B—s.

64

[R. FINCH.

It is competition. The taxable income of that year you referred to, when 68 per cent, was paid by companies, was derived from two reservoirs of capital, one was owned by the companies anel the either was in the hands eif individuals ?- Yes. Now, the assessable income that paid the: 68 per cent, was £15,341,000. The total assessable income that year was £48,000,000, so that, taking away the £15.000,000 it left £33,000,000 taxable in the hands of individuals ? Yes. That £33,000,000 in the hands of individuals paid, tax amounting to £3,200,000 : it, paid, roughly £3,000,000 in. tax, while the companies paiel £5,000,000, The' £33,000,000 paid £3,000,000 in tax, while the £15,000,000 paid £5,000,000 ?—Yes. The whole of the income returned by the companies was assessable ? —Yes. But the wheile of the income returned by the individuals was not assessable ? -That is sei. Say a man has a few shares in a company, that becomes part of the assessable income of the company ? —No, because: what he gets from the company is a dividend ; that tax has been paid. If a man has £100 invested in a company, that is part of the reservoir of the company, anel the income is earneel from that £100 ; so that no matter how small the e-ontribution erf the individual the income, is all assessable-. But in the hanels of the individual small investments are exempted ? —Yes. So that while that £15,000,000 represented the, whole of the income from companies, the £13,000,000 did not represent the wheile of the income returned by individuals ? —Not necessarily. Well, in Mr. Clark's evidence: given before the Taxation Committee he said the non-taxable portion about equalled the assessable income : is that not so, Mr. Clark- ? Mr. Clark : That is so. The figures are in that statement which you have. Mr. Hunt: No; because this does not include all the incomes that have no taxable amount. Mr. Clark : No. You have the, e:xact figures in the printed book —page: 10 of the introductory report. Mr. Hunt: I want tei point out the amount of the incomes returned by individuals. This £48,000,000 only includes those individuals who have taxable balances, but in addition there; are. a large number of incomes with no taxable balances, and which are not included. Mr. Clark : They are included under " Under £300 " at the bottom of page, 12 of the: report. £46,000,000 is the total income. Mr. Hunt: That is the: total assessable income. Mr. Clark: It would be assessable if it were large enough. The amounts under £300 are included there. That includes non-taxable incomes. Mr. Hunt: So that the total amount was considerably more than that £33,000,000 returned by individuals, was it not ? Mr. Clark : The taxable income of that lot was £21,000,000. Mr. Hunt: The exemptions were much more than the taxable incomes. There was £46,000,000 taxable and exemptions £24,000,000. Mr. Clark: That includes companies. You will find on page 11 of the blue-book what you are looking for. Persons and firms with assessable income £37,000,000, taxable £12,000,000 ; companies' assessable income £8,000,000, and taxable £8,300,000. Mr. Hunt.] Without going right clown into the figures, that £33,000,000 of assessable income, quite apart from exemptions, returned £3,000,000 of tax, and £15,000,000 from companies returned £5,000,000. But owing to the exemptions that £33,000,000 of income received by individuals would be actually higher, probably £45,000,000 or £50,000,000. So that the average rate of tax was very much higher on companies' than on personal incomes ?—(Witness) Yes. Now, companies are run on the investments of individuals. You need not put your money into companies unless you like, and you need not leave it there. ? —lf you can get it out. Yem can liquidate your company ? —Yes. Does it not folleiw that if the money in one reservoir is taxed so very much more highly than the money in another, no one will put his money into the highly taxed reserveiir unless he can get an income: out of it equal to what he can get out of the other reservoir ? —Yes, you use your own eliscretion. Would it not follow that tho highly taxed reservoir must be able to pass the tax on by extra, profits, or else the money will not be forthcoming ? —No, I do not agree: with that, because the aim eif the individual, and also that of the company, is first to make profits. The tax must be paid by the company or passed em to its customers ?—lt is paid out of the profits that the company makes. It is either a direct reduction of the amount available, for dividends or else because of the tax they can increase their profits and pass it on to their customers ?—No ; it is only the first. If it is only the first, does not that reduce the rate of profit that tho shareholders will get out of the company ?—The net result that the shareholders get out of the. company is, of course, materially affected by the tax paid by the company out of its profits ; but it deies not necessarily mean that the; company is able to pass on the tax to the, customer, because both prices and profits are regulated by competition. We will admit that, but if it pays out of its profits those, high taxes, does not it reduce the profits ? —Yes ; but at the same time, a company operating em a large scale can earn a, greater proportion of profit owing to its facilities with the large amount eif money available than an individual can with a smaller turnover. But would not the profits be larger if there were no tax ? —Yes. And the dividends woulel be greater ?—Yes. And would not that mean that more capital woulel fleiw into that industry run by the company ? —■ But that eipens an avenue for an individual to go into the same business,