19. "That so much of the dividends received by the National Debt Commissioners on securities held by them for the purpose of Part VI of the Supreme Court of Judicature (Consolidation) Act, 1925, as in the opinion of the Treasury is not required for paying the sums payable by the Commissioners under that Part of that Act and for providing against depreciation in the value of those securities shall be paid into the Exchequer from time to time as the Treasury may direct."
The Resolution is to give authority for the introduction of a Clause in the Finance Bill extending the existing charge of Estate Duty from personal property other than leasehold situated abroad when that property passes upon the death of a person domiciled in this country. It deals with a loophole in the existing law by which liability to Estate Duty can be avoided by the transference of assets abroad. Estate Duty was first imposed by the Finance Act, 1894, and the charge of Estate Duty made in Section 1 of that Act was an absolutely general charge on all property, whether real or personal, settled or unsettled. But it was obviously felt at the time that some limitation of the generality of this charging power should be effected in the case of property situated abroad, and for that reason Section 2 (2) of the Act provided, in brief, that property situated abroad should not be chargeable to Estate Duty unless it were at that time chargeable to Succession or Legacy Duty. That makes the test as to whether or not property situated abroad is chargeable to Estate Duty the answer to the question, is it chargeable to Succession or Legacy Duty by the law existing in 1894?
That is the present position of the law in brief, and this leads to certain differences in the treatment of property situated at home and abroad for the purposes of Estate Duty, and the purpose of the Resolution, and the Clause that will follow it, is to equate the position for the purpose of Estate Duty between property situated abroad and at home. The differences that exist at present are as follow: In the first place, if what is called by lawyers a gift inter vivos, that is to say, a free gift of his property by a living man, is made, it is not relieved from Estate Duty unless it is made more than three years before the death of the donor. That is the legal position with regard to property situated at home. With regard to property situated abroad, the position is otherwise. Owing to the operation of the Statute to which I have referred, the time limit does not apply and the gift is not chargeable to Death Duty.
It is not retrospective. It will only come into force when the House passes the Finance Bill, and it deals with all property that is situated abroad. Of course, the difference that I have explained leads to the position that it is possible for a person who wishes to avoid paying Estate Duty to transform his property into property situated abroad and give it any time before his death and free it from the charge of Estate Duty. That may be done by making a gift of bearer securities or deposits in a foreign bank, or making a gift of securities bought and registered abroad. The object of the Resolution is, in the first place, with regard to that category of case, to make the same three years' limit apply to property situated abroad.
The second case in which there is a difference is the case of a joint investment—property held in two names. When personal property situated in this country is held in two names, the position is that Estate Duty is payable on that portion of the property that passes by survivorship to the other of the joint names, at least in so far as that proportion of it is concerned which is derived from the deceased. With regard to personal property situated abroad held in joint names, no such charge for Estate Duty can be made, and therefore it is possible, by transferring property to a foreign place in joint names, to avoid the charge of Estate Duty on any part of it. The Resolution provides that again the position with regard to property in this country and abroad will be equated, and that the same charge will be leviable upon property held in joint names whether situated abroad or at home.
The third category of case wherein the situation of the property makes a vital difference for the purpose of taxation is the case of settled property. Personal, or moveable property as it is sometimes called, situated abroad and comprised in a settlement is only liable to Estate Duty if it is a British settlement, that is to say, if the forum of administration is Great Britain. If, on the other hand, it is a foreign settlement, if a person vests property in a foreign trustee and makes the forum of administration a foreign country, there is no charge of Estate Duty upon it. When one contemplates the sort of case that arises in these circumstances, where the settlor is domiciled in this country and where the ultimate beneficiary is domiciled in this country, and where nevertheless the forum of administration is artificially made a foreign country, it is quite clear that the only object to be achieved by such a transaction is avoidance of taxation. Consequently the proposal of the Resolution is to make such property chargeable if two conditions are fulfilled: one, that the settlement was originally made by a person domiciled in this country; and, two, that the deceased on whose death the property passed was also domiciled in this country.
That is the general purpose of the Resolution. It concerns only what is called personal property, excluding leaseholds. The reason why real property is not included in it is that it has been a convention in this country and in foreign countries from time immemorial not to make land situated in one country chargeable to the taxation of another country. That is part of what I might call the comity of nations. Secondly, the proposals are limited to Estate Duty. I commend the Resolution to the House. I believe that the avoidance of taxation by means of transferring property abroad is against the desire of this House, and I believe that if we are given the powers for which we ask it will practically cease.
The question about the Isle of Man is one of which I require notice. There are complications. With regard to the other categories, they both, for the purpose of lay remarks, come in as "foreign."
I wish to ask a question about the joint accounts that have been mentioned. If there are two joint holders, on the death of one of them does half of it pass for Estate Duty? Suppose that a husband and wife have deposited £10,000 in their joint names, does the Inland Revenue regard half of it as passing on the death of one of them?
My only wonder is that the law has remained so long in the state in which it is, that people were able to get away more easily by placing funds abroad than would have been the case if they kept those funds in this country.
I wish to echo the last remarks of the hon. Member who has just spoken. I would like also to extend the scope of our wonder. While everyone will welcome the attempt now being made to stop all these very glaring examples of evasion of just responsibility, the Government proposal hardly seems to go far enough. One of the conditions which the Financial Secretary said would apply is that the deceased person should have been domiciled in this country. While the Government were searching for the gaps which existed, gaps through which people who wished to evade their obligations successfully evaded them, is it not amazing that no steps were taken to stop up that loophole of domicile? I am aware of cases in which international complications would be almost insuperable, but there are other cases where the complications would be by no means insuperable. One thinks of the example to which reference has been made. The Channel Islands are not very far away, and the Dominions, I am sure, would place no insuperable difficulties in the way.
We all remember case after case. There is the glaring example of people who have made enormous fortunes in this country out of this country's industry and then, having retired not further away than the Channel Islands, have evaded Estate Duty on their death. In one notorious case an estate of millions of pounds, made under conditions which the country would hardly tolerate to-day, was taken away. The person became domiciled in Jersey and no payment was made at all. That person's widow is now engaged in spending a large part of that fortune not merely in attacking the Opposition for their lack of patriotism, but in holding up even the Government to ridicule for lack of patriotism, and in regarding the Foreign Secretary as a traitor to his country.
I am grateful to the hon. Member for his most illuminating interruption. We all know that there was a. public outcry at the time, and that arising out of that outcry the lady did come and offer voluntarily to give some small portion of what ought to have been a legal obligation. I ought to have given her full credit for that. No doubt it was not even necessary legally that she should do that much. But I suggest now that in this stopping up of gaps the biggest of them is untouched. We would all like to hear that the Chancellor of the Exchequer and the Financial Secretary, are to pursue their investigation a little further. We do not want to take anything from people while they are alive, but when they are dead cannot we get some of it back when they are as near as the Channel Islands?
Question, "That this House doth agree with the Committee in the said Resolution," put, and agreed to.
Eighteenth Resolution read a Second time.
Does this proposal arise out of the complete change called for by the recent legislation with regard to India? Does it mean that in certain circumstances India will pay a compounded duty, as does the Dominion of Canada, on its inscribed stock. Paragraph (b) of the Resolution, in line 9, contains the words "except stock or marketable securities." Why is that exception made?
As my hon. Friend suspects, this Resolution is to some extent caused by the recent legislation with regard to India. The position of Indian stocks with regard to liability to Stamp Duty is at the moment an anomalous and unique one. Some of the stocks are exempted altogether from Stamp Duty by ancient Statutes, and others pay the full Stamp Duty. When the recent legislation setting up a new Government in India was passed, it was resolved that the whole of this anomalous position Should be cleared up, and the effect of the Resolution is to put such stocks as may hereafter be issued by the new Government of India in the same position as Colonial stocks under the Colonial Stock Acts. As I have said, whereas some of the Indian stocks are exempted by old Statutes from the Stamp Duty, others pay the full rates. Those full rates are £2 per cent. in the case of bearer bonds and £1 per cent. in the case of transfers, whereas under the Colonial Stock Acts the rate will be a level 5s. per cent. all round. It is a, matter which, apart from technicalities, might have been discussed when the India Bill was going through the House, but inasmuch as it affects the revenue of this country, it is necessary to deal with it in the Finance Bill. That is the reason for the Resolution.
It should have been made clear that this Resolution will affect only new stocks to be issued under the new regime. Consequently the position which now exists with regard to old stocks will be unaltered. The new stocks to be issued by the new Government in India will be on all fours with the stocks of the Government of Canada and other Colonial stocks.
Question, "That this House doth agree with the Committee in the said Resolution," put, and agreed to.
Nineteenth Resolution read a Second time.
The origin of this Resolution was really in a Committee, appointed by the Lord Chancellor in the High Court, and was presided over by the late Lord Tomlin. The present Resolution and the Clauses to follow it are in accordance with the recommendation of that Committee. I am not aware to what my hon. Friend the Member for Farnham (Sir A. M. Samuel) referred in regard to the Public Accounts Committee. No doubt they dealt with the same matter, but the position is, that the recommendation of the Committee to which I have referred that any sum which is not required to provide a balance for the ordinary day-to-day working of this fund in the Bank of England should pass into the Exchequer. The reason is that the Consolidated Fund is behind all moneys deposited by suitors in these cases, and, therefore, it is not in the least necessary to preserve or to earmark any particular fund to stand behind it. I am sure that the House will agree that there is no reason for the surpluses lying idle and serving no useful purpose, that the Committee to which I referred was quite right, and that these moneys should pass into the Exchequer.