D. G. CLARK.]

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not be possible to say that. It depends on the proportion between the amount paid and the amount retained. At all events, the company is finding something over 4s. 6d. in the pound on the profits ? —Yes. Supposing that you were to let corfipanies off altogether and assess simply on the, individual, woulel you be able to get the income with the present rates ? —Oh, no. That stands te> reason. You have a certain amount of income assessed at present. If you arc going to let a certain proportion of that income off altogether —I am talking now of the taxable balance —or be assessed at a reduced rate, you must assess the balance at a higher rate to get the requisite revenue. The Chairman.] What rate would you require to impose ? —We would require to impose at least as high a rate as is imposed in England or Australia —probably a higher rate, because they are older and more highly developed countries, and they have a larger proportion of individuals obtaining good incomes from investments than we have here. Mr. Weston.] Probably the rate would be nearly doubled on incomes between £500 and £2,000 ? That rate would be practically double what it is at present ? —Quite double, I should think. You have tested that, have you not ? —We: tested it some years back. What do you anticipate from your suggested scheme of taxation ? What reductions would you be able to make in the present rates ? —I think we would come to a maximum of 4s. 6d. quite easily. It means that companies would pay a maximum of 4s. 6d. ? —Yes. Which is the rate that the companies are now finding in Great Britain ? —On their undivided profits. And how would that 4s. 6d. compare, with New South Wales, for instance, in company taxation ? —The New South Wales rate is about 2s. or 2s. 6d., I think, Federal and State ; and then in addition the dividends are assessed in the hands of the shareholders. The Chairman.] Dividends arc only assessed in the hands of tfte shareholders for Commonwealth taxation, not by the State ? —No, not by the State, just for Commonwealth taxation. I had a comparison of the New Zealand and New South Wales rates up to £4,000 of income from property. It showed that where ours was about £750, the New South Wales tax was over £1,100. There is a difference of about £400 at £4,000 income. The Australian rates were set out in one of the Sydney papers when showing the effects of the latest amendments in the Federal Act. I can give that to you —a comparison of the rates. Mr. Weston.] Do you think that the rates as they existed two years ago had got to a height that was beyond safety in taxation ?—Yes, I think so. They had got too high ?—I think so. So that in the interests of the; Dominion it was absolutely necessary to get them down ? —Yes. Even if you get them down to 4s. 6d., is there any reserve of taxation for a sudden emergency ? — I think our income-tax has shown itself to bo wonderfully elastic. An estimate of the maximum that could be raised in England in income-tax before the war I saw stated at £90,000,000. As a matter of fact, the combined income-taxes went up to over £400,000,000-- in the region of £500,000,000. Ours went up to £8,000,000-odd. There was an absolutely unnatural business activity —an abnormal business activity ? —Yes. Due to the expenditure of huge sums of borrowed money by the State ?- That was so. But in normal time do you consider that a maximum of 4s. 6d. leaves much reserve ?—lf we could increase it in normal times ? No ; I think our object should be to get lower than that as soon as ever we can. When we had the two taxes in 1917 the maximum of our ordinary income-tax was 3s. in the pound. The war-tax was assessed on the same graduation, with an addition, making it 4s. 6d. The idea was that as soon as possible we should drop the war-tax and come back to a maximum income-tax of 3s. in the pound. Take the case of a man at the present time who is subject to heavy taxation, and who invests in 4|-per-cent. tax-free bonds. The advantage of those bonds being free from taxation is paid for by the man investing in them in the price he gives for them ? —Yes, I suppose so. He says, " I prefer 4|-per-cent. bonels free of taxation to a 6|-per-oent. mortgage " ? —Yes. Mr. Shirtcliffe.] That depends on tho price he pays for them. Mr. Weston.] It is allowed for in the market price ? —Yes. And it is the same with the price of companies' shares : it is allowed for in the market price ?—Yes. So that although nominally he appears to be escaping taxation really that man is not ? —Not if he comes to sell. The argument that taxation cannot be: passed on depends upon the, same taxation being placed on every branch of industry ? —Yes. And under our present system of taxation, including that of companies, the taxation is on every branch of industry ? —Yes —well, with the exception at the present time of the income from land and the income from debentures. Mr. Shirtcliffe.] I would like to get your views, Mr. Clark. There seems to be some diversity of opinion as to the principle involves! in treating companies as separate entities for the purpose of taxation. There seems to be two schools of thought, one that the companies should not be taxed as separate profit-earning units, but that the component parts of the companies, tho shareholders, should bear the tax ; the other school of thought takes the: opposite view, that the companies themselves should, pay the tax. I want to ask you if you agree with some of the advantages that individuals have when they invest their money in companies. I am taking these questions from the Taxation Committee's report. When an individual is engaged in business on his own account he enters into a liability that may exhaust the whole of his resources in the event of disaster ? —Yes. But when he invests money in a company his liability is limited to the amount of his commitment in the company, and his private estate is left uninjured ?—Yes.