A. CLOTHIER.]

93

8.—5.

Do they have company-tax there ? —No. lam speaking now of forty-five years ago. They did not in those days. Had you anything to do with the financial management of the company ? —I had. I was in the secretary's office there for some fifteen years, and as a yeiung man I had much to elo with the finances of an undertaking which is almost as big as the Government of New Zealand. You say in connection with e-,ompany taxation that it comes to such an infinitesimal sum per share that it hardly counts ? —Speaking generally. You cannot individualize', you know, in these; things altogether. There arc cases I know in which a small e;eimpany has been successful and the tax has be:cn ve;ry severe. In one instance to my personal, knowledge the tax paid by the company in one year was equal to half the capital. That company was making a very large profit ?—The tax was based on the profits. Take a large company that makes a gross profit of 10 per cent. It would take 3 per cent, of the 10 per cent, to pay the tax at the present rate. That would reduce the profit to 7 per e:ent. ? — Yes. Would you call that an infinitesimal sum that woulel not be felt ? —Spreaeling the tax over each share, the amount of tax paid comes to a very small sum. But it conies to 3 per cent., assuming a profit of 10 per cent. ?—Yes, on the total investment. You would not call 3 per cent, an infinitesimal sum, would you ? —lt is not a large, sum. If I borrowed a sum of money from you at 6 per cent, and only paid you 3 per cent., woulel you call it infinitesimal ?—I might be glad to get even that! Mr. Shirtcliffe.] You quote an instance here, in connection with land-tax, of the effect of aggregating the leasehold with the freehold, and you show, in the instane:e you quote, that A had to pay £276, instead of £55 which would be the: graduated tax on his own freehold? —That is so. Sei that he was paying £221 on his leasehold land ? -Yes. I presume he, would take up that leaseheilel land with the: knowledge that he hael to pay the, graduated tax ? -No. That land was taken up befeire the, Finance Act of 1917 was passed. In that respect, of course, it would be a hardship on him owing to subsequent legislation ? -Yes. But if a man were taking up leasehold land to-day he woulel calculate the rent he was able to pay and the tax he: woulel have to pay ? —lf he was well advised as to the tax. But the position, so far as this section of the Act is concerned, is this :itis so little known generally. Even the; profession know nothing of it. So that as to ael vising a client you will find, in effect, that there is scarcely one; person in a thousand that, would take it into consideration. Then the hardship on the man taking up leasehold property lies in his lack of knowledge of the Act ? —Lack of knowledge on the part of his adviser, for which he has to pay. You moan to say that his advisers, who make this sort of work the-ir job, are, not able to advise him on that point- —one of the: most important points in the Act ?- 1 do not think more than one in a hundred knows of it. Now, with regard to income-tax : do you favour a graduated income-tax at all ?—No, 1 cannot -ay that I do. I consider that if a man has a large income he has also large responsibilities, and in other ways he has to perform his duty to the State. Do you think that a man making £50,000 a year shoulel only pay the same flat rate as a man making £500 taxable, income ? —So far as I am aware there arc very few individuals making large sums of that kind. But take: a man making £10,000 a year; he docs more' in proportion for his income than a man who is only making £1,000. You think it is fair that the man who is making £10,000 to £20,000 a year should pay only the: same flat rate as the man who makes £1,000 a year ?—Yes. And there is another thing which impels me to that conclusion, and this is the result of my personal experience amongst taxpayers for many years, bo.th here and in the Old Country too. If you can equalize the tax as far as possible: the taxpayer is very much more ready to accept the position. As I indicated in my memoranelum, almost the whole trouble over taxation, in this part of the country at all events, is that A's neighbour is getting out of it while A has to pay. That is the reason why I suggest that the penalty for failure to make a return shoulel be very substantially increased. Keep to the question of the graduated tax just for a moment. I gather that you elo not favour the levying of taxation on the principle of ability to pay ae:cording to income:. You see, a certain amount of money has to be raised for the country's needs, and that is one reason why the, graduated tax is kept in force. You are not in favour, 1 gather, of the man with a large; income being made to pay more in proportion than the man who makes a small income, be:aringin mind the country's needs ?- — The country's needs could be met by a very small increase, in the rate. The flat rate ?—Yes. Would not that bear hardly on the man with the small ine:ome—much more hardly than on the man with the large: ine:onw: ? For example, suppose a fiat rate of 2s. in the pxiund. A man making £1,000 a year would have to pay £100, while, a man making £10,000 would have to pay £1,000. It would be much easier for the man making. £10,000 to pay £1,000 than it would be for the man making £1,000 to pay £100 ? —Not always, I think. 1 had a very wealthy client in my office yesterday who was short of money. Mr. Shirtcliffe (to Mr. Clark) : With regard to Mr. Clothier's suggestion about the penalty, which seems to go in the right direction, is it right that failure to make a return entails a penalty of only 40s. ? Mr. Clark : That is the minimum. It goes up to £100. Mr. Shirtcliffe : A solicitor was fined £10 only this week in Christchurch. Mr. Clark: It is in the discretion erf the Magistrate. Mr. Shirtcliffe (to witness).] I gathered from your statement that you thought 40s. was the maximum ? —No. I used the, word minimum. Mr. Clark : If the failure to make a return is wilful, for the purpose of evasion, after the Magistrate has dealt with the case I can impose a penal tax —three times the amount of the tax. And that is frequently done.