DOUBLE TAXATION RELIEF (SOUTH-WEST AFRICA) (Hansard, 5 December 1962)

§ Sir Frank Soskice (Newport)

I also want to put some questions to the Minister about this agreement. I have given him an opportunity of considering the matter, because it may involve a matter of principle which raises grave considerations. This is an extension to South-West Africa of a pre-existing South Africa Order. Hon. Members 1449 on both sides of the House would probably wish to be reassured by the Minister that in extending the provisions of the South Africa Order to South-West Africa we are not, by implication or explicitly, in any sense reinforcing or recognising the jurisdiction of South Africa over South-West Africa.

I have anxiously considered this point. It was the kind of point raised when the House was discussing the South Africa Bill. The Government spokesman at the time—the Lord Privy Seal —in answering questions on that score put by hon. Members on this side of the House, gave an answer in the following terms: There is nothing whatever to indicate that the Bill accepts the annexation of the mandated territory in any way. What I said in my speech was that the mandate for South-West Africa is held by South Africa and that it provides that South Africa shall have full power of administration over the territory as an integral portion of South Africa".[OFFICIAL REPORT, 26th February, 1962; Vol. 654, c. 971.] That answer, which was given in the debate, broadly speaking, is, I understand, to this effect. South Africa has a mandate in respect of South West Africa. That mandate—whether it has been carried out or not does not matter; it exists—places on South Africa certain administrative powers and duties in respect of South-West Africa. As I read the agreement we are now considering, it is entered into in the course of the exercise of that jurisdiction and not otherwise. If that is the correct view, it would seem that if we accept this agreement we are not in any way either expressly or impliedly giving our assent to, or recognising, or reinforcing, any claim South Africa may have—to put it as was stated in a speech by Dr. Malan—to annex South-West Africa as part of South Africa. He did not use the word "annex", but the effect was that the Union and South-West Africa had become one territory.

The principle is whether I have correctly understood the position I have indicated. Have I correctly understood the position to be that we are not giving any blessing to any process of annexation or coalescence of the two territories? All we are doing is to recognise an act of administrative jurisdiction by South Africa in South-West Africa in the exer- 1450 cise of the mandate which South Africa possesses in relation to South-West Africa. If my understanding is correct, I feel that my hon. Friends would have no objection to the Order. But I think that they want to be reassured by the Minister that I have correctly stated the position. It is one which raises an important question of principle. I am sure that my hon. Friends and hon and right hon. Members opposite would wish to have that assurance.

The next point is a tiresome legal point about which I gave the hon. Gentleman notice. It is one which has to be considered because it possibly affects the question of whether the agreement is intra vires or ultra vires Section 347 (1) of the Income Tax Act, 1952, under which it purports to be made. That subsection gives power to enter into these double taxation agreements. It says: If Her Majesty by Order in Council declares that arrangements specified in Order have been made with the Government of any territory outside the United Kingdom… The ground of my uncertainty here is that when I look at the Schedule to the Order I see that it sets out the actual terms of the agreement and provides in effect that the existing South Africa Order shall read as if the Contracting Parties were the Government of the United Kingdom for the one part, and the Administration of the territory of South-West Africa for the other part.

I ask the Minister, as a matter of law, Whether he is satisfied that the declaration is in those circumstances one within the scope of section 347 (1)—whether, in other words, it can be properly said of this agreement that it is an agreement entered into by Her Majesty's Government in the United Kingdom with the Government of another country. It purports to be entered into in terms of the Schedule with the Administration of South-West Africa, not the Government of South Africa. That is a question which goes to the vires of the Order. I am sure that the Minister will be able to satisfy us that he has considered it and finds that it is within the scope of Section 347.

My final question is one which I asked in relation to the previous agreement: what will it cost? There was no pre-existing agreement in relation to South-West Africa, and the only way in 1451 which one can test it is to see what it cost under Section 348 of the Income Tax Act by way of unilateral relief. I am sorry that I was in error in thinking that there was a ceiling. That has been removed by the Section 16 of the 1961 Act.

§ The Financial Secretary to the Treasury (Mr. Anthony Barber)

I am grateful to the right hon. and learned Member for Newport (Sir F. Soskice) for giving me notice of the constitutional point which he raised as well as of the somewhat technical legal point.

He referred to the passage through the House of the South Africa Bill, and it is clear from the extract which he quoted from my right hon. Friend's speech that much thought was given at that time to the constitutional position of South-West Africa. It was natural that when we were considering the present arrangements which are embodied in the draft Statutory Instrument we should devote our attention also to the constitutional issue.

As he gave me notice that he proposed to raise this point, I have looked at it again, and I can assure him categorically that the Government's views are the same as those which he assumed to be the case—that this agreement has no effect whatever on the constitutional position of South-West Africa and, moreover, that it implies no change whatever in the Government's attitude to the mandate. I do not think that I could be more categoric than that, and I hope that that has reassured the House.

No doubt through my own misunderstanding, I thought that the legal point was somewhat different from that which he raised, but I can reassure him on the point which he put to the House. It was ascertained by the British negotiators at the time of the exchange of notes that the Administrator of the territory of South-West Africa had made a formal request for the arrangement to be entered into on behalf of the Administration. I do not think that there is any special significance in the use of the term "Administration" as opposed to the word "Government" in Section 347 of the Income Tax Act.

The Chief Executive in a Colony or other dependent territory is often formally described as the Governor, in 1452 which case one speaks of the territories governed. The Chief Executive of the territory of South-West Africa is known as Administrator, and it is therefore more apt in the Statutory Instrument to speak of "the Administration of the territory" rather than the Government.

But I do not think that this makes the provisions of the Order ultra vires merely because the enabling Section 347 refers to the arrangements made with "the government of any territory." For all practical purposes the Administration of the territory in South-West Africa is a Government, although because it is a mandate certain functions which would otherwise be carried out by a completely independent Government with full powers are carried out by the Government of South Africa.

Although under paragraph 2 of the Order the arrangements are made between the United Kingdom and the Government of South Africa, it is very relevant that they are made with the Government of South Africa on behalf of the Administration of the territory of South-West Africa, and we take the view that in this respect the Government of South-West Africa or the Administration of South-West Africa are the principals and that the Republic of South Africa are merely acting as agents. I hope that I have satisfied the right hon. and learned Gentleman that the Order is infra vires.

He asked what was the cost to the Revenue. In general, there will be no additional cost if the House approves the Order. The reason is that, prior to the operative date of the agreement in the Order, South Africa being in the Commonwealth, South-West Africa was also treated as a member of the Commonwealth and on the same basis as though she were, as indeed she was, an actual member of the Commonwealth. Consequently, the provisions for unilateral relief applied to South-West Africa just as they would to any other Commonwealth territory and in particular, the special advantages under the unilateral provisions as they are most favourably applied to Commonwealth countries were operative in respect of underlying tax.

As the right hon. and learned Gentleman will know, the unilateral provisions relating to underlying tax, which is very 1453 important in connection with this agreement, are more favourable toward Commonwealth than towards other countries. If we had not entered into this agreement with South-West Africa, that favourable position, from the point of view of South-West Africa, would have gone by the board. What we are doing, broadly speaking, is replacing in this agreement the position which existed under the unilateral arrangements applicable to South-West Africa as to other members of the Commonwealth, so that the general position is that there will be no additional burden on the United Kingdom Exchequer.