FINANCIAL MATTERS

Dominion, Volume 11, Issue 176, 15 April 1918, Page 6

FINANCIAL MATTERS

LOAN-RAISING METHODS EXEMPTION F.ROM INCOME TAX. Then the Committee began to discuss' the freedom-froni-iucome-tax clause. Mr. Himlmarsh was the most active oi>ponont of the system, saying that he considered that it would tend to increase the rate of interest on private loans. Sir Joseph Ward said—and he repeated die statement many times—that this was not so, that it would have ths contrary effect, and that in any case the Government was talcing steps to control rates of interest. Mr. Hinduiarsh said the Minister might fix the rate of interest at, say, 7 per cent. Sir .Toscph Ward: Lower than that. Mr. Ifindmnrsh: Then 1 venture to sny that it will be changed again very soon.

Mr. J. A. Young said that because the War Loan investment free of income tax was such an nttrnctivo one to b?? financial institution',, spine of ilmsn iiisHlii-

lions were selling their mortgages, even at a discount, m order to put the proceeds into uovernmenc stocks.

Sir Jo=epn Ward 'saw that (ho suggestions made that the Uovernment was playing into the hands of big money-lenders was absolutely contrary to fact. Xlie trulli was that if tiie tug lenders did not invest the Government would never get the money. If he Accepted the adyce of some honourable members the Government would run the risk of failure with the ioan. If the advice to offer til per cent, for bun money, the interest being subject to income tax, were accepted, ui a very short time interest rates would rise to 12 per cent. Tito Government was taking power to regulate interest rates and to make the moratorium apply to all future mortgages and also to some mortgages now in existence to which it did noi at present apply. Influence on Interest Rates. iMr. C. K. Slatliam iLnmedm Central) said that it was ridiculous to say tiiac tJio Government's ioan operations -at i[ per cent, tree of income tax did not raise the rates of interest. lie udviscu the Minister to drop this argument, because it was only irritating the llouse. One of tiie effects of attempts to fix the rates of interest at, 100 low a level would be to take- all money out ol the market. One object of the provision to allow parties to contract themselves out of the moratorium was that they could not get the money at all unless they were allowed to do this.

Sir Joseph Ward said that the banK rate was still 51 per cent, for ordinary lending. This "was evidence, that the. rates of interest had not been forced up by the Government's loan operations. The investment was not so very attractive. The loan now on the market was not even yet fully subscribed. He felt it necessary to say that. • The Prime Minister said that when the British Government raised its big thousand million loan it offered it at 4 per cent, free of income tax, or in the alternative 5 per cent, subject to income tax. When tne loan was closed thirty-nine-fortietlis. of the investors had taken up the 5 per cent, slock. At present tho taxation was so high that there was an app'u'ent advantage in the "freedom from income tax" scheme, but very soon after l!i? .war the taxation would drop, and liio advantage, if there was ono, would disappear. If the investment was so good, why was it necessary lor the Finance Minister to tell the House as he had that the loan was not being filled? It wou'i: b'. a different matter if the Government were offering the loan on terms such as were offered by the Canadian Government— 51 per cent, free of income tax. More Direct Methods. Dr. Newman said that in his opinion the Government- should make a fixed cliargo on people's means and havo dune with it, iustead of offering inducements/ to people and making appeals to them to subscribe. Whilst wc had taken men away from their homes and families, the Government should not hesitate to propose that other men should give of their wealth. He was sure that if ell the war loans wero raised free of income lax there would bo after the war about SO or !J0 millions ol untaxed wealth, and this would never be toler.ated in times of stress such as would be sure to come. He believed that soonor or later there would be something i» the nature- of a wealth lis. A division was called on the clause. It was retained by 10 votes to 18. The Compulsory Clause, Tho Committee proceeded to discuss Clause 16, relating to compulsory subscriptions, and certain amendments thereto proposed by the Minister. One of these amendments fixed the maximum contribution any person could be called upon to pay at six times tho yearly average of income tax paid in the three years ended March 31, IMS. Another gave the Government power to compel agents of absentees to .subscribe. Still another provided for appeal lo a Supreme Court Judge in Chambers against an assessment for compulsory contribution. A clause of doubtful meaning was made more definite. It was not clear in tho. Bill whether payment of the double income tax penalty w.ould excuse a person from contributing to tho loan. The amendment made it. clear also that the Commissioner of Taxes should have power to collect by legal process tho amount specified as his compulsory contribution. Still another amendment provided for the Minister of Finance retaining moneys subscribed compulsorily, even if they raised the loan total above /the authorised amount.

Replying to a question, Sir Joseph Ward said-that a, man who had subscribed to the limit of his means to one loan would not be required under compulsion to subscribe to a succeeding loan. ■ The clause was passed with all the amendments as proposed !>y the Minister.