Seanad Éireann - Volume 100 - 09 March, 1983

Payment of Taxes: Motion.

An Cathaoirleach: Before I call on Senator Hillery, I should say for the benefit of new Senators that Standing Orders lay down time limits for motions other than Government motions. In brief, the proposer of the motion has 30 minutes and every other Senator has 15 minutes. The Senator winding up the debate has the same, 15 minutes.

Professor Hillery: I move:

[133] That Seanad Éireann notes with concern the abuse by employers of the duties imposed on them by statute as evidenced, for example, by their failure to pay taxes already collected by them such as PAYE and VAT and the implications of this abuse for the national finances.

I should like to congratulate you, Sir, on your election as Cathaoirleach. This is the first opportunity I have had of doing so. I wish you well and every co-operation in that role. I also welcome the Minister for Finance to the House and wish him well in his new and very onerous position.

In moving this motion I wish to say straight away that the payment of taxes and the maintenance of jobs are among the most important issues of public concern at present. Both relate to the motion and both affect most people's lives. At a time of economic difficulty, as we have at present, the last thing we need is the non-payment of taxes such as PAYE, PRSI and VAT. Millions of pounds are collected by employers but regrettably not paid over on time to the Revenue Commissioners. No matter how one looks at it, we are talking about very large sums of money and this has serious implications for the revenue side of the Government's finances. Given the very high rates of VAT we have at present, let us take an example of a manufacturer of electrical goods with a turnover of £10 million. The VAT element alone in that turnover is £3½ million, a very sizeable sum indeed.

All too often nowadays we have company closures. When a business gets into a tight financial situation, taxes like PAYE and VAT are among the first to go unpaid. This non-payment of taxes can serve as a danger signal that there is trouble in that business, perhaps even a pending insolvency. Vital jobs may be in jeopardy and the business with these tax arrears may owe debts to smaller enterprises. Too often nowadays we see smaller companies going to the wall because their accounts have not been paid by the larger companies they have [134] supplied. This, of course, is compounding the problem of job losses.

In some insolvencies the situation is really bad. Not alone have some employees lost their jobs — and that is bad enough — but they also have, in some cases, lost their pension rights which had been deducted but had not been paid over to the appropriate funds. So there is a problem, which for employees in particular is of the gravest proportions. This raises the question of what to do about it.

In this connection I look forward to the contributions of other Senators and to the Minister's observations. For my own part, the non-payment of these taxes like VAT and PAYE to the Revenue Commissioners should be tackled in a positive way rather than by using the big hammer of penalties alone in all cases. The reality is that there are companies providing valuable employment and adding value and wealth to the national economy. In some of these same companies there are substantial arrears of PAYE and VAT due. If the Revenue Commissioners are under strict instructions to impose penalties for late or non-payment than in many cases the cure could be worse than the actual disease. The consequence could be more company closures and therefore more job losses. Having said that, however, I feel that the Revenue people would be doing a valuable service to companies that do not pay VAT and PAYE on time by insisting on prompt payment. In so doing, they would be placing an onus on these companies to get to grips with their financial situation and to get their working capital requirements in order. In so doing, they would be placing an onus on the offending business to find a loan elsewhere, such as from Fóir Teoranta to meet their working capital requirements.

I would like to make an additional point here in relation to insolvencies. I fail to see why Government taxes are regarded as preferential creditors in a winding up situation. Employees, in particular, have in many cases invested a large part of their working lives in a business. There is a case certainly for examining the priority of preferential treatment [135] for them when a company is becoming insolvent.

It is usually however — and in fairness to companies this should be said — in an attempt to keep a business afloat that PAYE, PRSI and such taxes are not paid on time. But this raises the question of what actually causes business failure in the first instance?

On both sides of the House we know that we are in the grip of a very severe international recession and external factors do, of course, militate against the prosperity of companies. The point I want to make is that there are internal factors which are within the control of particular businesses. Among those I would include efficient production, imaginative marketing and the development of good relationships between management and employees in the work place. I would like to say that I regard the lack of good working relationships between management and employees as one of the main causes of business failure. There is an urgent need for more co-operation between management and employees involving an indentification by both sides with the fortunes of the enterprise and also a recognition by both sides that profit is essential for the success of all. Too often, however, there is mistrust between management and employees in the work place, with each side going down its respective tunnel of self-interest: management mistrust employees and employees mistrust management.

A business, however, is a shared venture and this should mean, but all too often does not mean shared decision-making and shared information. On the question of information, there is an extreme reluctance by managements to sit down, disclose and discuss company information with their employees. It is true that more work needs to be done on the presentation of meaningful information and also of course to prepare employees to treat such information in a confidential fashion. However, employees for their part very often are the local experts in a work place. They very often have a pool of knowledge, a pool of expertise about the workings of an organisation. [136] This is left untapped because management do not ask them for their views. Furthermore, where a business has financial difficulties surely key stakeholders like employees should be among the first to know about it.

I mentioned earlier that the problem of the non-payment or late payment of PAYE and VAT could best be tackled by adopting a positive approach to it rather than by relying solely on harsh penalties. There are, of course, cases of gross abuse which certainly demand severe penalties. Take, for example, a person in business who recognises that his company is going into severe trouble and disposes of his assets in advance of the winding-up. When the creditors come to collect their debts there is little or nothing left.

The more general problem however is that management do not acknowledge financial difficulties early enough. This is a real managerial problem. It was underlined by the Joint Committee on State-Sponsored Bodies, of which I was then a member, who examined the affairs of Fóir Teoranta. In their evidence to the committee Fóir Teoranta representatives said, and I quote, “the fact is we continue to receive requests at very short notice. The reasons for this would seem to be psychological; many businesses experiencing financial difficulties will go to endless trouble to conceal their plight from creditors, bankers and financial advisers in the expectation that things will come right. The result very often is that irreparable damage has taken place before we come aware of the company's problems”.

Clearly there is a compelling case for businesses to adopt preventive measures before things get out of hand. I suggest to the Minister that by not pressing for prompt payment of PAYE and VAT the Revenue are in effect giving a loan towards working capital to businesses. This is inequitable. It is not fair to the firms that pay up these taxes on time and it is particularly unfair to the employees who already have had these taxes deducted at source from their incomes. I would hope that the practice by the Revenue of allowing employers to defer payment of PAYE and VAT would [137] stop. Business needs working capital and some of the companies that do not pay up these debts are actually in need of loans for working capital. If they can make a decent case for such loans, then they should go to Fóir Teoranta and not fund themselves from unpaid taxes.

I would now like to turn briefly to the role of State enterprises and the contribution they can make to the rescue of operations of businesses in financial difficulty. Fóir Teoranta are an obvious one; the IDA have a very good rescue division; AnCO have a role to play, as have CTT and so on. Now by acting in a coordinated fashion they could bring a speedy, concerted rescue package to a business in difficulty. While each of these State agencies has a valuable contribution to make to rescue activity, there is a tendency for them to adhere to the narrow confines of their briefs and not act with enough co-ordination or speed when called upon for help. Meanwhile valuable time is lost while the company is trying to survive and get on the path of profitability.

The main theme in what I have said then is that prevention is a preferable and more desirable way to handle tax arrears than reliance on penalties alone. The law, however, does have a role to play, particularly in relation to insolvent businesses. As the law stands at present, creditors cannot effectively take action against dishonest practices by directors and managers of insolvent businesses. The law on insolvency is in need of review and certainly is in need of reform. One of the more provocative spectacles we see in this respect is that of directors of companies which have become insolvent starting business again, perhaps the next day, under a different name. Our company law as it stands now makes it an offence for any person knowingly to carry on business with intent to defraud. The problem is that this offence cannot be proved. It is impossible to prove it. This is very disturbing, it seems to me, because it undermines confidence in the entire system.

In this connection, the Cork Committee, chaired by Sir Kenneth Cork, has studied the law of insolvency in the UK. [138] It represents the first comprehensive study of insolvency law in the United Kingdom. There is much in those proposals that we could usefully study. The Cork Committee recommended the introduction of the offence of wrongful trading as a situation in which a person incurs debts without a reasonable prospect of being able to meet them. I would like to summarise the main points that I wish to make. When a business gets into financial difficulty taxes like PAYE and VAT are the first to go unpaid. By not facing up to their financial difficulties on time many businesses are putting vital jobs in jeopardy and perhaps doing irreparable damage to companies for the future. If a business needs working capital and can justify a case for a loan for that purpose, then it should seek a loan from Fóir Teoranta and not fund itself from unpaid taxes. The lack of good working relationships between managements and employees is one of the main causes, in my view, of business failure. All too often management mistrusts employees and employees mistrust management.

There is an extreme reluctance by managements to sit down, disclose and discuss company information and company affairs with their employees. It seems to me that if employees were put on the alert about difficulties in a business, they could jointly with management contribute to ideas for improving the business.

On the question of State-sponsored bodies, I have called for a more co-ordinated approach among State agencies that can make a direct contribution to the rescue of companies in trouble. I am not advocating the establishment of another State-sponsored body for the purpose, but rather informal co-ordination by these bodies to tackle in a concerted fashion and promptly companies seeking help. I made the point that the law of insolvency needs to be examined and reformed and that there is a lot of valuable work already done under the Cork Committee in the UK whose law is similar to our own, which could be studied with benefit here without engaging in elaborate exercises along the same lines.

I would like to conclude by warmly [139] congratulating Senator Tras Honan on her election today as Leas-Chathaoirleach. I wish her every success in her position which I know she will discharge with commitment and courtesy.

Mr. Killilea: I second the motion. I reserve the right to speak.

Mr. Kirwan: I share the concern expressed by Senator Hillery which prompted him to place this motion on the Order Paper. While he dealt with the implications of this abuse for the national finances I regret that he did not include the implications of this abuse for the workers directly concerned. I know that in the general body of his observations later he did touch on this subject, not always to my satisfaction, because both of us approach the concept of industrial relations — I do not call it a skill, technique or a profession — from extreme ends of the spectrum. Senator Hillery approaches it from the halls of old ivy and I approach it from the hedgerows. While the State suffers substantially by a failure of companies that go into difficulties to meet their just statutory payments, I always have the feeling that the State is better able to sustain that type of pressure and that type of loss than the unfortunate workers who are the victims of this mismanagement which Senator Brian Hillery so eloquently dealt with.

Not only is there a question of PAYE and VAT, but there is also the problem of PRSI. A classic case in this area recently concerned Carrigaline Potteries where the owners of that enterprise, like the bedouins of old——

An Leas-Chathaoirleach: A particular firm may not be mentioned in the Chamber.

Mr. Kirwan: You will have to bear with me. I am a new boy to this environment.

An Leas-Chathaoirleach: I appreciate that.

Mr. Kirwan: A firm situated in the [140] geographic location of Carrigaline recently went out of business and the owners of that enterprise, like the bedouins of old, disappeared over the sand dunes and to the best of my knowledge have not yet been located. The net effect of that exercise was that workers employed in that enterprise, near the location of Carrigaline, did not and were not entitled to avail of their statutory benefits. One of the sad features of this exercise was that this problem developed as a result of the State ensuring that the implications of this abuse — as Senator Hillery described it — did not cost them any money. To my knowledge the Revenue Commissioners moved in and had a liquidator appointed and the net effect of that was that while the State to some extent guaranteed its fiscal stability, the workers suffered immeasurably and to this day have not received that element of statutory benefit to which they are entitled.

There is an obligation to introduce some sort of mechanism to enable people employed in any enterprise to be certain and confident that statutory deductions from pay are transmitted to the appropriate statutory body. Whether this can be done speedily or in the course of time I do not know. I am aware that while Senator Hillery expresses concern about this problem, it was a problem when his administration were in power and indeed it was a problem when previous administrations were in power and nothing was done about it. I can tell him, and it may be of interest to this august House, that my organisation are taking the necessary steps to ensure that it does not happen again in respect of its membership. We have advised our members to go to their employers at determined periods and demand from these employers substantial evidence to the effect that statutory payments have been made. If they cannot get this type of evidence then that experience which I have gleaned on the hedgerows and not in the halls of old ivy will be brought in as a defensive mechanism and will click merrily into gear for quite some considerable time, with all of the after effects that that type of action calls for.

[141] That is what we propose to do, but I would be less than honest if I did not say that there is an obligation on the appropriate Minister to ensure that hardships such as have been described by Senator Hillery and myself do not occur. If the debt is owing then that debt has to be paid. People who are trapped within the fiscal arrangements of the State through the medium of PAYE and PRSI must pay. Some means will have to be found to ensure that employers who have an obligation to meet statutory payments in respect of their workers are also trapped within the fiscal arrangements of the State. If this motion on the Order Paper does nothing other than focus maximum attention on those in positions of responsibility who have an obligation to see that this difficulty is eliminated and if we have achieved that here today, then I will go home happy.

As a new Member who was not here when she was Cathaoirleach, I would like to add to the many congratulations which have been extended to Senator Tras Honan on her election today as Leas-Chathaoirleach.

Mr. Killilea: I, too, would like to be associated with the compliments and the congratulations to Senator Tras Honan on her appointment as Leas-Chathaoirleach. I also congratulate the previous speaker on his recent election to a very high office in his union.

I would agree with much that was said by the previous speaker. I feel he is correct in saying that the failure by companies to pay moneys owed to the State is literally stealing. It is the lowest form of stealing there is. This money is deductible by law each week from the already overburdened and overtaxed PAYE payer.

The Minister and the Government have a difficult task ahead of them. Senator Kirwan pointed out that there was the case in Cork recently concerning a reputable company. We had in the past far more serious cases than that, and the one that comes to my mind was the first. It happened in County Leitrim and the McCartin group of companies left the State with a burden of approximately £1.3 million in moneys due in PAYE and [142] PRSI. When that company were wound up the Government let that matter slip.

The Minister is in a most precarious position because no matter which company is involved in future in non-payment they will use that as an example of what the previous Coalition Government did when they were in power in that particular instance. To add injury to insult, recently a Member of the Houses of the Oireachtas made a statement in a newspaper that the companies would be right to utilise that money and not pay it to the State. That person is a member of a Government party and I am amazed that he is still a member of that party.

It places an onerous task on the Minister for Finance to try to make an effort to bring in legislation to correct this. We should be really talking about the rules of common etiquette, the rules of normal living, whether a person who collects money on behalf of another person pays the debt. It is as simple as that.

The Minister for Finance has my sympathy. For many other reasons he must be the most popular, or unpopular man throughout the country. The example has been set within his parliamentary party, by a Member supporting the Government, in the public pronouncements made by that member in the national press recently. He is a Fine Gael Member of the European Parliament, no less. It certainly behoves the Leader of the Government, the Taoiseach, to show some leadership in how normal discipline should be applied within his party.

I do not blame many of the smaller companies who find themselves in difficulty after watching that episode. I look forward to the Minister's explanation today, to me and to the nation, of that performance.

We offer him a beautiful opportunity to explain to us precisely how he proposes in the future to eliminate this problem. My belief is that a person who collects money on behalf of another person or body and does not pay it is doing something worse than stealing. We saw the workers in the Carrigaline district in great difficulty when they applied for what they were entitled to. They had actually paid [143] their PAYE tax and PRSI out of every week's wage packet.

Where does the Minister start? If he starts from today the example of the past will be used. The Minister has to go back and clear the air regarding what has passed before he begins to apply new rules for the future. That is of great importance to this House and to the nation. I look forward to the Minister making his comment on that line. It is terrible to think that a private company could walk away with £1.3 million of State funds paid by workers and members of that company. It demands an explanation. It was with that in mind that I put my name to this motion with Senator Hillery. The lapse is in the past tense. An explanation will clarify the matter.

As regards VAT, which is also mentioned in the motion, it has almost come to the stage now when VAT is paid and there is very little room for escaping it if the VAT inspectors call to see you. That system does not seem to be as important as the PRSI and the PAYE aspects because it is done on a monthly basis. When it is not returned you are questioned as to why, and the repayments have to be made. The system is clarified from that point of view although there may be people caught for peculiar circumstances. It is not as open to as much abuse as the other is. That is why I felt it deserved a mention, but probably more from the point of view of explanation. I do not see many loopholes in it. There may be efforts made now and again to dock an issue but it is such an entwined system that you get yourself choked up if you are operating the system illegally. The VAT returns are straightforward. VAT is paid quicker. This is because it involves repayments in most part.

I concur completely with Senator Hillery on what he has said. I do not blame the trade union movement for now drawing up rules and insisting on receipts from those who collect those taxes. These are to be viewed at certain times. It is about time that was done. That will not solve the problem because there may be some companies who are not unionised and who may not have that facility to check.

[144] For that reason the Minister must now, for the protection of those workers who have paid their bills, ensure that that money is paid and that accounts are settled. I look forward to hearing what the Minister has to say on this matter.

Minister for Finance (Mr. Dukes): May I join with your colleagues, first of all, in congratulating you, a Leas-Chathaoirligh, on your election to office this afternoon? I wish you a long career.

I am very pleased that the House has given me the opportunity to reply to this motion today. It is a subject which is causing a great deal of concern and it is also a subject on which there is a certain amount of less than well informed comment. I do not propose to go into individual cases. I do not even propose to follow the euphimistic circumlocutions of Senator Killilea in going into particular cases. That would not be right in relation to the firms concerned. The problem is a very substantial one. We must all be concerned about it not only from the point of view of the efficiency of the collection of our taxes, although that must be a major concern, but also from the point of view of the more general approach within our community to the payment of taxes, which indeed is another problem of wider scope than the matter of this motion. I am bound to say that some of the misunderstandings in relation to this problem have seemed to gain currency rather rapidly in recent weeks. If I might just instance one or two of them which Senator Hillery raised it will illustrate the size of the problem.

Senator Hillery said that it was necessary to stop the practice of allowing businesses to defer payment, to take unsanctioned loans of working capital from the State. I want to make it quite clear that there is no practice of allowing businesses to defer payments of taxes. I will expand on that a little more. There are cases where this happens by arrangement, but there is no practice of allowing firms to defer making payments.

I would like to add, before coming to the body of the motion, a remark or two about another point made by Senator Hillery. Again, it is in a different context, [145] but since he has brought it into this motion we should, perhaps, look at it very briefly. He suggested that certain State agencies are interpreting their particular role too narrowly, that Fóir Teoranta and the IDA interpret their role too narrowly and, perhaps, lose time in coming to the aid of firms. There is a wider discussion there and, indeed, a very important one for our industrial development. To make the point that State agencies are losing time in coming to the assistance of companies is rather beside the main problem. The difficulty is, as the Senator pointed out during the course of his remarks, that a number of companies lose time in approaching the State agencies. It is difficult for any State agency, the IDA or Fóir Teoranta, to spark off to come to the rescue of a firm unless the firm has brought the problem to that agency's attention.

I would like to say very firmly that the practice of deliberately withholding taxes due, in any circumstances, is an abuse which I condemn without any hesitation. We are all aware that in some cases firms hold on to moneys in order to keep the business going for a period. There are cases also where firms have been able to raise insufficient money to pay the net wages of their employees. In those circumstances they have withheld the payment of taxes collected in order to improve the cash flow and to keep the business going at the level which is desired. They do not, in fact, simply withhold tax due to the Revenue, but they thereby create a debt to the Revenue which proves very difficult to recover. I would not approve of either of these practices but we must recognise that these are some of the consequences of the most serious recession that has hit this country for the past 50 years.

There has been a lot of publicity in recent times about a few individual cases where firms have gone out of business leaving due and unpaid large amounts of tax which have accumulated over an extended period. Questions are asked as to how this can happen. As I have said, I do not intend to go into individual cases, but I would like to set the problem in its real perspective, see what is actually happening [146] and suggest what courses of action might be open to us in future to ensure that employers and traders pay their due taxes.

It is a complex issue and it is very easy to assume that all of the problems are uniform and general. It is also unfortunate that a lot of concern about this issue has led to the problem being fairly widely misrepresented in some recent reports. That has led in turn to a tendency to agitate for particular solutions, without first studying what the true nature and extent of the problem is.

There is a real problem in that PAYE and PRSI contributions and value-added tax remain in the hands of traders and employers long after the sums should have been paid to the Revenue. We all know that there are those who exploit limited liability so as to cheat their creditors and the Exchequer, and that they can go on creating further damage to the business they engage in and to the community as a whole. I would make the remark that when times are good and revenue is buoyant the tendency seems to be to approve, without questioning, those who seem to have achieved success in their particular fields. On the other hand, in difficult times, we must be careful not to change our emotional attitudes and swing too far the other way and rush into condemning the entire business world because of the conduct of a few who default in their responsibilities. That is what I have in mind when I say that I want to put the problem into its context.

This year the Revenue Commissioners will collect about £5,000 million in taxes and PRSI contributions. Value-added tax and PAYE are the major segments of the total yield. These are collected and paid over by traders and employers. In the current year we expect value-added tax to yield £1,000 million and PAYE to yield over £1,500 million. A further £990 million will come in for PRSI health contributions and income levies through the PAYE system. The duty to remit these taxes is imposed by statute but the entire basis of our collection system depends on there being a high level of compliance and the minimum tolerable degree of inspection and policing.

[147] No system will work if statutory sanctions and legal proceedings have to be taken in the case of virtually every taxpayer. Compliance must continue to be the accepted norm. It is important that public opinion and attitudes should emphasise this. It can be said that the system worked reasonably well for about ten years in the case of value-added tax and for some 20 years for PAYE. There was always some difficulty about non-compliance. I am bound to make the point now that the difficulties we are discussing did not start today or yesterday. I suppose when tax revenue was buoyant the default was generally not very significant and was relatively manageable. Inflation and higher tax rates all round have dramatically increased the amounts of money coming through the system. Coinciding with the recession and other difficulties there has been a slowing down in compliance and a growth in the sums remaining unpaid.

To illustrate the size of the collection operation, I will just point out a few figures. Each month the Revenue Commissioners process some 50,000 PAYE and PRSI payments from employers. Every two months there are up to 40,000 VAT payments due and a further 20,000 claims for a refund. While there has been great emphasis on the amounts of tax outstanding and criticisms of the collection procedure, these form only a part of the Revenue staff's work. They have other responsibilities and other functions to carry out such as the making of tax assessments, the bringing of cases to appeal, the preparation of the Finance Bill legislation and the preparation of material for replies to parliamentary questions. We are all very conscious of the fact that tax matters are very frequently the subject of parliamentary questions. There is also a great deal of work in relation to customs and excise, capital taxation and other areas of taxation.

In respect of collection work significant progress has been made in recent years in automating the collection arrangements, which are now largely computer based. The corollary, however, is that if [148] an individual employer decides or feels compelled to defer or to reduce his tax payments the likelihood is that he will escape detection for a period. Whether this is short or long depends upon the degree to which he appears to be defaulting.

In order to make it more difficult to escape detection I am looking now at ways and means of improving the automated collection arrangements operated by Revenue so that default will be detected more rapidly and more accurately. The only way to ensure absolutely that delays or defaults do not happen will be increase dramatically the Revenue staff on inspection and collection work and to enforce payment of arrears quickly and ruthlessly. It is doubtful if, in any democracy, such a rigid and ruthless system would be acceptable, since it would have to apply to the good taypayer, the one who pays fairly quickly but after the precise deadline, and the defaulting taxpayer. There would be no merit in stepping up inspection unless this is followed through by effective and inescapable enforcement. The consequence of such increased surveillance and enforcement would be that firms going through a temporary period of difficulty could not expect any period of grace.

I was encouraged to hear Senator Hillery in his opening remarks say that we should proceed not by means of the rigid application of penalties but that we should adopt a more constructive approach to the problem. I will be pointing out to what extent the approach is, and indeed has been for some time, constructive and how we hope to make it a little bit more constructive in the future, while safeguarding the integrity of the collection system.

Various figures have been mentioned about the total amount of tax uncollected. The media have frequently used the figure of £1,200 million. This figure, I would emphasise, is an accounting figure and is taken from the Report of the Comptroller and Auditor General on the Appropriate Accounts for 1981. I ask Members of the House to consider very carefully what I am about to say in order that we may grasp the true extent of the [149] problem. The figure is not an amount of tax which is ripe for collection and being left there uncollected. It is a balance flowing from an accumulation of assessments which are almost entirely estimated assessments. More than £700 million, that is well over half of the total, is already under appeal or inquiry. It is in a collection system being processed, indeed, in a way which in many cases responds to Senator Hillery's call for a constructive approach to the problem. That accounts for over half of this figure of £1,200 million which has gained currency in recent weeks.

This leaves a balance of less than £500 million which appears to be for collection but which ultimately might prove not to be collectable, at least in the short-term. This is because, first of all, in many cases there will be claims for the admission of late appeals; secondly a large amount of tax is already subject to instalment arrangements; and thirdly, in a number of cases the persons assessed are in financial difficulties and are liable to go out of business leaving the tax unpaid. I want to make it clear that I am not playing down the extent of our collection problem, which is serious, but I want to get the figures straight so that we will be talking about the real problem that is there and not a mythical, inflated problem which is the one which seems to have gained popular acceptance by the uncritical and undistinguishing mention of that overall figure.

I also ask Members to accept the figures of outstanding tax or what appears to be outstanding tax covering all the years up to 1981 in the context of a collection figure of more than £1,200 million collected over the last six years. I have been quoted on a few occasions recently as having said that “there is no crock of gold out there”. It is important that we all realise this. If there were such a crock of gold I can assure the House that I would be the first person to want to get my hands on it.

I might illustrate this by reference to what has happened to that £1,200 million figure arising from the Comptroller and Auditor General's report of July 1982. By the end of last year that figure had [150] dropped to £960 million, a reduction of £240 million. Of that £240 million over 90 per cent was discharged as not being properly due and less than 10 per cent was brought into the Exchequer. This proves that there is no crock of gold out there. It illustrates also one particular aspect of the figure outstanding, which is the fact that a great deal of it is accounted for by estimated assessments.

The problem is that, for a variety of reasons, the collection of this money, or indeed the portion of it which will ultimately prove to be due or collectible, is a long drawn out process. A large part of it will be the subject of claims for late appeals, as is allowed for under our existing legislation. Unfortunately, there is no time limit on this, and in some cases the firm or individual owing tax will not have the money and will be unable to pay. Others who are going through a difficult period will have been given an instalment arrangement and collection will be spread over a couple of years. I am sure that Members will agree that it is reasonable to allow such arrangements in cases like this.

Even in those cases where enforcement action is initiated there are problems. There is a backlog of work in enforcement which seriously delays collection but I must say that it is not simply a question of staff. Increasing staff numbers in the Office of the Revenue Commissioners will not of itself bring about a large decrease in these arrear figures. The situation is more complex than that and calls for a different approach. We must look not only at the fundamental rules governing the collection of tax, but also at the law in relation to appeals and other factors. We must consider the basic community attitudes to tax generally, to evasion of tax, the avoidance of tax and to unreasonable delays in the payment of tax. As long as these practices are perceived by the community at large as being somewhat less than a crime against the community it will be difficult to make progress in this area.

As I said a few minutes ago, efficiency in tax collection depends to a very large degree on compliance on the part of taxpayers. I would add also that in looking [151] at the reasons for delays in tax collections, we should have some regard to the reasons why the law is as it is with such defects as we may believe it to have at the moment. Essentially, there are concerns in the present state of law put there by our legislators to ensure that taxpayers who believe that they are being over-assessed, too rapidly assessed or wrongly assessed have a means of appealing against that. The fact that the appeal procedure may be abused is not in itself an argument against having an appeal procedure in the first place. That is an aspect of the present discussion which does not get enough publicity but which is very important in the case of individuals or firms — we all know them — who believe quite sincerely that the assessments made on them for tax do not properly reflect the liability which they believe they have under existing legislation. There must be in our system a means under which such firms or individuals can have redress or can have a discussion and can establish what their true liability is both to their satisfaction and to the Revenue Commissioners' satisfaction without the scales having been loaded against them from the very beginning.

I have been talking about the collection of tax generally. The subject matter of this particular motion is the retention of taxes due by employers. This is part of the overall collection problem. There has been a considerable amount of criticism of the behaviour of employers in withholding this tax and the Revenue Commissioners have been criticised for permitting businesses to hold on to Revenue moneys, thereby financing themselves out of moneys properly due to the Exchequer. The point has also been made in some quarters that it would be in everybody's interests if the Commissioners moved more quickly and brought these businesses to the brink so as to force them to seek professional help at an earlier stage.

The practice of withholding moneys due to the State is unacceptable. In a period of recession it has become more widespread as firms in difficulties have [152] sought every possible means to ensure a cash flow to maintain their business. In some instances, at least, this action simply postpones the day of reckoning and may well have the ill-effect of delaying an approach for a proper rescue operation. This aspect has been exaggerated, and the claim that such rigorous and ruthless action by the Revenue would result in new life being infused into the company is a claim which has not been put to the test. Secondly, the impression has been given both in public debate in recent weeks and in this House this afternoon that workers lose their social welfare entitlements if employers fail to make proper returns to Revenue. This is just not true. The impression has been created also that virtually every other firm in the country that has run into difficulties in recent years have resorted to the practice of withholding tax. Again, this is not true, although that misconception may arise from the widespread publicity given to a few situations where it has emerged that very large amounts were owing to the Exchequer.

A few figures will help to put the situation into its proper perspective. An examination was carried out of the firms which went into liquidation or receivership in the period November 1981 to April 1982. These numbered 286, of which 276 were liquidations and 10 were receiverships. Of the 286 cases, 103 were not registered for PAYE-PRSI and VAT, being mainly investment companies. Of the remaining 193, 167 were registered for PAYE of which 41 had no outstanding liability at the date of liquidation and 154 were registered for VAT of which 85 had no liability.

Of the 126 PAYE cases with liability, 14 involving £835,000 were under individual control at the date of liquidation and 112 involving £860,000 were subject to automatic processing. Individual control refers to instalment arrangements or negotiations under way with the Revenue Commissioners or individual referral for enforcement. Of the 69 VAT cases which had liability, the corresponding figures were five under individual control involving £595,000 and 64 subject to automatic processing involving £1,100,000.

[153] These figures will show that the general situation is by no means as bad as some presentations would have us believe. This should not, however, diminish our determination to defeat this problem.

It has been said that enforcement would be more effective if the preferential status accorded to taxes due to the Revenue Commissioners were repealed, the suggestion being that Revenue's preferential status leads to a certain laxity rather than a determination to go out and pursue the collection of outstanding tax. This allegation is totally untrue. Indeed, those who have had occasion to come into direct contact with the Revenue about payment of their taxes are unlikely to subscribe to this view. The allegation is based in the first place on the false assumption that all tax is protected by preferential status. That is not so, and where a company are forced into liquidation, Revenue have to take their place with the unsecured creditors in respect of their non-preferential tax. In these cases, the Revenue are also at a loss. It is therefore wrong to suggest that the Revenue Commissioners are neglectful in carrying out their statutory responsibilities, or that they sit back, resting on a preferential status which is only partial. I can state categorically that preferential status is not a factor in determining the Revenue Commissioners' approach to the collection of tax.

The calls from some commentators for drastic action by the Revenue Commissioners remind me of the man in the Gospel who caught his fellow servant by the throat and cried “Pay what thou owest”. The reply was “Give me time and I will pay thee all”. It is true that Revenue have entered into arrangements in particular cases whereby outstanding tax is to be paid in instalments on an agreed basis. Where this is done, however, there is insistence on current taxes being paid as they fall due. Such arrangements have been made frequently, and some have received considerable publicity. The arrangements have been entered into where the money was just not there, the alternative being imminent closure of the firm in question or redundancies. If the money was not available at that time but [154] there were plans to make the company viable, it is difficult to say that the Revenue Commissioners should have rejected this approach and closed down the company immediately. Instalment arrangements are not attractive to the Revenue Commissioners and they do not like entering into them, but there are times when it may be the only rational approach in the circumstances where a firm are unable to pay, but have a possibility of being brought back to viability. We must leave it to the Revenue Commissioners to decide in what cases and in what circumstances they will give time to pay the debt.

This type of arrangement is probably one of those which Senator Hillery had in mind when he was calling for a more constructive approach to the problem of collecting arrears and it is one which our legislators and our administrators in their wisdom have retained within the system. Some commentators have suggested that Revenue should operate an early-warning mechanism whereby the rescue agencies would be alerted in good time to a company running into difficulties. This suggestion overlooks the obligations as to confidentiality which are imposed on the Revenue, again for very good reasons with which we would all agree. Secondly, it is not the function of the Revenue to counsel businesses as to when they should seek help from rescue agencies or to call in those agencies. The Revenue function is to collect tax, not to spark off the rescue process referred to earlier by Senator Hillery.

The publicity which this particular issue has received is one which as a community we should try to turn to good advantage. It is an abuse for employers to withhold taxes, and this practice must cease. The Revenue Commissioners will be far from lenient with firms who resort to this practice. I hope that my contribution to this discussion will put this problem into proper perspective and allay fears that it has reached almost epidemic proportions. This is by no means the case. The fact is that the vast majority of employers in this country remit their taxes, if not immediately, fairly shortly afterwards, so we are not [155] dealing with a widespread problem, the result of which is to deprive workers of their rights in the event of a firm closing down.

It is disappointing that the hard core of outstanding taxes — which is a small proportion of the figures quoted — is not amenable to immediate collection. I should say, however, that out of these arrears, the Revenue have been collecting about £20 million a year, a figure which we hope to bring this year to £30 million. With a streamlining of procedures, it is intended to make a much bigger impact in coming years. The growth in arrears must be arrested. While I have listed various barriers to improved collection, this does not mean that we are accepting the status quo. I expect to see further improvements at an early date. A more selective approach to enforcement has been introduced and this is already showing results. I announced in the budget a tightening of the appeals system designed to speed up this long drawn out process of finalising liability. This will help, but more remains to be done and I will be looking at further measures which might be brought in. If the abuse of withholding tax is not discontinued, we may have to look at the possibility of attaching to company directors liability for PAYE-PRSI and VAT not paid over by their companies and which those directors know have not been paid. I appreciate that such a step brings into question the concept of limited liability and could raise some legal problems, but these may have to be faced if we can find no other satisfactory solution to a problem which, it is clear, the general body of taxpayers are not prepared to tolerate. In that connection — Senator Hillary mentioned that same approach — we should be conscious of the fact that it would be a fairly substantial change in our approach to limited liability and one into which we should enter with a very clear knowledge of what we are doing and of what the consequences would be. If the practice of withholding these taxes continues we may have to consider going that far. I wish to make that point very clear so that those people who are involved in that [156] abuse will be very conscious of the risks they are running for their own businesses in, perhaps, bringing us to the point when we would have to make a fundamental change in a part of our business which has a very important function to play even though its origins may have been some time in the past. Such a change may be the price of continued abuse of the system by a small number of individuals.

I should like to add one or two remarks about the basic approach to this problem. I mentioned the fact that the efficiency of the collection of any tax depends on compliance by the taxpayer. It would be almost impossible to operate a system which required the application of statutory powers and the exercise of inspection in relation to each individual taxpayer. While statutory provision and the administration of the law can obviously do a great deal, and I hope will do more, to ensure compliance, the fact remains that we must rely on the taxpayer's sense of involvement in and responsibility with the community to make the system work with proper efficiency. There is no substitute for a belief by taxpayers that they should pay their taxes as part of their duty to the community. It may sound platitudinous to say this, but it is a problem which is probably more acute in times of depression. But in times of depression and economic difficulty it is even more important for the State to be in a position to be sure that it is going to collect the revenues which are due to it on behalf of the community. Until we get to the point where we have a wider and keener — I do not say more enthusiastic — approach by taxpayers to paying their taxes, in spite of whatever measures we may take we will have a problem in relation to the collection of taxes. We, as legislators, have a duty not only to look at the legislative requirements of this problem but to look also at our own role in forming the attitude of the public in general and of taxpayers in particular to the payment and collection of taxes.

I conclude by saying that I have been trying, during the course of these remarks, to put the problem into its [157] proper perspective, and I hope that when we have seen what the real extent of the problem is, we will then be able to measure more accurately the size of the response which we must make to it. We have announced a number of measures in this year's financial statement aimed at dealing with this problem, and I would hope that this, plus the fact that other changes of a fundamental nature may be required if compliance is not improved, would bring those involved in this abuse to a realisation of the size and seriousness of the abuse and that we would then be able, both from the point of view of public attitudes and from the point of view of our legislative and administrative equipment, to reduce this problem to a fraction of what it is today.

Mr. Kirwan: In the course of his speech the Minister made the point that the impression has been given, with regard to workers with social welfare entitlements, that the employers fail to make the proper returns to revenue, and that this is not true.

An Cathaoirleach: As the Senator has spoken already, he should now resume his seat.

Mr. O'Leary: We are indebted to those Members who have put this motion before the House for consideration. As a number of Senators have remarked, and has been confirmed by the Minister, this problem has reached a degree of public awareness in the last few months which makes its discussion at this stage relevant to what is being talked about by the ordinary people of Ireland. It enables us to afford the Minister an opportunity of putting on record the point of view of both himself and the Revenue Commissioners in this regard. It was with considerable anticipation that I looked forward to the contribution of Senator Hillery. The motion was quite clearly to condemn the employers who failed in the duties which are outlined in that motion. I looked forward to the manner in which he proposed to tackle the implications of giving practical application to that abuse. It is fair to say that we are all very strong on abusing the matter in general but we [158] might not stand up to such careful scrutiny when being examined in the particular. In that regard I was disappointed with the way in which Senator Hillery proposed to tackle the problem.

This situation arises because companies are starved of finance. A company can be starved of finance for many reasons. It may be that through no fault of the workers, the company are running into hard times because of that being the way the market is going for the particular product in which they deal. They can alternatively be in that situation because of an abuse of their position by the participators in the company or by the workers. Obviously the emotional attitude we would have to the people who find themselves in this position would vary significantly depending on how the company arrive at the position in which they find themselves. As practising politicians, when faced with the closure of an industry in one's own constituency or in one's one area, the practical considerations which force their attention on one might from time to time bring about an attitude of mind which is totally in contradiction with the spirit of the motion which is before the House. There is no one problem but a large number of problems, and because there is not one problem there is not one solution. We might condemn a company who find themselves short of cash but whose participators and operators are living a lifestyle which is not compatible with the level of the earnings of the company. In that situation a decision by the Revenue Commissioners to apply the full rigours of the law would be politically acceptable and welcome. The inevitable consequences of that situation would have to be accepted as right and proper.

In a situation where a company, through no fault of their own, find themselves temporarily short of money and if the employer at the end of the week finds he can do one of two things — pay next week's wages or return the VAT and PAYE — his position is a lot more difficult. Here is the nub of the problem: have we as legislators the political will to put into effect the sentiments which are contained in this motion? I do not see any [159] evidence that we have that political will. Our whole concentration on this aspect of our finances is in itself a fudging of the issue. It is a refusal by elected representatives to take seriously the grave problems which exist in our public finances. Instead of being willing to tackle the real problems by real sacrifices, we are willing to divert the attention to this side issue and side show, and for that real reason I welcome the Minister's speech which put into perspective the kind of figures that we have been hearing of in respect of tax arrears.

I know from personal experience in a previous occupation that because the Revenue Commissioners consider that tax is now due that is very different from the tax actually being due and payable at some time in the future. The Minister quite rightly points out that a very large proportion of the £1,200 million would be under appeal. Some of it would be due and would be paid in due course, and if it was improperly appealed, if the rules are being properly applied, penalty interest would be applied by the Revenue Commissioners in respect of that improper appeal. In respect of the portion that is under appeal it is either legitimately under appeal and should not be counted as part of the £1,200 million at all or it is not legitimately under appeal, in which case not only would it fall due to be paid itself but a penalty rate of interest will fall to be paid by reason of the fact that it was improperly appealed. In those circumstances, in considering what the outstanding taxes are, we must eliminate from consideration virtually all that amount of money which is under appeal. The penalty rates of interest are very severe. Not only are they quite high by ordinary standards — I am a little out of touch but I suspect about 1½ per cent per month of 18 per cent per annum — but, significantly, they are not allowed as a deduction for tax purposes in the following year, so that the 18 per cent which you are charged for delaying the payment of tax is the equivalent of twice that amount in ordinary interest terms. The penalties for wrongly appealing tax are quite severe.

[160] In addition to that, the balance of £500 million can arrive in a variety of ways. No doubt some of it is arrears, in the real sense of that word, and all those arrears should and must be paid, but to think that the collection of this tax is going to solve the problems of the country is oversimplifying the extent of our financial problems and diverting attention from the very real problems we have to face in the years ahead. That is the danger of putting all our emphasis on the question of tax arrears.

I would like the Minister, if he has not the opportunity to clarify the position here today, to investigate the question of whether the employees of companies who default on their payments should suffer a diminution of their social welfare entitlements. This is not an area in which I am expert but I do know that they should not suffer in this way because it is not their responsibility to collect the tax. It is not their responsibility to see that the tax has been paid. It is important that the Minister should clarify this because the feeling is abroad in many different kinds of activities that the workers who work in a firm like the firm in County Cork that was not mentioned here today are placed at a disadvantage. I do not know whether that is right or wrong, and if the Minister cannot answer it here today he should fully investigate the matter and issue a public statement to ease the disquiet that I know is growing over items such as that. If the workers of the country know that they need not fear the consequences of a default by their employer their concern can be the same as everyone else concerned, the concern that a defaulting employer damages the general interest of the country rather than the specific interest of the employees.

When times are tough and a private company are going through a difficult period how often have we heard the argument that it is much cheaper to keep people at work than to pay them the dole? Very convincing arguments are put forward at the time of the imminent closure of any industry. The consequence of reliance on an argument like that is that it provides a justification for an employer [161] who says: “At least by keeping the firm open for a while longer I am keeping 20, 30 or 40 men off the dole” and the general view is that that is better than putting them on the dole.

One of the reasons for the Revenue Commissioners being selective in the way they tighten up but nevertheless may be, considerate in certain cases, is that very often the lifestyle of an employer is not consistent with the relative lack of prosperity in his firm. In those circumstances, it is reasonable for the Revenue Commissioners to apply the full rigours of the law.

In my experience of dealing with the Revenue Commissioners, which is considerable enough, I must say that by and large they are both humanitarian and sensible in their approach. I do not deal with them now but I have never had the experience of putting a request to them that was based on reasonable logic and having it refused. They have always refused requests which I or other people might have made but which were not deserving of support and consideration. The way in which the Revenue Commissioners discharge their responsibility in this regard is sensible. They go a long way towards striking the balance that all sides agree is important in ensuring that precipitate action on the one hand does not close firms too readily and, on the other hand, that delay does not cause untold losses for the Revenue Commissioners.

I was very interested in what Senator Hillery said with regard to the law of bankruptcy, and I would add a change in law of receivership, because company law is based on the law of bankruptcy, and it is all tied up in the same Gordian knot. The Minister's comments with regard to preferential treatment are obviously valid, but they do not fully deal with the problem and it is something which we should carefully consider. As far as the Fine Gael side of the House are concerned, we support this motion. We think the abuse by employers should be noted with concern, and for that reason we will be supporting the motion when it comes to be put.

[162] Mr. Lynch: This is the first occasion I have had the honour to speak in this House. May I congratulate you on your election as Cathaoirleach and wish you well. I would like to place my comments regarding this motion on record. I agree entirely with the motion and with the spirit of the motion. We are concerned about the deliberate or convenient abuse by employers with regard to their statutory obligations of payments of PAYE, VAT, employment levy, income tax, impositions by local authorities and as rates, water rates and other changes that would be coming on stream. It is very unfair to the ordinary worker, the taxpayer and the ordinary businessman who pays his fair share of tax — and sometimes his unfair share of tax as seen by him — who knows in his heart and soul that there are people in his locality who deliberately evade the payment of their tax, be it PAYE, VAT or otherwise.

I would like to place on record my views of the problems that exist in certain areas, especially business areas. I would like this House to take special note of the plight of the family business that had existed over many years. Take the family grocer, the family publican, the hardware shop, the electrical shop, or the small industrialist who saved his money and had the willpower and the guts to develop a small industry and give employment to local people. What happened? Businesses could be put in two categories. First there is the old type businessman, the family grocer, whose only knowledge of bookkeeping was to enter in his book a few groceries a local person had not the money to pay for. Then there is the firm that is properly administered. They have a staff, a secretarial assistant and proper records are kept. The family businessman has not moved with the times. To him bookkeeping is abhorrent, something he knows little about. To keep up with the times the small family grocer had to improve his premises, probably by borrowing money from banks and other institutions, to compete with the bigger type supermarkets who import most of the produce they sell.

The garage proprietor has been hit in [163] many ways. His business has fallen flat. The garage business at the present time is in what I call the black economy, where people drawing unemployment assistance, work in the back streets. The family publican is almost non-existent due to cross-Border trade — the black economy again, smuggled goods, spirits, etc. We must remember that approximately 65 per cent of the publican's turnover is revenue for the Government. Since the beginning of the year, the turnover of most publicans has dropped by almost £1,000 per week. To compete with modern trends, these people improved their premises through loans from banks and other institutions in the late seventies and early eighties, and at interest rates of approximately 20-25 per cent.

When we look at this motion we would be wrong to condemn everybody who does not pay tax or who does not keep up to date with his tax payments as a person who deliberately sets out to evade the tax for which he is liable. These people are caught up in a net where their business is failing, their capacity to improve their businesses is curtailed or has come to a halt, and because of falling returns and pressures to meet their repayments in order to hold on to the business, they gradually fall back in their duty to the State. I agree wholeheartedly that our first duty is to the State, to pay our taxes, but these people, through no fault of their own, are caught up in this net. We should have a human approach to the smaller businessman. I am not referring to the big, get-rich merchant who sets up a business, owes hundreds of thousands of pounds — and it has happened in this city — to the Revenue Commissioners, folds up and then opens down the road a few months later. We should get after these people.

I know from experience that small business people got tax assessments for £500 or £1,000 and they were very worried about them because they did not know how to deal with the problem. They did not know how to handle a bookeeping system and they were saddled with this problem. It was only an assessment, but to them it was something more than that. [164] They see their businesses closing down because they do not have the money to pay these tax demands. I am sorry to say that the recent Finance Bill struck a death knell for the small businessman. The problem looks bad today but, in my opinion, it will be much worse in the years ahead.

Mr. Lanigan: There are only a few points I want to make on this motion. Everybody in this House will agree that we all must note with concern the abuse by employers of the duties imposed on them by statute. That is only right. I would prefer if the motion were broadened to suggest that employees also should be concerned with what happens within their own firms. To a large degree, there has been abuse by trade unions in not giving their members the knowledge of business procedure which would allow them to go to their employer and find out in what state their payments of PAYE-PRSI are at any particular time.

One of the bureaucratic decisions made in this country some years ago was the abolition of the stamp. We went on to the PRSI system where the employer sent off his returns at the end of a particular period. With the stamp system the employee could find out how many stamps were on his card at any time, and if there were no stamps on his card he knew exactly where he stood. Once the change over was made from the stamps to the present system the trade unions did not follow through with their responsibilities to their members.

Somebody should speak for the employers, because at present it seems to be a sin to be an employer. Every day one reads in the papers of the abuses by employers of their duties to the state. Employers have a duty to more than the State; they have a duty to the people who work with them, for them and beside them, and they have also a duty to themselves. The State is not set up, as has been suggested, on Orwell's 1984 system, and I sincerely hope never will reach that stage, but we are heading there very fast.

The first sign that a business is in trouble is when they do not send off their PRSI or their VAT payments on time. [165] Unfortunately, people in small businesses are spending so much time trying to survive that they do not have time to sit down to do the proper things and they are late making their PAYE and their VAT returns. They are trying to survive not alone for themsleves but for the people working with them. It has been suggested recently that employers who do not send off their PAYE-PRSI-VAT returns on time should be jailed. I would like to know how much it is going to cost to keep those people in jail, and how many people would be out of work as a result.

Senator Lynch mentioned the problems of small businesses trying to stay open. The smaller business people are being hit hardest at present because they are easily got at by the Revenue Commissioners. The local tax man can get at the small businessmen very easily, but he is not getting at the multinationals, he is not getting at the bigger companies; he is not getting at the companies that have owed tax, PRSI-PAYE, for years. Each week one reads of companies who have come here — whose jobs and premises are grant-aided, everything about them is grant-aided — and when they go out of business it is found that they have never paid PRSI. What they did was to send PAYE and PRSI returns, without sending the cheques. The computer grinds this information into the system and the computer knows they owe that amount of money, but with the small businessman it is a different story.

The small businessmen have been the backbone of this country. They are forced by legislation or otherwise to look at the implications of making late PRSI or VAT returns — that they will go to jail — and that this country is going to sink into the mire and nobody will be prepared to employ people. We have imposed a tax collection system on business people which takes as much time as it takes to run the business. Take a small business down the country. It takes at least three days a month to organise the VAT returns, and probably another day to organise the PRSI. There is somebody employed as a tax collector, and if the businessman is late making his returns he [166] is liable to daily fines, and interest rates which are quite high.

Mention has been made of the large amount of PRSI money owed to the Government. One would imagine it was all owed by the employees, but when one looks at the actual situation 11.61 per cent comes from the employer and only 7.5 per cent from the employee, which is a very large sum to take from any employee's gross wage. In too many cases, because of high interest rates, the 11.61 per cent is notional, and the money is not there to be paid.

We should note, as the motion states, that there is concern about the abuses but I do not think the extreme measures suggested by various people for dealing with employers should be put on the Statute Book. Next month there is going to be an extra 1 per cent levy on employment. That is going to create more problems for employers and employees. As was said by Senator Lynch, too much of the economy is being driven out from the tax paying economy into the black economy. I am in the motor trade and I know what is happening there. Daily I see people being let go but they turn up working in back street garages doing jobs for everybody.

Next month under the Social Welfare Bill there will be a reduction in social welfare short-term benefits from six days to five days. This means garages will let many more people go, because at present they are working three-day weeks. This applies to other industries also. At present the employers are getting the benefit of these workers for three days and the employees are being subsidised by the State for three days, but what is going to happen as a result of the Social Welfare Bill? These people will not easily allow themselves to be put on short time. They will be looking for redundancy. What will happen then? Many firms will not be able to pay redundancy. There will be a spate of smaller firms going into liquidation, because they will not be able to pay the inflated redundancy rates that are being looked for. The employer will get only 60 per cent of the statutory redundancy figure. Unfortunately — and it happened recently in Arklow — people are not [167] getting the statutory redundancy payments; they are getting three to four times more. That is fair enough if the firm can afford to pay it.

I am afraid the reduction from six days to five days for social welfare benefit is going to push more people out of work. That is not what I want. If we could get back to a situation where the employee, as much as the employer, would take responsibility for the payment of the PRSI there would be less abuse. If the trade unions took proper steps to ensure that their members, or their shop stewards, went to their employers at the end of each payment period, there would be a lot less abuse.

This motion asks that the Seanad note with concern the abuse by employers, but I would prefer to see it widened to take note of the failure of employees to look after their own interests and of the trade unions to look after the interests of their members.

Professor Hillery: I will be quite brief. I would like to thank the Minister for giving his time this afternoon to speak on this motion and for the lucid and informative presentation he made on this subject. He did emphasise that compliance by taxpayers is essential and I find we are at one on the approach to tackling the problems of non-payment of PAYE, VAT and PRSI. He rightly made the point, in exhortation or otherwise, that there is no substitute for people exercising their duty to the community. The payment of these taxes, of course, falls clearly into that category. He did underline, however, that if a point is reached that lack of compliance becomes a more serious problem, then fundamental legal changes may be necessary.

The Minister, in his statement, referred to the role of Revenue as being that of collectors of taxes only. In the course of my opening contribution I did say that the non-payment of PAYE and VAT may serve as the first real signal that a company are in financial difficulty. It would not be drawing too much on the ingenuity of the Revenue people to discuss with an employer who is unable to [168] pay his taxes promptly, the possibility of seeking finance elsewhere in order to pay his tax arrears. It was in that context that I mentioned Fóir Teoranta as an appropriate agency for a working capital loan.

The Minister did not specifically take up the point about the reform of insolvency law. I am glad Senator O'Leary joined me in that connection in encouraging the Minister to explore the possibilities of examining and reforming the law in this respect. It is certainly overdue. In conclusion, I would like to say that Senators have made very valuable contributions and have given many insights drawn from their own practical experience. While I have the opportunity, may I congratulate Deputy Nealon, on his appointment as Minister of State, who is now standing in for the Minister for Finance?

Question put and agreed to.

Professor Dooge: You will recall that when the previous debate was adjourned it was believed that we would be taking this motion from 3.30 p.m. to 6.30 p.m. The House has been less loquacious than expected. I have sent for the Minister to resume the debate on the Air Companies Bill, but I am not sure how soon he will be available. This is really a matter for the House. Would the House think it appropriate that we adjourn for an hour, take a light meal and resume at 6.30 p.m.? The Minister will certainly be here then.

Business suspended at 5.25 p.m. and resumed at 6.30 p.m.