation. Profits from farming were exempted from tax until 1969.

The result was that despite a fourfold increase in agricultural production between 1938 and 1954 the contribution from agriculture was relatively less than other sectors, falling from 4% in 1938 to 2% of income tax take in 1954. This was despite agriculture representing by far the most significant industry in the country.

The Commission recommended that the premises in which the person resided normally should be exempt from schedule A occupation where the valuation did not exceed £20. A limited turnover tax at 15% was recommended. Certain commodities were to be excluded.

Person whose valuation was in excess of £100 should be subject to income tax on the actual profits with a credit for local rates payable. When not based on actual profits income tax on ownership and occupation should be taken 6 times rateable valuation

Reliefs

Relief was given for scientific research expenditure in 1946. Relief was granted for life assurance through Irish policies in 1953. Relief for medical insurance premiums was introduced in 1955.

In 1956 profits from export sales above a certain level were relieved from tax. Wear and tear allowances were modified to encourage capital investment.

Balance of Payment Measures

The Finance (Miscellaneous Provisions) Act 1956 was introduced in the midst of balance of payments crisis. A special import levy was placed on a range of less essential imports. The levy was over and above customs duty with rates up 27% 15% and 5%.

Customs-Free Airport Area

The Customs Free Airport Act 1947 provided that goods and passengers in transit through Shannon airport should not be subject to customs examination. Shannon was largely a transit hub. Measures to safeguard public health,  animal and plants and currency controls were preserved.

The standard rules regarding importation and exportation of goods would not apply to good moving by direct traffic between the airport area and outside the States. Revenue was given an enhanced powers within 20 miles radius of the airport. The extent of the customs area was specified but could be varied by Ministerial regulation.

The Customs Free Airport (Amendment) Act 1958 sought to take further more positive steps to promote Shannon airport. It allowed the Minister to grant licences to permit persons to carry manufacturing in the customs free airport area, free of tax.

Exemption was to apply for 25 years from 1958 for trading operations certified  by the Minister. Goods manufactured in the area could be brought outside into the rest of the State paying duties only under the element imported into the State i.e., materials used in the manufacture.

Commission Proposals Implements

PAYE was recommended by the first report of the Commission on Income Tax. It  was introduced in 1960 pursuant to the Finance (No.2) Act 1959. It was to apply to employees and public servants. Earnings were to be subject to tax deduction at source by the employer.

A government White Paper on direct taxation was published on in 1961 in response to the 2nd 3rd and 4th report of the Commission on Income Taxation. The third report had recommended a purchase or sales tax.

The Commission recommended the principle of a single annual assessment of tax Each taxpayer should be sent a single composite statement of liability annually. It would be notified by tax office for the district in which the income was accrued.

The government did not alter the method of taxing the ordinary farmer. They accepted that owner occupiers should be relieved of income tax.

The second White Paper on direct taxation was published in 1963. It gave government proposals in connection with the commissions 5th, 6th and 7th reports. The provided for enforcement provisions including that banks and financial institutions might be required by notice to the deduct monies from monies held on deposit by Irish residents.

It allowed for requirements to deliver accounts and particulars of a business. There was provision for an amnesty whereby if a person provides Revenue with the accounts and information necessary to calculate  income tax underpaid. Penalties would not be charged but the underpaid taxation will be accepted in full settlement.

Collection

The office of the collector general was established by revenue on a pilot basis in 1963/ 64. This replaced the collector of taxes appointed annually responsible for income tax collection. The contract was entered annually with collectors providing for remuneration of staff and expenses.

The office of collector of taxes was abolished in 1965 and centralised under the collector of collector general, with the introduction of early computer equipment. Compensation was paid to  collectors.