DOUBLE TAXATION RELIEF (ESTATE DUTY) (Hansard, 22 July 1963)

§ The Financial Secretary to the Treasury (Mr. Anthony Barber)
I beg to move, That an humble Address be presented to Her Majesty, praying that the Double Taxation Relief (Estate Duty) (France) Order 1963 be made in the form of the draft laid before this House on 4th July. The Order seeks approval for a Double Taxation Convention with France relating to Estate Duty. Section 54 of the Finance (No. 2) Act, 1945, provides for agreements with other countries for relief from double death duties to be given statutory effect by Order in Council. Under Section 56(2) of the same Act any such Order must be laid before Parliament in draft before being submitted to Her Majesty.
The Convention with France was signed in Paris on 21st June, 1963. It is the first agreement to be made since the passing of last year's Finance Act which provided wider powers for the making of agreements for relief from double death duties. Before last year's legislation, comprehensive agreements could be made only with countries that charged a duty which was similar to our Estate Duty. Where another country charged some form of death duty different in character from our duty the agreement had to be of a more limited kind confined to the adoption of a code of rules.
This was the position in relation to France. Our Estate Duty is a mutation duty payable on the passing of the property on death without regard to distribution among the beneficiaries. The French succession duty is of a different character. It is an inheritance tax levied on property received by the beneficiaries on a death at rates varying according to their relationship to the deceased.
Section 29(2) of the Finance Act, 1962, abolished this distinction and enables us to make comprehensive agreements with any country that has a death duty whatever form it takes. This agreement with France is such an agreement. It is obviously to the mutual 1196 advantage of France and the United Kingdom, and I commend it to the House.

§ Mr. G. R. Mitchison (Kettering)
The Explanatory Note at the end of this Order explains that it provides a code of rules for determining the category of property which may pass on the death of a person who dies domiciled in either country. That appears to be the main object. There have been a number of agreements with other countries having that main purpose, in order to avoid double Estate Duty.
There is, however, one remarkable innovation in the Order which calls for some explanation. Article 4 of the Schedule, which itself reproduces the Convention, gives the rules for determining the situs of property. The very first sentence of these rules, which appears for the first time, constitutes a remarkable innovation in the use of the English language and apparently in the intentions of the Government. For the first time—it has never been necessary with other countries—the following remarkable observation is made: land shall be deemed to be situated at the place where it is located…' You are, Mr. Deputy-Speaker, what you are, but I suppose you are deemed to be what you are not. It therefore appears in the view of two Governments that land is not situated at the place where it is located but it is deemed to be situated at the place where it is located. I wonder what is the purpose, and indeed the effect, of this remarkable sentence. I find it a little difficult to conceive of land being situated any where but at the place where it is located. Indeed, the sentence seems to me to mean exactly the same thing if one turns the words round and says that "land shall be deemed to be located at the place where it is situated." I cannot see the difference between the two forms of words.
I wonder what is the use of putting nonsense of this kind into an agreement of this sort. It has never happened before. There have been proper rules about the location of immovable property and immovable rights. They require something of this sort because there always is a question whether a 1197 right should be attached to the land or whether it is something personal which goes with the domicile of the person concerned. But no Government, however harassed, however uncertain of the very ground on which they are treading, have yet been driven to say that land shall be deemed to be situated at the place where it is located. What has been happening? Has President de Gaulle been laying some kind of fiscal banana which has caused the Government to slip up and come down with a bump and say that land is deemed to be situated where it is located? What is the point of putting nonsense of the kind, meaningless stuff, into Conventions or Orders? Perhaps we could have an explanation.

§ Mr. Barber
It is perfectly true, as the hon. and learned Member for Kettering (Mr. Mitchison) says, that paragraph (a) of Article IV could be expressed to read that "land shall be deemed to be located where it is situated." But if we were to employ words in that order we should then be out of line with the remaining paragraphs of Article IV which are all concerned to describe where various rights, types of property, debts, securities and so on are situated. Therefore, I should have thought we were simply being reasonable and logical.
As for the reason for declaring that land shall be deemed to be situated at the place where it is located. I am afraid that without notice I should find it very difficult to be dogmatic about a matter of this kind, but I would suggest to the hon. and learned Gentleman that it is conceivable, as we are here dealing with French law as well as with English law, that in French law land is in certain circumstances deemed to be situated in a place other than that in which it is located. If that were the case, obviously it would be necessary to make this particular provision.

§ Mr. Mitchison
Could the hon. Gentleman tell us what is the meaning of the words "deemed to be"? It appears clear that in the view of the Treasury, land is not situated where it is located. It has to be "deemed" to be situated where it is located. Where is it?
1198 Before the hon. Gentleman answers that question, may I ask him another? It is very ingenious of him to refer to French law, but I have been trying hard to get the French text of this document. It is a Convention in two languages each of which has equal force, and I am sorry to tell the hon. Gentleman that so far as my researches went, the Treasury had not even got a copy of the French text, so we do not know where this application of French logic would lead us in these peculiar circumstances.

§ Mr. Barber
I can only tell the hon. and learned Gentleman that if on any future occasion he would like a copy of the vernacular of the other country and will get in touch with me, I will do my best to obtain a copy for him.