ESTATE DUTY (ANGLO-SWEDISH AGREEMENT) (Hansard, 1 December 1960)

§ The Financial Secretary to the Treasury (Sir Edward Boyle)
I beg to move, That an humble Address be presented to Her Majesty, praying that, on the ratification by the Government of the Kingdom of Sweden of the Convention set out in the Schedule to the Order entitled the Double Taxation Relief (Estate Duty) (Sweden) Order, 1960, a draft of which was laid before this House on 8th November, an Order may be made in the form of that draft. This Order ratifies or confirms an Agreement with Sweden, and it is made under Section 77 of the Finance Act, 1948, which provides for double estate duty agreements with other countries to be given statutory effect by Order in Council. I will not say very much about this Order in my opening remarks, but it arises directly out of the difference between the law of Estate Duty in Britain and the Swedish succession duty.
In the case of our Estate Duty, when somebody domiciled in another part of the world dies, Estate Duty is levied on all his property, either moveable or immoveable, which is situated in this country. But in the case of the Swedish succession duty, when a Swedish national dies, or someone domiciled in Sweden dies, the Swedish duty is charged on all his moveable and immoveable property, wherever it is situated. If he is neither Swedish nor domiciled in Sweden, it is none the less charged on his immoveable property in Sweden and also on certain types of moveable property in Sweden. The same item of property may be charged with both British Estate Duty and Swedish succession duty. For example, if a person domiciled in Sweden dies and leaves property situated in Great Britain, the Swedes tax it because he is domiciled in Sweden and we tax it because it is situated here.
672 It is that problem with which the Agreement seeks to deal. The purpose of the Agreement and the purpose of the Order is to reduce the number of cases where this double taxation occurs, by laying down in Article IV of the Agreement a code of rules for determining the situs of property passing on the death of a person domiciled in Great Britain or Sweden. If the right hon. and learned Member for Newport (Sir F. Soskice) who, I understand, is to speak for the Opposition, has any questions, perhaps I shall be given leave of the House to answer them briefly later.

§ Sir Frank Soskice (Newport)
I am grateful to the Financial Secretary for explaining the purpose behind this rather complicated Measure which we are now considering. Speaking for myself, I would say that his proposal is one which we should support. We have to consider no fewer than four of these double taxation agreements this evening and I should like to ask, and perhaps I can conveniently ask while we are considering the first, some general questions which are applicable to all four Orders. Having asked those questions, I should like to ask one or two particular questions which particularly relate to the Order which we are now considering.

§ Mr. Deputy-Speaker (Major Sir William Anstruther-Gray)
I think that we had better get clear what is convenient to the House. I thought that we were to take this Order first and then the subsequent three together. If the House prefers to take all four together, so be it, but I had thought that to take this Order first and then the other three together would be a better plan.

§ Sir F. Soskice
I am not sure that that would be very convenient. As I have indicated, I want to ask some general questions which I was proposing, subject to your Ruling, Mr. Deputy-Speaker, to ask when this matter was being considered, and also questions in relation to each of the four Orders, some several questions which relate to each of them separately. I would have thought that it would be better if we took each of the Orders separately.

§ Mr. Deputy-Speaker
I am surprised by the right hon. and learned Gentleman's last remark. I thought that he 673 was going to suggest that we took all four together, and it would then be in order to make any remarks on any of the four Orders during that general discussion of the four. But we must have it one way or the other, according to what is convenient to the House.

§ Sir F. Soskice
I thought that what you were suggesting, Mr. Deputy-Speaker, was that we should take the first Order first and the other three together What I was suggesting was that it would be more convenient if we took all four separately, as there are separate considerations which arise in relation to each of the four.

§ Mr. Deputy-Speaker
By all means, if that is convenient to the House. Each Order will be taken separately.

§ Sir F. Soskice
The questions which I wanted to ask with application to each of the four, which are also individually applicable to each, are these. From time to time, we are asked to consider these double taxation Orders, and I think that they serve a very useful purpose. We may differ as to what the scale of taxation should be, but I think that both sides of the House agree that when one is taxed, one should have to pay only one set of taxes on the same form of income or the same form of property. These double taxation Orders are designed to achieve that purpose.
Can the Financial Secretary give some idea of how far these Orders now extend? What countries are now bound by double taxation agreements with this country? Obviously, I do not want much detail, but if the Financial Secretary could give a rough idea of how many of these Orders are in application and what sort of territories are covered and what are now under negotiation. I should be glad of the information.
The second general question which applies to all four Orders and also separately to each—

§ Mr. Deputy-Speaker
I am sorry to interrupt, but it seems to me that the right hon. and learned Member for Newport (Sir F Soskice) is now talking about all four Orders and I understood it to be his wish, and, following that, the wish of the House, that each Order should be 674 taken separately. It is quite immaterial to the Chair which course is taken, so long as we are clear what our procedure is to be.

§ Sir F. Soskice
May I make it perfectly clear? I want to speak about each Order separately and to put questions on each separately. I have asked the first question. The second question is how much the provisions of this Order will cost in terms of revenue lost to the Treasury in this country. I should be grateful if the Minister would give some idea of that and indicate subsequently the amount involved with the other Orders, although if he gives an aggregate figure, I shall be perfectly content.
I wanted to call attention to and nut one or two questions on the form of this Order. I should like the Financial Secretary to confirm my impression that the Swedish estate duty is on an entirely different principle from our own. Our own is on what I think is generally referred to as the mutation principle, that is to say, Estate Duty is charged on a passing of an estate, but I believe that I am right in thinking that Swedish Estate Duty is charged on a succession principle.
Thirdly, I believe that a number of persons hold the view that we ought to assimilate our own Estate Duty legislation to the succession principle, but am I right in thinking in the first case that what I have asked is the case, and in the second case that the Order must of necessity be somewhat limited in scope and that all it does is to define the location of property for the purpose of the incidence of potential double tax, and does not seek to achieve any objective other than that limited objective?
Am I right in thinking that normally when there a similar system of Estate Duty in two countries the double taxation order operates by way of affording a credit in one country or another to avoid doable tax and that there is a distinction between this Order and the usual form? Is it possible to extend the scope of the Order beyond its present limited scope?
Those are the only things on which I should like information and, subject to the Financial Secretary being able to give satisfactory answers, I think that we should support the Order.

§ Sir E. Boyle
By leave of the House; I think that I would be in order in answering the general question of how many double taxation Orders affecting Estate Duty are in operation. We already have double taxation Orders affecting Estate Duty with seven other countries—the United States, Canada, South Africa, India, Pakistan, Switzerland and the Netherlands—and this will make an eighth.
I cannot give the revenue estimate for the effect of the Order, but perhaps I may say that if one takes the whole range of double taxation Orders and considers their effect on the balance of payments, which is the most relevant consideration, I am assured that, so far as we can tell, with credits going into and out of the country, the result leaves the balance of payments approximately all square. That is to say, whereas these double taxation Orders, as the right hon. and learned Member admitted, do greater justice to individuals, in the aggregate they do not greatly affect our balance of payments one way or another.
The right hon. and learned Gentleman was quite right to say that this was an Order different in its effects from most of the others which I have mentioned. That arises directly out of the 676 fact that, as I tried to explain, there is a difference between our system of Estate Duty and the Swedish system of succession duty. Ours is a mutation duty arising directly out of the fact that property changes hand$, whereas the Swedish duty can be more accurately described by lawyers as an acquisition duty.
As the right hon. and learned Gentleman said, the Order has very limited scope. Article IV prescribes a code of rules for determining the situs of property passing on the death of a person domiciled in Great Britain or Sweden. It is that Article which is the sole purpose of the Order, which covers a narrow point, but which will be none the less valuable for that.