§ "Section Six, Sub-section Two, of the Finance Act 1894, shall be read and have effect as if at the end of the sub-section, after the words 'such payment,' there were inserted the words 'and an amount equal to the proper rateable part of any Estate Duty paid by an executor may be recovered by such executor from each legatee or beneficiary according to the proportionate share of the whole property passing to each legatee or beneficiary by the death in respect or with reference to which such duty has become payable."
§ He said that the Chancellor of the Exchequer had been so generous that he could not be expected to accept any alteration in the Death Duties which would involve a sacrifice of revenue. But this Amendment- would not involve any sacrifice. There was a clause to the same effect in the original Bill of the right hon. Member for West Monmouth. At present the whole of the duty on an estate passing by death was payable by the residuary legatee. The other legatees got their legacies in full. It was said that if this were not so, it would be an infraction of the analogue to the Probate Duty which this Act was supposed to represent. But the principle of making each beneficiary pay his own death duty was recognised in the Act in regard to real and settled property, and in regard to donations made within, twelve months of death. There was a case last year in which a wealthy gentleman gave £10,000 to a nephew on the occasion of the nephew's marriage. The gentleman died within twelve months, and the nephew had to pay £800 duty on the gift which had not been made at all in anticipation of death. That showed that the principle of the Probate Duty was not adhered to in the Finance Act of 1894. Last year there was no doubt a difficulty in pressing an Amendment of this kind, because it was felt that in case each man were called upon to pay his own. Estate 772 Duty, a difficulty might arise in the Department, inasmuch as it would be necessary after the whole Estate Duty had been taken out- of what the French called the "local" estate, for the Department to apportion each beneficiary's share of the duty before coming to the charge of legacy and succession duties. That difficulty mainly, and he thought exclusively, arose with regard to annuities, but tire difficulty had been removed this year by the operation of Clause 16 of the Finance Act 1896. Consequently the difficulty which was felt in the Department no longer existed, or if it did it existed already in the case of annuities. Certainly it seemed fair, as in the case of donations within twelve months before death, as in real estate, and as in settled property, that the beneficiaries should bear their proper proportion of the duty. It was in consequence of his desire to affirm the principle that each man should bear his own taxes, that he had put down the Amendment, and he trusted the Chancellor of the Exchequer might be able to accept it, because it did not touch the revenue.
§ Clause Read the First time.
§ *THE CHANCELLOR OF THE EXCHEQUERsaid that at present Estate Duty was paid out of the residuary estate, and many wills had been made by testators on the basis of the existing law, and he was advised that to carry out the proposal of his hon. Friend would cause great difficulty and confusion, and lead to a considerable increase of payments to lawyers by requiring these wills to be recast. He must therefore refuse the Amendment.
Clause, by leave, withdrawn.
§ MR. GIBSON BOWLES moved to insert: "Sub-section 2 of Section 2 of the Finance Act 1894 is hereby repealed." He said that this was the sub-section which charges duty on property situate out of the United Kingdom. He had always held that it was an extremely dangerous thing to attempt to charge property situate out of the United Kingdom. The amount involved was trifling, and apart from that, it was a duty which, having regard to the comity of nations, we should 773 attempt to levy. But in addition to that, it fell with distinct hardship on the Colonies. It was extremely hard for a colonist to find that the property he had made and accumulated in the Colonies should be subject to taxation. On all these grounds he submitted that it would be extremely advisable if the Chancellor of the Exchequer could be induced to part with this tax.
§ Clause Read the First time.
§ *SIR W. HARCOURTpointed out that the whole object of the enactment in question was to make property, wherever situate, subject to the duty. If a distinction were made between property abroad and property here it would give an enormous advantage to foreign investments over investments in this country. That was to say, if a man invested in the British Funds he would pay the duty, whereas if he invested in, say, Russian Funds, he would pay no duty at all. He confessed to sonic surprise that the hon. Member should propose Amendment founded upon such a. principle as. that.
§ *THE CHANCELLOR OF THE EXCHEQUERwas of opinion tied the Amendment, if accepted, would open the door to considerable evasions of the Death Duties, and would be very unfair to investors in this country. The amount of foreign personalty which paid the Estate Duty in 1896–97 was £3,334,000, representing about £160,000 duty. He had little doubt that a much greater loss than that would have occurred if it were known that foreign property could be exempt.
Clause, by leave, withdrawn.
§
MR. GIBSON BOWLES moved the following new clause:—
Section Two, Sub-section One. Clause (c) of the Finance Act 1894 is hereby amended as follows:—the description of property marked (c) shall be construed as if the words in Section Eleven, Sub-section One. of The Customs and Inland Revenue Act 1889, "be read as if the word twelve 'were substituted for the word three therein, and the said description of property shall" were omitted therefrom.
In other words, this meant the abolition of the charge on property passing by disposition made within twelve months
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of death. This Amendment and two subsequent Amendments, were really all one, and the present one he thought one of the most monstrous enactments of the Finance Act of 1894. He could understand that you might perhaps argue that a man was constructively dead three months before he was really dead, but they could not assume that a man was dead twelve months before the event. This was done simply and solely for the purpose of cheating the successor to the man's estate out of duties to which the Revenue was not entitled. He was the last to contend that a man should he allowed to make a gift, when he knew he was dying, in order to evade the duty; on the contrary, an. Estate Duty should be charged when such attempts to evade Estate Duty were made. But it was a question of fact to be determined by evidence, and was cognate with the question of domicile— whether a man was or was not domiciled in this country at the time of his death. It should he decided upon evidence, and not by a brutal assumption in favour of the Revenue. It was both unjust and unnecessary to assume that a man could not properly dispose of any of his estate, within twelve months of his death. He might have no suspicion that death was coming. He might be killed in a rail way accident. He would call in aid the case of Richard Montague; who made a gift of £10,000 at a time when he was apparently in perfect health, but he died within the twelve months and duty had to be paid. So that there was not an inhabitant of this Kingdom who could receive a gift of more than £100 value, and enjoy it in security until a whole year had passed. At any time during the year the donor might die—by a railway accident, or by natural causes, and the donee would be called upon to pay duty to the State. He did not claim that a man should be able to evade duty by making gifts in. contemplation of death, but he did say that to make this large, bold, and brutal assumption that every man was fraudulent for a year before his death, and that every gift he made during that time was made with a fraudulent intent to cheat the Revenue, was an assumption that ought not to be made. He was aware that the Chancellor of the Exchequer had already pronounced and voted
775
against what he considered to be the just principle for which he was pleading. He was, of course, lamentably aware that the First Lord of the Admiralty was the very exaggerator of this principle from three months to twelve months. He was aware also that the Government had a large majority, and he had no hope of carrying his Resolution against the opposition he too readily foresaw it would receive from the Chancellor of the Exchequer. But he thought this thing so unfair, unjust, and wicked on the part of the Revenue that he should never cease from putting down his Amendment and rising in his place in defence of a principle of justice which he had vindicated year after year. He should never cease to preach, inside and outside the House, that it was the duty of those who sought to levy revenue to do so in accordance with the principles of common fairness and justice, and not to perpetuate on the statute book the monstrous assumption that a man is dead twelve months before he dies.
§ *THE CHANCELLOR OF THE EXCHEQUERsaid it was evident that his hon. Friend knew very well what his duty was with regard to the Amendment. His hon. Friend adhered to his own opinion; and he (the Chancellor of the Exchequer) must also adhere to his own. The hon. Member had admitted that a gift made a short time before death ought to be looked upon with the gravest suspicion. He almost admitted, in fact, that three months was not an unfair term. But, as a matter of fact the three months limit was tried, and was found to be insufficient to prevent great evasions; and in 1887 it was extended by the present First Lord of the Admiralty. It had been found that twelve months was absolutely necessary to prevent evasions, and he was afraid that even twelve months did not always prevent them. ["Hear, hear!"] He must, therefore, oppose the Amendment.
MR. GIBSON BOWLESsaid it was hopeless to argue with the master of many legions, and, with the permission of the House, he would withdraw his Motion. ["Hear, hear," and cries of "Divide"]
§ Motion made and Question put, "That the Clause be read a Second time:"— The Committee divided:—Ayes, 25; Noes, 197.—(Division List, No. 254).
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§
MR. T. W. LEGH (Lancashire, S.W., Newton) moved the following new Clause—
Section 20, sub-section 1, of the Finance Act, 1896, shall be read and have effect as if the words 'appear to the Treasury to be' were omitted, and the word 'are' inserted in their stead.
It seemed to him that the present arrangement was distinctly open to objection. In the first place the Treasury was given the power to construe an Act of Parliament, and in the second place the Treasury was an interested party, its interest being to obtain as much money as it possibly could from the persons liable. He would not be sorry to restrain the capacity of the Treasury to some extent if he could. The usual practice of the Treasury was to refer these questions to various experts, and he believed that was the course followed by the present Chancellor of the Exchequer. But there was not the least obligation on the part of the right hon. Gentleman to take this course, and there was no reason why the successors of the right hon. Gentleman should be expected to imitate his example. If, for example, his right hon. Friend the Secretary to the Treasury became Chancellor of the Exchequer, looking to his well-known zeal for public economy, he was inclined to think that the exemptions which would he made by him would be of a very trivial character indeed. What was the object of these remissions? The principle aimed at was to exempt certain objects because they were valuable, and not because they appeared to be valuable to the Treasury or to any one else. Under the present arrangement great uncertainty prevailed, and no one knew what he would have to pay, as had been well said, until he was dead [Laughter]. His Amendment was intended to elucidate the point to a certain extent.
MR. GIBSON BOWLESsupported the Clause. He did not know whether the Committee was aware that in giving the decision as to these matters to the Treasury they were really appealing from Cæsar to Cæsar, because the Inland Revenue was the Treasury. The Inland Revenue was bound to act under the direction and control of the Treasury; it could not 777 call itself its own master, so much so that, the Comptroller of Legacy Duties positively told the Public Accounts Committee that if an unlawful order were given to him by the Treasury he would consider it his duty to obey. There was another reason. Their recent experience of the Treasury should disincline the Committee to leave in its hands the construction of an Act of Parliament. The Treasury, in a case which had become notorious admittedly against the law, sanctioned a remission of Death Duties in the case of the Tsar of Russia. The Public Accounts Committee reported that this was against the law; and yet this was the body forsooth to whom the Committee were going to leave a decision which might affect property valued by millions. They gave to the Treasury the power to decide as to whether a work was of historic, national or scientific interest. It was a most improper body to arrive at such a decision on such a subject. The Treasury was only another name for the Inland Revenue, and it would be better to give the decision to the Inland Revenue than to give an appeal from the Inland Revenue to the Treasury. The proper way moreover to decide the intepretation of an Act of Parliament, was to employ the proper machinery which was provided, and which ill the last resort was the courts of law. The first agreement was that between the parties, and in 999 cases out of 1,000, the Inland Revenue and the persons interested in: Legacy Duty would come to an agreement between themselves as to what was brought within the meaning of this clause. The Chancellor of the Exchequer might give his decision in regard to one matter, but another Chancellor of the Exchequer might take an entirely opposite view. Fancy some new, Philistine, inartistic Chancellor of the Exchequer being called upon to decide as to whether a Madonna of the 16th century was or was not of historic interest.
*THE CHAIRMAN OF WAYS AND MEANSsuggested that the two new clauses on the Paper of the hon. Member for the Newton Division of Lancashire should be combined and put forward as one new clause.
§ Mr. LEGHaccepted this view, and moved to add to the proposed new clause:—
Section 20, Sub-section 1, of the Finance Act 1896, shall be read and have effect as if after the words 'to be of national, scientific,' the end "artistic' were inserted.He said that the expression "not yielding income" had led many persons to suppose that heirlooms were exempted from duty. Those who knew better were well aware that the concession obtained from the Chancellor of the Exchequer last year was of a very narrow character. By the wording of the section objects which were to be exempted from duty were to be of national, scientific, or historic interest. Take the most common instance, the case of family pictures. It was extremely improbable that the bulk of family pictures would come within the category of being national, scientific, or historic"—nay, how many pictures in the National Gallery itself would come within this category? The view of the right hon. member for West Monmouthshire was that the only persons in possession of works of art worth anything in this country were millionaires. Everybody at the present moment professed an extreme interest in art, and the object of the exemption made in the Act was mainly to enable valuable works of art to be retained in this country. Where the national interest came in was when such works of art were sold and found their way to foreign countries. One of the results of the financial achievement of the right hon. Member for Monmouth was that a very large number of works of art had left this country. He had been assured by a gentleman who was probably the highest authority upon this subject in the kingdom, Sir William Agnew, that no less than three-and-a-half millions worth of pictures had left, this country and found homes abroad since the Act of 1891 was passed. ["Hear, hear!"] That was an important fact, and it would be a misfortune to this country if works of art were to continue leaving at that rate. ["Hear, hear!"] flu would also point out that in consequence of the extremely narrow character of the concession made under the Act there was no encouragement to private individuals to form 779 collections. He had heard of public-spirited people who had left valuable collections to public bodies, but who had made it a condition that if any tax was imposed the bequest was not to be effective. Mr. Franks left a very valuable bequest to the British Museum on the condition that no duty should be exacted. He thought this was a very valuable argument in favour of widening the scope of the section, and, as a matter of drafting, as it was already stated that scientific collections must be scientific if they were to be exempt, it stood to reason that works of art ought similarily to be "artistic." If, therefore, the Chancellor of the Exchequer refused to accept the word "artistic," it was only logical that the word "scientific" should be eliminated.
§ *THE CHANCELLOR OF THE EXCHEQUERobserved that it was much too early to raise any point as to the working of the clause of last year, because in the financial year ending March last there had not been a single case decided under it. The fact was that collections of this kind were not very common; but there were two cases now before the Inland Revenue. One of them would very soon be decided, and the other one, he imagined, would shortly follow. He was pretty certain that when the decisions were known his hon. Friend and those who sympathised with him would find that the views of the Inland Revenue and the Treasury were much more favourable to them than they seemed to imagine. His hon. Friend had alluded to the extraordinary suggestion which had been made that persons should be enabled to discover whether their collections would be exempt from Death Duties or not before they died. That was quite impossible. ["Hear, hear!"] It would certainly be impossible if the Amendment were accepted and the operation of the Courts substituted for that of the Treasury, because the Courts must interpret the section somewhat narrowly, and they could not decide whether certain articles were exempt from duty before the death occurred upon which the duty would be payable. Lists of collections had been sent to him, and he had been asked to decide whether the articles named in them would be exempt from duty when the person to whom they belonged died, perhaps, 30 or 40 years hence. 780 (Laughter.) He need not say he had declined to undertake such an impossible task. ["Hear, hear!"] The effect of the section could only be tested by its working, and so far as the Amendment went he believed that to transfer the decision from the Treasury to the Law Courts would be to act directly contrary to the interests of those on whose behalf the hon. Member spoke, and would narrow the operation of the clause instead of extend it. ["Hear, hear!"] He should like to state the way in which, in his judgment, the clause would be interpreted. His hon. Friend proposed that the word "artistic" should be inserted. That was absolutely unnecessary. This was the manner in which, as he had indicated, the Inland Revenue proposed to interpret the section: The section was held to apply to particular works of art which were of such national or historic interest that they would be purchased or accepted as a bequest by one of the national collections, and the Inland Revenue would employ an expert to give his opinion upon the subject. If there was any doubt as to the decision of the expert the matter would be referred either to the Trustees of the National Gallery, or of the National Portrait Gallery, or of the British Museum, as the case might be, whose opinion would certainly, so far as he was concerned, be accepted by him as a sufficient guide. ["Hear, hear!"] He ventured to say that no Court of Law in the world would interpret the clause more liberally than that. ["Hear, hear!"] He contended, indeed, that they would interpret it much more narrowly. He would point out that the interpretation he had quoted rendered the word "artistic," which his hon. Friend desired to insert, quite unnecessary, and that he would gain nothing by its insertion. In deciding whether a picture or series of pictures was of historic interest regard would be had not merely to their merits as works of art, but to the persons whom they represented; and not merely the history of the country but of a county or a county family would be taken as justifying the exemption of those pictures from duty. He could not go beyond that interpretation of the clause, and he hoped that the Committee would support him. ["Hear!"]
§ SIR CUTHBERT QUILTER (Suffolk, Sudbury)confessed that he would rather see the won "artistic" inserted in the clause or some equivalent than trust to even the very liberal interpretation placed upon it by the Chancellor of the Exchequer. They might not al ways have the good fortune to have a gentleman of such great ability and such large views holding that position. He could corrobate the statement of his hon. Friend as to pictures leaving this country. It was an immense misfortune that men of moderate means having valuable pictures were forced, or believed themselves to be forced, by fear of the death duties, to part with pictures of inestimable value to wealthy American arid foreign purchasers. If things went on as at present in a few years we should have parted with hundreds and thousands of art treasures which we would then give worlds to replace. Surely if the addition of a few simple words would do anything to prevent those pictures going out of the country it would be a boon to the everincreasing number of people in this country who took an interest in art. ["Hear, hear!"]
§ MR. VICARY GIBBS (Herts, St. Albans)supported the Amendment, and expressed the hope that the Chancellor of the Exchequer would do something more than enunciate a liberal interpretation of the clause.
§ *THE CHANCELLOR OF THE EXCHEQUERappealed to his lion. Friends. He had told them that the section of the Act would be interpreted by him in the way lie had stated, and he thought the manner in which they had criticised the wording of it was somewhat ungracious to himself. ["Hear, hear!"]
§ VISCOUNT CRANBORNE (Rochester)said that although he should much prefer that the intentions of his right hon. Friend should be enshrined in the Act itself, he thought Ins hon. Friends ought to be satisfied with the liberal interpretation which the Chancellor of the Exchequer had given to the clause. He thought a great concession had been made.
§ MR. T. W. LEGHsaid he was not altogether satisfied, but as the Chancellor of the Exchequer was undergoing a process of conversion—[The Chancellor of the Exchequer: "No, I am not," 782 and laughter]—he would ask leave to withdraw his Amendment.
§ Proposed Amendment, by leave, withdrawn; Clause, by leave, withdrawn.
§ *CAPTAIN PRETYMAN moved the following new Clause:—