J. B. CONDLIFFE.]

107

B.— 5

If you will take the rates of interest on various forms of investment in Great Britain anil compare them with the pro-war rates, you will find that the rise in interest in Croat Britain is practically the same as the rise in the rate of interest in New Zealand ?—Quite. So that in England you see, where there is no company-taxation, you have the same rise as you have in New Zealand, where there is company-taxation. Does that not go to show that companytaxation does not affect the rise in New Zealand. ? I think the rise is almost identical. Take New Zealand securities, for instance—the price of our securities in London and the price here ? —lt is almost exactly the same.. You will find that the rise in the rate of interest throughout the: weirlel for similar classes of undertaking —that is to say, where you have not got to make an allowance for insurance of risk —is practically the same. It is practically the same in Australia, Great Britain, and here ?—Does that indicate that the rate of interest on overdraft for merchants and the rate of interest on mortgage here is the same as in Great Britain or has changed in the same way ? What I say is that the proportion of the rise is the same in the three places ? —I have not sufficient facts to say whether it is exactly the same. Do you think you could look into that ? —I do not know whether I could do it. Ido not think ■ I have all the relevant material. Supposing that the facts as I state them are correct, would not that rather go to show that the extent to which company-taxation has affected money rates in this Dominion is very small indeed ? —■ It would, yes. There is another point, if I may say so, in connection with the banks. The banks, while not perhaps a close monopoly, have something perhaps in the nature of a monopoly, and they may already, in the ordinary way of monopoly profits, be making almost as much as the market will stand, consonant with the business interests of the community ; and therefore they may pay a part of the tax from that point of view, according to the ordinary theory of monopjoly value and the taxation of it. Mr. Begg.] You said that in your opinion company-taxation is a contributing factor in the high cost of living ? —Yes. That is a factor that is more or less under our control ?—Yes. Are the other factors contributing to the cost of living under our control ? — The other factors in the rise in the cost of living ? The existing high cost of it ? —Of course, they all arise from the economic organization of the country. If you make a change in the economic organization of the: country you change the cost of living. The incidence of company-taxation could be altered if the country wanted to do it, and in that way it would partly reduce the cost of living, in your opinion ? —Yes, but not to any very great extent. Other factors, I take it, are almost beyond our control, as, for instance, the cost of our imports ?— Yes. And also the cost of eiur exports; that is automatic too, is it not ? —Yes ; but, of course, wages and matters of that kind are largely regulated and under control. You could not give us any idea as to how far, in your opinion, these different factors affect the cost of living ? —No, I should not like to venture an opinion. Mr. Shirtcliffe.] On the question of the incidence of taxation as between large and small shareholders in cemipanies, I suppose we may take it that a small investor—a man with, say, £1,000 —puts his money into a company for the purpose of obtaining a dividend that he could not possibly get in any other way. He looks for some higher return than he could get by handling that £1,000 himself ?— Yes. He piuts his money into the company and he gets, say, a 10-per-cent. dividend. He is enabled to do that by combining his small capital with the very much larger investments of the big shareholders, and it is really their larger investments that enable him to get his dividend, because they form the bulk of the working capital ? —ls that the case ? lam supposing a case. I suppose that that really does apply to a good many companies. He gets the same rate of dividend-—say, it is 1.0 per cent. —as the biggest shareholder in tho company. He gets a dividend at a higher rate than he could obtain himself. Do you see that he is suffering any injustice in obtaining the same rate of dividend on his £1,000 as the: big shareholder who perhaps has £20,000 in the company ? I know of actual cases where there are such large: and small shareholders. Do you feel that the small shareholder is suffering any injustice ? —Yes, I think he is. In the first place, your case, while it may occur in practice, is supposititious. One could easily produce a case where a great number of shareholders put small amounts of capital together, and by combining they are able to get the advantage of large-scale operation. I have already said in my statement that I think that for the privilege the law gives them they should pay some taxation. But what I object to is the graduation upon the company as an individual, insteaei of upon the individual person. I was wanting to get your view. It is said by some that the small shareholder is at a great disaelvantage as compared with, the large shareholder, because he is paying the highest graduated rate in the same way as the big shareholder ; but, on the other hand, some people say that the small shareholder can have nothing to complain about because he gets the same rate of dividend as the big shareholder, a rate of dividend presumably that he could not get if he handled his money himself ? —Then, the operation of the tax clearly means, I think, as one can see from the diagram that I have produced, that the opportunities for investments of that kind are going to become fewer. The operation of the tax is pressing hardly upon companies of that type, and therefore it means that the channels for investment by the small investor are going to be less. You know that the registration of companies is going on very steadily. During the past five years there have been one thousand three hundred private companies and nearly five hundred public companies registered ? —Yes.