8.—5.

54

[D. G. CLARK.

these; advantages and the: other is not ? —Generally, where that is the case the reason for the high percentage, erf the: small company's earning is that a large part is the personal earning of the directors. There may be exceptions, but generally that is the: case). Into the: smaller company's profits there: enters a large; proportion of personal e:arnings of the direotors. It is very often a family concern where all the: shareholelers are working in the business and directing it. At ail events, you have told us already that you consider the: graduation on the companies is right ?— Yes, as long as it is not too high. I think that the tax lately has been too high to continue, and it is still too high. It wants reducing. But you are satisfied that when taxation has to be increased, increasing on the present system is the most equitable way of doing it ? —Yes, and certainly the most efficacious way. In the event erf abseilute stress and when taxation had to go up until it practically absorbed everything but a barf: living for the community ?—Wo did not get quite up to that. I think it was about half-and-half. You nearly reached that at Bs. 9d. in the; pound ?—That was on the: larger- incomes. It would, certainly put companies out of existence ?—- If you went for any length of time at that rate, that is quite likely. It would not kill an individual, but it would kill a company ?—lt would kill an individual, too, who was engaged in trade. He coulei not carry on a business at that rate of taxation. We had evidence that companies are becoming more: popular as a public investment ?- Yes ; the: advantages of corporate formation for trading are so great that I quite expect that tendency to ge> em. Is there; not some indication- in that that the whole: weight of the taxation does not fall on the company ?—No. It appeared to me as an indication that by some means or other,these companies were escaping their full share ?—No. Or were capable of making some one: e:lse pay for them ?—-No, I do not think so. Tt seems unreasonable to expect that large sums of money would be put into a form of investment in which probably the maximum tax would be imposed ? —There are: advantages which counterbalance the heavy tax. There is an expectation that the tax will not be continued at the, high rates. With regard to the; rates of interest, there has been some evidence as to rates of interest being as high in a lightly taxed country as in a heavily taxed country. There: are many things that affect rates of interest, but do you think that heavy taxation in itself, other things being equal, would tend to raise the: rates erf interest ?—lf the taxation was the same: in all countries, 1 do not think it would affect the rate of interest. I mean, anywhere. 1 agree with. Mr. Shirtcliffe that it must be fixed by the, law of supply and demand ; but does not heavy taxation reduce the, supply ? —Yes, very heavy taxation would. So it would naturally tend to put up the rate of interest ?—lt would take; some time to eio it. The e:ffe:ct would not be immediate, anel the tax would have to continue for some time to have any appreciable effect. But it would have that tendency ? —lt would, 1 think- -that is, by depleting the capital available for investment. Mr. Shirtcliffe.] Would it be possible, when you are making up that estimate of the rates required under your proposed scheme—you indicated just now that you thought you could bring the rate down tei 4s. 6el. as a maximum ? —I think so. I was hoping you would have said 3s. 6d. ; but would it be possible for you to bring forwarel alternate rates in order to provide for a lower maximum rate ? —Yes, it might be. Say, 4s. 6d. or 4s. or 3s. 6d. ?—Yes. It is the weight of the tax that the companies are really up against ? That is my feeling. And it is the weight of tho tax we want to get reduced ? —Yes. Mr. Begg.] .Could you give us a short statement of the practice in the Australian States, and in Britain, and in America too, in regard to company taxation ? —I could tell you now what it is. 1 cannot remember if you tell us offhand ? —Very well. I will have a statement made: up. (At 4.30 p.m. the: Commission adjourned, to meet again in Dunedin on Tuesday, 29th April.)

Dunkdin, Tuesday, 29th April, 1924. Roderick FiNem, Public Accountant, Oamaru, examined. The Chairman.] You have maele a study of the subject of taxation, have you, Mr. Finch ?— To some extent. And you have prepared a Statement setting forth your views ? —Yes. Will you please read your statement ? —Yes, sir. It is as follows : — My principal idea in wishing to give, evidence: before this Commission is to urge, that the present method of levying income-tax on companies as separate: entities should be adhered to, and that no change-over to the, method erf taxing the; elividemels paid should be made ; and to urge: that the correct time to tax profits is when they are, made, and not when they are distributed. In aelvancing my opinions I propose to take: as a basis for my remarks the majority report of the Taxation Committee which sat in 1922, and endeavour to reply to the arguments therein advanced. Any contemplated change, in the incidence of taxation must be viewed in the light of its affect on the total revenue to be received by the State from this particular source;, for the Government would be faced with the necessity, if it relieved one: section of the income-tax payers, to increase the tax levied on the remainder in order to maintain the total amount to be, collected. The majority report, clause 38 (c), reads as follows : " The, Commissioner for Inland Revenue, in his evidence before the Committee,