Committee Reports > List of Committees > Dáil > 1940 > Committee of Public Accounts > Interim and Final Report - Appropriation Accounts 1939 - 1940

MIONTUAIRISC NA FINNEACHTA

(Minutes of Evidence)

Déardaoin, 13adh Meitheamh, 1940.

Thursday, 13th June, 1940.

The Committee sat at 11 a.m.

DEPUTY DILLON in the Chair.

Seoirse Mag Craith (Ard-Reachtaire Cunntas agus Ciste), Mr. T. S. C. Dagg, and Mr. G. P. S. Hogan (Roinn Airgeadais) called and examined.

VOTE 23—VALUATION AND BOUNDARY SURVEY.

Mr. Herlihy called.

No questions.

VOTE 24—ORDNANCE SURVEY.

Mr. Herlihy called.

No questions.

VOTE 6—OFFICE OF THE REVENUE COMMISSIONERS.

Mr. W. D. Carey called and examined.

Chairman.—I suppose we may be permitted, Mr. Carey, on this occasion, to congratulate the nation and yourself on your new appointment.

Mr. Carey.—Thank you very much.

Chairman.—There is a note here by the Comptroller and Auditor-General, which reads as follows:—

Revenue Account.

“5. A test examination of the Revenue Account has been carried out with satisfactory results.”

1137. Chairman.—The first paragraph of note 6 is as follows:—

Extra Statutory Refunds of Excise Duties.

“6. Quantities of duty-paid home-grown tobacco of the 1934 crop which had been allocated to manufacturers under the Tobacco Act, 1934, were found to be unfit for manufacture and were destroyed with the consent of the Minister for Industry and Commerce. There is no statutory authority for the refund of Excise Duties in these circumstances and extra-statutory authority for repayment was granted by the Department of Finance in 1936. The total amount repaid under that authority was £21,734 6s. 7d., of which £684 19s. 7d. was repaid in the year ended 31st March, 1939.”

Can you tell us, Mr. Carey, the circumstances under which this refund was made and what became of the tobacco?—The tobacco leaf referred to was destroyed under official supervision and at the expense of the manufacturers to whom it had been allocated. If the real condition of the tobacco had been discovered before it was cleared from warehouse the leaf would have been destroyed before duty was paid and no question of refund would have arisen. The manufacturers paid duty because they apparently assumed that the leaf allocated to them by the Department of Industry and Commerce was fit for use in manufacture. They therefore had an equitable claim to repayment of duty when the leaf was found to be unfit for use. Sanction of the Department of Finance was obtained before the repayment was made to them, and there was no loss of revenue involved because the destroyed leaf was replaced by imported leaf on which Customs Duty was paid. The thing arose at a time when the tobacco-growing scheme was in its experimental stages, and as our growers, curers and rehandlers of tobacco have now more experience it is not expected that any home-grown leaf will in future be unfit for use, and it is therefore unlikely that similar payments will fall to be made. The question of permanent authorisation by law was considered, but it was regarded as undesirable since the concession was only required as a temporary measure and therefore it was considered hardly necessary to get statutory sanction for something that would not be likely to recur in future.

1138. Are we to understand that, in the event of recurrences of such an incident, statutory authority will be sought for such repayment?—I should not like to answer that question until the matter arose. Obviously, if it were something that was likely to occur more or less regularly, then statutory authority should be obtained and we should certainly suggest it, but I should not like to go the length of saying that we would necessarily seek statutory authority if there were another incident which looked like being just an isolated incident. We would probably discuss the matter with the Minister and take his views upon it, but I should not like to say that, necessarily, we would look for statutory authority.

1139. Chairman.—The next paragraph of Note 6 reads as follows:—

“Extra-statutory repayments amounting to £27,309 6s. 8d. were made during the year with the authority of the Department of Finance, in respect of Excise Duties paid on home-grown unmanufactured tobacco which was subsequently exported, and further similar repayments were made in the year 1939/40. I inquired whether it was anticipated that refunds under that authority would continue and, if so, whether it was proposed to take steps to secure legislative sanction. In reply, I was informed that since all further exports of unmanufactured tobacco should be from warehouse, and warehoused tobacco not being duty-paid, no refund should fall to be made on its exportation.”

This is another case in which extra-statutory payments were made under somewhat similar circumstances?—Yes, that is right. In July, 1938, there were certain manufacturers who represented that as their firms specialised in the making of cigarettes, they were unable to use some of the leaf grown in the years 1934 to 1936 and allocated to them by the Minister, the leaf in question being suitable only for the manufacture of pipe tobacco. The Government decided, in due course, to allow these manufacturers to export the leaf under licence. There was no legal authority for repayment of the duty on the exportation of home-grown unmanufactured tobacco, but it was considered that the manufacturers in question had an equitable claim to repayment of duty on tobacco leaf exported in the circumstances referred to, and the Minister for Finance accordingly authorised the Revenue Commissioners to repay the duty extra-statutorily. As the leaf in question was replaced by a corresponding quantity of imported leaf, on which duty was paid at the customs rate, the repayment did not ultimately involve any loss of duty to the Exchequer. Tobacco grown in 1937 and subsequent years has been allocated to manufacturers on a new basis, each receiving only leaf of a type suitable for the manufacture of the lines he produces. It is expected that this basis of allocation will obviate the necessity of manufacturers having to export any of the leaf now being allocated to them. The extra-statutory authority given by the Minister for Finance dealt with isolated transactions which occurred in the past but which are not expected to recur. In the unlikely event of any manufacturer finding himself unable to use all the home-grown leaf allocated to him in future, it is probable that he will realise the position before he has cleared the leaf from the warehouse, and that if permission is granted to him to export it the leaf will be exported direct from the warehouse and, therefore, no question of repayment will arise. For these reasons, it has not been considered necessary to obtain statutory authority for the repayment of duty on home-grown unmanufactured tobacco exported.

1140. I note, Mr. Carey, that you say that this tobacco was exported by the manufacturers on the representation that, while being unsuitable for cigarette manufacture, it was suitable for pipe tobacco manufacture?—Yes.

1141. Did the Revenue Commissioners examine the bona fides of that representation?—I have no doubt that would have been done.

1142. Was your attention directed to the fact that this tobacco was valued at ld a lb. when it was exported, which would suggest that it was being exported for the purpose of being manufactured into insecticides?—I am not sufficiently familiar with the facts to answer that. I was not Chairman at the time. I will make a note to inquire if the Committee so desires.

1143. If your attention had been directed to the fact that the tobacco was valued at 1d. per lb. on the occasion of its export, would you have thought that the representation that it was suitable for the manufacture of pipe tobacco was bona fide?—I might have had some doubt on the subject. I understand that in fact there is rather too much tobacco being produced which is only suitable for manufacture as insecticides. We have actually had to destroy a certain amount of tobacco offal at our own expense, that is to say, the surplus which is not required for the making of insecticides.

1144. Did you advert to the fact that on these exports, bounty was paid of 2d. per lb. by way of export allowance, and compensation bounty of 8d. per lb? I fully appreciate that that is not really within your province, Mr. Carey, but I take it that it was within the province of the Revenue Commissioners to say: “If you propose to export this tobacco and qualify for these bounties, we will not facilitate you by making an extra statutory refund, and you must burn the tobacco or destroy it at home in order to avoid creating an obligation on the Treasury to pay you export bounty?—In that case the manufacturers would be at a loss because they had paid for this home-grown tobacco and, of course, they had paid the higher price. As you know, the need for the bounty arises from the fact that the short price, the duty free price, of the home-grown tobacco, is very much higher than the duty free price of the imported tobacco. The manufacturer had paid that higher price and was at the loss of it.

Chairman.—I see that clearly.

1145. Deputy Keyes.—Do these manufacturers not import tobacco to make the cigarettes for which this home-grown tobacco is unsuitable?—I have no doubt that most of the cigarette tobacco would have to be imported.

1146. There was no loss of revenue because of the fact to which you have adverted. There was an import of tobacco to manufacture cigarettes. These people must have been mistaken in their estimate of the suitability of this tobacco?—Yes. As I said, the real condition of the tobacco was not discovered before it was cleared. If it had been discovered, then the question of refund on exportation would not have arisen.

1147. Chairman.—Have you considered, Mr. Carey, that the making of extra-statutory payments of this kind removes from the discretion of Dáil Eireann consideration of the situation arising from the export of home-grown tobacco at 1d. a lb?—Would you go as far as that, Sir? The matter comes before you and, in that sense, it comes before the Dáil. Of course, the practice, I think, generally with regard to the Revenue Departments has been that odd things are liable to arise which have not been covered by legislation.

Chairman.—Quite.

Mr. Carey.—And which probably only arise, or may arise, very rarely. There is the fact, of course, that it is almost a physical impossibility to cover by legislation everything that arises, and the general attitude, I think, to this question of legislation is that when something of this kind arises, there must be a certain discretion to do the equitable thing, but that if that was something which was likely to recur and was of such a nature that it could readily be covered by legislation, and did not present ghastly drafting difficulties, then it ought to be covered by legislation.

1148. Chairman.—It would appear that these difficulties have recurred, and though you hope that in future effective examination of tobacco before it is dewarehoused will prevent it arising again, it does look like as if legislation should be introduced if further payments of this character become necessary?—Yes. I will make a note of your views on the subject, Sir, and if the question does arise again I will put your views before the Minister.

Chairman.—Paragraph 8 of the Comptroller and Auditor-General’s note is as follows:—

Remissions.

“I have been furnished with a schedule of the several cases involving a loss of £50 and upwards in which claims for duty or interest receivable under the Revenue Acts were remitted during the year ended 31st March, 1939, without statutory authority, from motives of compassion or equity arising out of particular circumstances in individual cases. The reasons given for remission appear to be satisfactory. The total amount shown in the schedule is £4,611 16s. 0d. as compared with £7,500 0s. 6d. in the preceding year. Of the total, £3,180 12s. 2d. has been remitted in respect of Income Tax. £493 10s. 6d. related to four cases in which the assessed parties died insolvent or were destitute, and recovery was impossible; £543 18s. 2d. related to three cases in which assessments were raised, but subsequent evidence revealed no net liability to tax, and £2,143 3s. 6d. related to three cases in which tax was remitted for other reasons. The remissions also include sums in respect of Estate, Legacy, and Succession duties and interest on such duties amounting to £931 5s. 9d. and Customs duties amounting to £499 18s. 1d.

The above figures do not include duty passed as irrecoverable for various reasons.”

That is purely an informative paragraph.

1149. Chairman.—In regard to subhead A A, I take it that that refers to transactions arising out of the reciprocal income-tax arrangement?—That is right. There is a staff in the Conjoint Office in London consisting partly of Irish officials and partly of English officials. If the office, for example, requires three higher executive officers—I am not sure of the figures—the theory is that we have to provide half the staff and the British provide half. Quite obviously, you cannot provide one-and-a-half, so what happens in a case like that is that the British are allowed to provide two and we provide one and then we halve the cost of the extra man.

VOTE 7—OLD AGE PENSIONS.

Mr. W. D. Carey further examined.

Chairman.—On this Vote there is a note by the Comptroller and Auditor-General as follows:—

Excess of Expenditure over Grant.

“9. The account shows an excess of expenditure over the gross estimate of £9,211 5s. 3d., and a surplus of receipts under appropriations in aid of £1,474 1s. 0d., resulting in a net deficit of £7,737 4s. 3d. The excess is explained by the Accounting Officer as due to the exceptionally large number of pension orders presented for payment on the 31st March, 1939, and to the abnormal number of outstanding appeals disposed of during the year, giving rise, in respect of successful appellants, to payment of increased current pensions together with arrears.”

1150. Chairman.—In page iv of the Report, under the heading of “Excess Votes”, in Note 2, the Comptroller and Auditor-General mentions two Excess Votes, one of which relates to the paragraph we are now considering. On a previous occasion, I think it was Deputy Childers who raised the question in connection with this Vote as to whether there were any check reviews from time to time of pensions being paid, with a view to detecting fraud. Is that ever done?—Oh, yes. If the investigation officers who are responsible for investigating pension claims have reason to think that a pension is being paid which should not be paid, they are supposed to see that the thing is gone into afresh, and if they are not satisfied the matter is referred to the Appeal Tribunal. If you look at the statistics of appeals heard— I think they appear in the Local Government Annual Report—you will find set out the number of appeals heard and the number of questions dealt with. These questions are considerable in number and they represent cases where officers have questioned an existing pension.

1151. Are you satisfied that no old age pensions are being paid to persons who are not entitled to them, or at rates in excess of what persons are entitled to?— That is rather a difficult question to answer because the granting of these pensions does not rest with the Revenue Commissioners. We simply investigate and the facts are reported. If an officer disagrees with the local pensions committee. the matter comes before the Local Government tribunal. We are not represented on that tribunal and we have no voice in their decisions, so that, without being familiar with what they do or the lines on which they work, I could not answer the question.

1152. Deputy Keyes.—Is it not true that even the grave does not prevent the pursuing of appeals where it is considered that a pension was illegally granted?—In any case in which it comes to our notice that a pension has been illegally granted, we have to take the matter up, and recover, if we can. I am reminded that, in addition to the taking of the initiative by the investigation officer, there is supervision and check by the surveyor who is placed over these officers. There is a surveyor over a certain number of officers, and, apart from the initiative of the officer himself in raising any case in which he thinks a question should be raised, there is a check by the surveyor so far as is possible. He can have a case reopened, if he is not satisfied.

1153. Chairman.—I have had occasion to say that the Revenue Commissioners are very charitable men, but I think that some of their officers are even more charitable?—I might say that in, I think, something like 60 per cent. of the cases which come before the Local Government tribunal, the officers are turned down.

Deputy Keyes.—And, I should say, rightly.

Mr. Carey.—I am simply replying to the Chairman’s comment on what he seems to suggest is the over-charitable attitude of the Revenue Commissioners’ officers.

Chairman.—If I told the truth, perhaps I should add that Deputies are even more charitable. In connection with the Excess Vote referred to, I would ask the Committee to make an interim report in the usual form to Dáil Eireann, stating that we have no objection to this Excess Vote and that we consider that, in the circumstances, it was justified. That matter we can dispose of at the end of our proceedings.

VOTE 8—COMPENSATION BOUNTIES.

Mr. W. D. Carey further examined.

1154. Chairman.—There is a note by the Comptroller and Auditor-General as follows:—

“10. The original Estimate for this service provided, in relation to tobacco, for the payment of bounties on tobacco manufactured from home-grown leaf, on which drawback was paid, and statutory authority for these payments is contained in Section 5 of the Finance (Miscellaneous Provisions) Act, 1935. Section 23 of the Finance Act, 1938, authorises payment of bounties on tobacco destroyed as unfit for manufacture, and funds for this purpose were provided by Supplementary Estimate. A further Supplementary Estimate made provision for the payment of bounty on unmanufactured home-grown tobacco which was exported, but no specific statutory authority exists for payment of bounty in these circumstances. In reply to my inquiry as to whether it was proposed to seek such authority I was informed that in view of the uncertainty as to the ultimate disposal of the 1937 and later years’ crops no definite steps towards that end had been taken.

The total amount charged in respect of bounties on exported unmanufactured home-grown tobacco was £1,986 2s. 8d.”

Mr. McGrath.—You will notice that this is not a statutory payment. We wrote to the Accounting Officer drawing his attention to the matter and asking whether, if such transactions took place in future, they would undertake to approach the Dáil and get statutory authority. As I say in the note, the Accounting Officer said that in view of the uncertainty as to the ultimate disposal of the 1937 and later years’ crops, no definite steps have been taken to obtain statutory authority for the payment of the bounty on home-grown unmanufactured tobacco exported.

1155. Chairman.—Can you tell us what is the position now, Mr. Carey?—You mean whether anything has happened since?

1156. Yes?—The only information I have is that the tobacco grown in 1937 and in subsequent years has been allocated to manufacturers on a new basis, each receiving leaf of a type suitable for the manufacture of the lines he produces, and it is expected that this basis of allocation will obviate the necessity of manufacturers having to export in future any of the leaf allocated to them. Of course, if we found that our anticipations in that respect were not being realised, I agree that we ought to go to the Minister and ask for legislation.

1157. So that if a further application is made to you for bounty on unmanufactured home-grown tobacco for export, you will consider the desirability of seeking statutory authority?—Yes, certainly.

Mr. Hogan.—On that point, may I say that I do not think Mr. Carey means that to apply in the case of a purely isolated transaction, but only if there was a tendency for that to continue in the future over an unascertained period, a year or more. If there was a recurrence of this type of bounty payment, we would feel obliged to consider whether specific legislation was necessary. Of course, the Appropriation Act is sufficient authority as it stands.

1158. Chairman.—We should be glad to hear the views of the Department of Finance on the propriety of paying bounty on exported unmanufactured leaf when provision is expressly made for the payment of bounty on exported manufactured leaf, which, in fact, imports, by the doctrine of exclusion, a suggestion that it was not the intention of the legislature that bounty should be paid on unmanufactured exported leaf. In these circumstances, do you think that presumption can be rebutted without statutory authority?

Mr. Hogan.—I think possibly that you misunderstand my intervention. So far as the Department is concerned we would naturally lean in the direction of having specific legislative authority, if the circumstances warranted it, in the case of the bounty to which you have just referred. In regard to the 1934-36 crops of unmanufactured tobacco which were exported on account of the defective system of allocation, we felt that there was not any evidence that this would continue, that, while equity demanded the payment of the bounty, it was in the nature of a transitory concession which it might be unnecessary or impolitic to elevate into a statutory right. Consequently, we did not seek legislation at the time, and with regard to whether we should have legislation if the same circumstances arose again, I think we would lean in the direction of having such legislation if there was any evidence to show that the circumstances were likely to continue over a period, and were not merely an isolated transaction.

1159. I take it the Department of Finance would agree with us that extra statutory payments are dangerous things, and, if allowed to grow into a system, are capable of developing very grave abuses? —That is so.

Chairman.—The circumstances with regard to the excess vote to which I referred previously are that two excess votes arise. The procedure is that where an excess vote is brought to our notice, we make an interim report forthwith to Dáil Eireann expressing our agreement with it. There is an excess vote in connection with Forestry with which we have not yet dealt, because it falls under the Department of Lands. We propose to take that Vote on Wednesday week, and it would be then time enough to make our interim report covering the excess votes on Forestry and Old Age Pensions.

The Committee adjourned for a fortnight.