INDIA (ESTATE DUTY) BILL [H.L.] (Hansard, 30 January 1945)

§ THE PARLIAMENTARY UNDERSECRETARY OF STATE FOR INDIA AND BURMA (THE EARL OF LISTOWEL)
My Lords, the object of this Bill is to enable the Government of India and the Provincial Governments to levy Estate Duty on property passing at death. The strain of war upon India has made it more essential than ever before for the Central Government to be in a position to add Death Duties to existing methods of taxation. By mopping up purchasing power that might otherwise be used to buy consumer goods, such a tax would put a brake on the rising price level in India and thereby serve as a valuable weapon against the constant danger of inflation. Adequate powers of taxation to counteract inflationary tendencies are indispensible to the fiscal equipment of the Central Government. But the new taxation will not only serve the negative and immediate purpose of tethering prices: the proceeds of Estate Duties will provide a fund to assist the Provinces with their plans for post-war economic development. As your Lordships are aware, we are hoping that big schemes of irrigation and industrial development will be launched in British India as soon as may be practicable after the war, and that they will be important features of an All-Indian reconstruction programme that will rapidly improve the general standard of living.
The Government of India were naturally anxious to proceed if possible by means of the powers already conferred upon them by the Act of 1935. Estate Duties are not expressly mentioned in the list of federal powers contained in the Act, which only provides for the imposition of Succession Duties. The Viceroy referred to the Federal Court the vital question as to whether a Succession Duty could be construed in law as including a duty levied on a whole estate, and the Court 767 decided by a majority opinion that the power to levy Estate Duty was not implied in this provision of the Act. There was thus no alternative for the Government of India to a request to Parliament here for fresh legislation to meet this urgent requirement. The present Bill seeks to close the inadvertent gap left by both Houses in 1935–because it certainly was not their intention that the Government of India should be unable to levy Death Duties—by providing specifically for the levy of Estate Duties, and the distribution of their proceeds among the Provinces. The Government of India would like to introduce a Bill imposing the new Duties not later than March of this year, as otherwise there will be a year's delay in the collection of the tax. I therefore hope that this measure will have a speedy passage into law.
I will, if I may, just draw your Lordships' attention to the provisions of the Bill. Clause 1, subsection (1), of the Bill inserts in the Federal Legislative List, in the list of federal powers, the new power to levy Estate Duty on property other than agricultural land, and a complementary power in respect of agricultural land to the Provincial Legislative List. Subsection (2) of Clause 1 adds Estate Duties to the list of federal taxes that must be distributed to the Provinces. These subsections contain the marrow of the Bill. I have confined myself in these few remarks to an explanation of the broad principles of the Bill, but if any of your Lordships would care to raise any matter to which I have not alluded, or to ask any question relating to the Bill, I shall be more than glad to answer to the best of my ability. I beg to move that the Bill be now read a second time.

LORD STRABOLGI
My Lords, in the absence of my noble friend Lord Addison, I have the pleasant duty, on behalf of my noble friends on these Benches, of offering our thanks to His Majesty's Government and to my noble friend opposite for this Bill. Obviously it closes a gap which was left inadvertently in the Government of India Act, and it will give powers to the Provincial and Federal Governments of India which they require. I gave notice to the noble Earl that I 768 was going to ask two questions. They are, as I understand them, more of a domestic nature, and they really lie within the province rather of the Governments concerned in India. Nevertheless I think that it is worth while to ask them. First of all, however, I would say that we welcome this Bill because we hope that it will do something to bring back into the general coffers of India some part of the very large war fortunes which have been made in India during the present war. Fiscal conditions in India have been very different from those which have obtained in this country. They have in fact been rather more like the conditions prevailing in this country in the first world war, and enormous fortunes have been accumulated.
Now as to the two questions which I have to ask. I presume that these taxes are scaled up, that there will be a certain limit, and that the small estates will not be mulcted. That is, of course, a general practice and I take it that it will be followed. The second question relates to the exemption of the estates of soldiers and sailors killed in the war. I presume that the general practice followed in this country will be followed in India in the case of the estates of Indian soldiers and sailors also. There is another matter which I did not mention beforehand to my noble friend. I presume also that levies on agricultural estates will be such as not to displace cultivators. If the levy is too heavy on land passing on death, the successor who may represent a family which has been for many generations on the land may have to sell out. That I think would be a pity on practical grounds. I have always been opposed to Death Duties, not on principle, but because of the way in which various Chancellors of the Exchequer have used them. They are levied on capital, and they have been used to meet current expenditure. That is, in effect, living on capital, and we see the results to-day. I hope that the Government of India will learn from our bad example and our bad experience, and will use the proceeds of these Estate Duties for capital purposes in India on which such expenditure is certainly desirable. Having mentioned these points I would only add on behalf of my noble friends that otherwise we are very pleased to support this important little Bill.

§ THE EARL OF LISTOWEL
My Lords, I should like to thank my noble friend Lord Strabolgi, speaking for his colleagues, for the support which he has given to this measure, and for the assistance which he has provided for the speedy passage of the Bill into law. The terms of the Bill that will be introduced into the Central Legislature in India when the Government of India are in a position to exercise this power are, of course, a matter 'or the Government of India to decide. But I can assure my noble friend Lord Strabolgi that the specific points which he mentioned will be referred by me to my right honourable friend the Secretary of State, and I have no doubt that he will pass them on to the Government of India. I repeat that I am grateful to my noble friend and his colleagues for their support.