I am afraid that is the sum total of my knowledge of Swedish. Passing from that to Article 1, sub-paragraphs (2) and (3), I presume that the English there is purely a translation of the words that follow, which I shall not attempt to pronounce. I have no doubt whatever that the Revenue Commissioners here, in considering Swedish law, will have taken note of the fact that there they seem to have a specific tax on public entertainers. I trust the Minister will not try to follow them in that respect in our next Budget.
There is also a provision that movable property will be considered as taxable in the country in which it is situate. I should like the Minister to tell me whether movable property in Sweden is construed, in the terms of the Agreement, according to our law or according to Swedish law. There is something known as a "Jersey mortgage" which according to Jersey law is movable. I am afraid that, whether or not it is construed according to our law, there may be a conflict where something has to be determined as within the definition in one country and not within the definition in the other. What exactly happens under this agreement then?
If the definition in Swedish law of movable property is different from our definition, is it the case that if the article so to speak—be it a mortgage property itself—is situate in Sweden, Swedish law will prevail, and if it is situate in Ireland Irish law will prevail? If the law is different in the two countries, is there some type of compromise, or will the agreement not operate at all?
So far as I can see also, this agreement refers solely to persons who are resident in either of the two countries and who are not resident in both. It seems, therefore, that the question of double residence may arise and I am not clear as to what happens in that case. The clause which appears to govern it is paragraph (c), Section 1, Article 2, which refers to residence in Sweden and residence in Ireland, as applying respectively to any person who is resident in one country and not resident in the other. What transpires if there is double residence?
I find it a little difficult to follow these references to the agreement being operative by way of credit, by way of exemption, and by matching credits. I should like, therefore, to be clear as to whether the effect of these provisions, which I think are entirely new in any double taxation agreement, is, so to speak, directly opposite to the principle enshrined in the British 1952 Finance Act. As I understand the situation now, in that Act the operation of double taxation relief is specifically restricted to the tax actually suffered by the company in Great Britain. It is not possible under that Act to obtain refunds or relief by way of credit here for tax that has not actually been paid to the British authorities; and that our double taxation agreement so provides. In this case it would seem that we are to take into account not merely the tax suffered in Ireland but also the tax that would have been suffered were it not for the remission by way of specific industrial incentive to which I referred earlier. If I have correctly understood the position, I think, without question, it is an advance, and perhaps an advance which the Minister, having got it through in the case of Sweden, might now endeavour to extend into the British, Canadian and American double taxation agreements.
I do not know whether there is in Sweden the same system of individual taxation, for individuals, arising from dividends paid by companies. Here, as in England, of course, the dividend that is paid by a company is paid with deduction of tax; the tax has, in fact, already been paid by the company concerned. It is treated here, therefore, as being income already subject to tax before receipt by the recipient. I do not know whether in Sweden the same principle applies as between company taxation, on the one hand, and individual income tax on the other. I think I am correct in saying that it does not apply in the United States of America; in the United States of America exemption is given for only part of the tax suffered by the company before the individual draws his dividend from it. The operation, therefore, of that part of the agreement must depend entirely on the manner in which the general structure of Swedish income tax is made out.
The State capital tax in Sweden is exempted in so far as anyone here is concerned but, as far as I can understand it, only if a company here does not set up a branch in Sweden. I want to be quite clear now as to what is involved in setting up what is described, I think, as a permanent establishment in Article 2. The display that is organised, for example, by Coras Trachtála for goods in another country, or for the exhibition of goods in another country, seems fairly clearly to come within the exemption included in paragraph (a). Supposing we decided that it would be in the general interest for Coras Trachtála to open in Stockholm a permanent place of exhibition on the lines of the exhibition house in London—I cannot remember the name of it at the moment—operated by Coras Trachtála there, would that have the effect that anyone who took part in that, and ran a business in it for a week, a month, or whatever it might be, would thereby be outside the terms of this agreement?
It seems to me difficult for a firm to display, or even to deliver goods or merchandise, and equally to store goods or merchandise, without having some sort of office facility for the taking of orders, the issuing of merchandise, and even the organisation of the display itself. I am not clear, therefore, whether the very specific statement, that the permanent establishment includes an office would override the provision in the phrase "permanent establishment shall not include display".
The general scheme in which Coras Trachtála has been operating has been to do the promotional part of getting together Irish industrialists and getting them to run jointly displays, exhibitions, and so forth, in other countries. It may well be that, as part of its general work, Coras Trachtála might well decide to have a permanent office in Stockholm. If it does, are we clear that the fact that it has a permanent office, and the fact that people giving the display are subscribing to the cost of making arrangements, as they do, means that the exemption from Swedish tax to the manufacturers here will continue to apply?
Apart from the explanatory note, I think it is a pity that there is not attached somewhere to the agreement, or to the Order, a table of contents, or an index. It may be intended to incorporate such when the final printed copy is issued. This is a long Order, a complicated Order, and one in respect of which a table of contents, or an index similar to that which is incorporated in an Act, would be of tremendous assistance to those who must refer to it from time to time. I think there should also be a somewhat more explanatory note available after the agreement is ratified. The explanatory note is certainly helpful but I think it could be supplemented by slightly greater detail, and possibly there is some more detailed summary in the Minister's brief which would be of great assistance to anyone who had to consider the terms of it. Such a supplementary memorandum could easily be included, subject to the note that is to be found in the existing explanatory note, which sets out that while it is not part of the Order and, therefore, is not binding, at the same time it includes the general purport.
As we are on this question of double taxation relief, perhaps I might be permitted to ask the Minister if there are official explanatory memoranda issued dealing with the effects of the Canadian and American agreements? I cannot remember if there are, and I should also like to ask are there any other double taxation agreements under negotiation? France is a case where such an agreement clearly seems to be needed. Now that some French companies are setting up factories here, it would seem to be necessary and desirable that we should endeavour to negotiate a double taxation agreement with the French authorities so as to provide the same facilities for residents in France who may start manufacturing operations here as we are providing in this agreement for residents of Sweden. Germany, of course, is a similar case in point.
In saying that I do not want to be unfair to the Minister or to the Revenue. I want to make it perfectly clear that I accept without question that the negotiation of a double taxation agreement with any country, particularly one that has a different system of taxation from ours, is a matter that requires an immense amount of ground work before one can get down to the real negotiating end of the bargain. Therefore it is a thing that cannot be done perhaps as quickly and as speedily as everyone would like.
I should also like the Minister to tell the House whether there is any form of subsidiary body to O.E.E.C. in existence which endeavours to iron out taxation differences between one country and another? Is it possible through O.E.E.C. to arrive at some system of what one might term a standardised form of double taxation agreement? It may be, however, that the systems of taxation in all countries are far too different to provide such standardisation, but whatever our individual views may be in Ireland, it does seem that we are moving forward to the concept of there being a greater flow between one State and another in Europe in trading matters. The establishment of the Common Market, E.E.C., the negotiations leading up to the E.F.T.A. and the fact that the Taoiseach said that we were considering the implications of joining G.A.T.T., to which I referred last night, all make it clear that there will have to be many more double taxation agreements between countries than were necessary up to this.
If that is so, and I think everybody will agree it is, would it not be desirable that we should be in the position that there should be some standardisation in the form of double taxation agreements, sponsored by O.E.E.C. or some similar organisation, though I cannot say what other organisation there would be, which would make negotiation of these arrangements very much more simple in the future? The Minister is in a strong position to take such a line because in this agreement we have gone further than was possible before.
As I understand it, the credit system has meant that we have got here the right to offset in Sweden not merely taxation suffered here but tax that might be suffered if we had not got the incentives provided by the Finance (Miscellaneous Provisions) Act, 1956, which I introduced, and which was extended and improved by the present Minister in subsequent legislation. Having got that principle accepted here it would seem to be desirable, and almost essential, that we should go one better and endeavour to get that principle accepted in relation to other countries with which we are bound to have far greater trading relations in the future. Of necessity, when one is to be involved in more intimate trading relations, more intimate taxation arrangements have also to be made.
