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8.—5

W. GOW

individual taxatiem adopted. But while on that point I will go this length : I will admit that there are privileges connected with companies, and I know that some hold very strongly that the taxation eif a ceimpany as an entity is the correct view. Ido not hold that. lam epuite prepared to admit that there are a sufficient number erf privileges attached to the trading-power of companies to warrant a moelerate company-tax being maintained. A very moderate company-tax might be maintained, as is the practice in some other places. I think that is the practice in Australia, is it not ? There is a moderate company-tax, which may be conceived as a tax upon the privileges of a company as compared with a private trader. But for the bulk of the taxation of members of companies it shoulel be inelividual ; it shoulel be charged, to the: individual. Anel I. do not know that the loss would be so great as is sometimes estimated, because an enormous number of people have a certain amount of income from companies and a certain amount of income from private sources —perhaps their private efforts or their salaries or something else—and the aggregation of the two for taxation purposes would bring them into the higher scale upon their whole income. Therefore I do not think that the loss woulel be so great as has been feared if tho change were to be effected. That is my opinion on company taxation. The taxation should be upon the inelividual. The privilege attaching to the ceimpiany might be covered by a reasonable company-tax. Mr. Shirtcliffe.] It would be a privilege tax ? —Yes ; in the same category as the land-tax. It would be a privilege tax. Ido not know whether there are any other privileges which might be taxed, but they are not under our purview at present. Mr. Begg.) You mentioned that the company-tax suited you : do you mean that it suited any one whose income is derived from dividends ? —I would not like to go so far as to say that it suits every one, but it suits me, whose income is derived from dividends. Because the company pays the tax and they get it free of tax ? —They pass it on. But if shareholders get their dividends free of tax, if company taxation were abolished, would not they not only get that dividend but also what now goes to the Government in the shape of tax ? — No ; competition will regulate that. You think that a company earns more when it has to pay that tax than it would if it did not pay that tax ? —lt makes up its mind to earn that tax more. The position is that capital always seeks the best investment. For purposes of revenue you cannot find capital unless you can give it something better than the ordinary investment rate. If you want capital to carry on a business —and every one wants capital to carry on a business, either his own or some one else's —you have got to provide for the capital a rate somewhat better than, say, the price of loan-money, which may be 6 per cent. Unless you can show shareholders that by leaving their money in your business they will get more — say, 7 per cent, as a minimum—then they will not put their money into the business, but will invest their money in mortgages and loans. Then the only corrective asserts itself : as soon as the money market gets so flooded with this money that investors cannot find investments for it, immediately tho price of investment-money goes down, and instead of being 6 or 7 per cent, it may go down as low as 4J per cent, or even lower. Whenever that stage is reached people will come back and say, "We can make 7 per cent, in business and so we will find the investments for our money in business." Money goes into businesses when businesses can produce more than investments. Money leaves businesses when they will not produce as much or as safely as in investments. That, I think, is obvious. The consequence is that a large company particularly, and even a small company, seeks to encourage the investment of capital by keeping up the rate of its dividends, and this applies more to companies than to private individuals. Private individuals may be leisurely inclined. They may be all right as far as their positions go, and they may not need to worry about making more than, say, 5 per cent. ; but the manager or the elirectors of a company are in the position that unless they can show their shareholders that they can give them something better than the investment rate they will find their shares dropping, and their company will go into liquidation. Consequently, if there is going to be a tax which is the equivalent of 3 per cent, on the income of that company, then they will have to pay better in order to pay shareholders 7 per cent. The shareholders will growl otherwise, and will take their money out. They have to get it, and we are told that it does not pass on. Well, I would like to say that in every case it does pass on. Some pjeople are unfortunate enough not to be able to pass it on, but it does pass on in practically every case. You may say that it does not pass on directly. For instance, a firm does not put down on the end of the invoice it sends you, " Your proportion of the income-tax is so-much," but it takes jolly good care, in reckoning what it can sell its goods for, that income-tax is taken into consideration, and necessarily the cost of the goods is higher. That money has to come from somewhere. The: shareholders will not part with it. They want their 7 per cent. The wise manager charges more for his services, the legal profession charge more for their services : in every case men charged more for their services or for the goods they sell. They certainly do pass on thp tax. It does not come out of the shareholders' pockets. Remove that tax and. immediately the competition of one business with another will bring things back to something better than the investment return because of the, increased risk of the business. That continues all the time, and no legislation, nor any human scheme, will avoid it, because it is human nature. Mr. Shirtcliffe.] We, have had evidence this morning from a leading manufacturer and with a wholesale and retail business, and he was most emphatic in his statement that it is impossible to pass on the tax. Mr. Hunt: Only in the retail trade, he said. Mr. Shirtcliffe : He was very emphatic that as regards the wholesale and retail side of his business it was impossible to pass on the tax, that they bought and sold to the best advantage, and made the profit which the market conditions would give them, and that at the end of the year they had to proviele a certain proportion for income-tax : you disagree with that ? —There are many people

12— B. 5.