Ri FINCH.]

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Take, for instance, the farmer who has 200 acres and grows 100 acres of crop : do you allow for depreciation of the land ?—He is allowed to manure his land. But he may not ? —Then it is injudicious farming. A great deal of farming is injudicious. Do you not think it is extremely difficult to distinguish between capital and income return in agriculture ?—No. Would not it be possible for a farmer to show no income for ten years and be improving his land all the time ? —Yes. Would he not be escaping income-tax and be building up his capital ? Personally I think it is almost impossible to get accurate returns from agricultural lands. Do you think it is as possible to get as reasonably accurate income statement as from a business ? —Yes, because it is spread over a period. The provision to carry forward losses over three years enables it to be done. You know the rules relating to landlord and tenant and the trouble there has been to define the rights of each ? —I have never studied the subject, though I have seen it referred to. You think it is quite possible to get reasonably correct income-tax returns from agriculture ? —■ Yes. Mr. Shirtcliffe.] Mr. Begg drew attention to the fact that some large insurance companies have been withdrawing their investments from mortgage securities and piutting them into tax-free securities. Do you think that the slump in the value of rural lands and the uncertainty in regard to their values during the past few years has had anything to do with that? —I should say it is extremely probable from an ordinary investment point of view. Because the securities were more or less uncertain ? —Yes. So that it is quite likely that because the investments in mortgages have been uncertain they have preferred to put their money into tax-free securities ? —Yes. Mr. Hunt mentioned that most shareholders in companies took up their shares under the old system without the knowledge, that they would have: to pjay graduated tax. Well, I just want to put it this way to you : during the past five years, since 1918, there have been registered 1,307 private companies and 476 public companies. In the last year, 1922, there were 106 public companies registered with a nominal capital of £11,000,000. Mr. Hunt: They were mostly small. Mr. Shirtcliffe.] I am not referring to the size of the e;ompanies ; but does that seem to indicate that shareholders and investors are becoming shy of putting their money into companies, either private or public, because of the graduated income-tax ? —I should say not. With the present system of collecting the tax from the unit that makes the profit ? —I should, say not. Malcolm Stevenson examined. The Chairman.] You are a carrying contractor in Dunedin, Mr. Stevenson ?—Yes, and I have also a farm which I run in conjunction with my business. I have prepared the following statement of my views, which I will read to the' Commission : — 1. Income-tax paid by Farmers. —I understand that if a farmer owns the freehold he is exempt from taxation on income. If he owns a farm —of which he has the lease —he has got to pay incometax. If this is a correct statement of affairs, as I happen to be a leaseholder and piay income-tax on my farm I fail to see because lam a leaseholder why I should pay income-tax. Although my lessor pays land-tax I pay income-tax, and yet he does not. He derives that land-tax from me. Hence I fail to see why because a man is a leaseholder with a farm he should pay income-tax and the freeholder should be exempt. 2. Unearned Income. —I own certain house property which I lot to tenants. After allowing for collection of rents, depreciation, and interest, I consider that I get barely 2j to 3 per cent, on my capital. On this lam charged unearned income-tax. I fail to see why this should be so, considering the shortage of houses at the pjresent time. I also own some war bonds. On these I would not mind being charged unearned income-tax, because here you have no depreciation, no trouble, collecting your money, and no rent-restrictions. Not only that, but many a time a tenant will let you in for a month's or six weeks' rent. While on that point I would like to mention another matter in connection with which I have got into conflict with the. Valuation Department. lam the holder of land from the Otago Harbour Board. I have a valuation which shows the capital value at £1,650. The owner's interest in the unimproved value is £1,050. The lessee's interest in the unimproved value is £95 ; hence lam asked to pay land-tax on £95. I have got to thresh that out with the Valuation Department. This is not the first occasion on which we have had to pay the tax in connection with leasehold land. Are these the only points you wish to lay before the Commission ? —Yes. Mr. Hunt: In regard to the tax on the leasehold, that is wrong, is it not, Mr. Clark ? Mr. Clark : The position is that the only income-tax payable by the occupiers or leaseholders of land is where they have live-stock or produce, and where the land held is insufficient to produce the tax. It is only intended to apply to dealers. The leaseholder as a leaseholder is not liable for income-tax. If he is letting the properties and he is getting more than 5 per cent, on the taxable value he is liable. Witness: I carry on the farm as part of my business. The whole of the farm-work is in a separate account. The teams are charged up to the farm the same as if they were ploughing for my neighbour. On that we have to pay income-tax. Mr. Clark: No. Witness : That is my reason for bringing it up. This is a burning eiuestion with quite a number of people, and we see a great deal of correspiondence about this matter. If we show a profit of £300 on this farm we have got to pay income-tax.

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