B. —3.

You have not the figures for sterling funds held by the banks in the last decade ? Are they included ill the Australian operations ? —I would not like to say. . For taxation purposes must they not be segregated ?—For taxation purposes I should say that London figures would not be combined with New Zealand. The Bank of New South Wales in a recent bulletin compared sterling funds held on two different dates. Could that be done in New Zealand I—No, because the figures have not been segregated. It is obvious from some of the answers to questions that there is no monopoly of credit in New Zealand ? That is quite true. Mr. Asliwin mentioned the other day that the total mortgages in the country amounted to £200,000,000 and the total of all bank advances including mortgages is only one-fifth of that amount. Could you tell the Committee, in regard to question 19, why it is necessary to sell securities to add to the cash holding rather than issue more notes «—You mean print more notes and hold them in the till ? If you want money for cash purposes ? —lf you printed more notes, they would not be cash. You would want cash ? —Yes. You sell securities to get cash, why not print notes ? —Well, that would not give us sterling. You would not sell securities in New Zealand to get cash in New Zealand ?—I do not know of any case where that has been necessary. I thought it might be so in New Zealand. Why do you say, when you admit that New Zealand is on a sterling standard, that your bank paper money is inconvertible ? —I mentioned that not as a definition but as a description. ... It is not a very important point and you say it is just a description of existing inconvertible bank paper money I—lnconvertible into gold, but convertible into It is convertible into sterling exchange 1— It is convertible at a proportion, not pound for pound. So it is not inconvertible ? —No, but so far as economics is concerned it is not convertible, because it is paper money which is not regarded as convertible into gold. But you are using a sterling-exchange system ?—lt would not apply there. However, that was just a description. You are speaking of convertibility with a gold-standard country. lam speaking of convertibility with a sterling-exchange system, which is the New Zealand position. One other point. Do coins come into circulation by minting ?—As a result of the minting of coins it could be described more accurately, as the person who has the bullion would take it to the Mint and the Mint would issue the coins back to him. Does that happen ? —Not at the present time. They have stopped minting coins now, gold coins ? Mr. Harle : They only issue gold to the value of 400 oz. Dr. Sutch.] I meant gold coins. Mr. Ashwin.] I have not many questions to ask, as Dr. Sutch has brought out some of the points I was going to mention. I was interested in the statement you made when you said you were taxed on income unearned. Is that correct at present ?—I do not know that I would put it in that form, but we are taxed on the assumption of a certain income. What I mean to say is, do you suggest that the income on which you are taxed is greater than that which you are earning ?—Yes. Would you say that that applied generally over a period averaging good times and bad I—-No ; as a matter of fact, I do not think it would, but the position is that the banks would rather be m the position of paying a fair rate of income-tax when they are making good profits and being relieved, just like trading firms, when there are times of stringency. I appreciate that. Would you say that the nature of a banking business is suitable for taxation on a company basis ? —That is another matter. That is a matter of machinery. The banks are of the view that it can be done ; that is why they ask for it, and it is done in other countries. Ido not know of any other country where the banks are taxed precisely on the basis they are in New Zealand. Are you aware that the banks were originally taxed on the company basis ? Yes. Are you also aware that some of the banks' returns disclosed no income or very little ? —When was that ? _ Somewhere about 1898 ? —I would be very much, surprised to hear that they disclosed anything much at that time. Are you also aware that the present basis of taxation was actually suggested by one of the banks in operation at that time ?—I would say that the banking conditions of to-day are not such as would make that system so equitable as the taxation on income. I do not want to embarrass you, but I wanted to bring out the point that the bank is not the only class of business where it is necessary to have a more or less arbitrary basis of taxation ? I understand that, but I wanted to mention that the banks felt it would be more equitable if they were taxed on the basis of their income ; that would mean that in good times they would pay more and in bad times they would pay less. You would agree that that must be contingent on the_ Tax Department being able to devise a system whereby they could ensure that you do pay on the income earned in a year 1 I should say, speaking without prejudice, that it is for the Tax Department to devise an equitable system of taxation, because they are getting the benefit. You will also admit that there is considerable difficulty in the case of tracing the domicile of the profits earned by a bank which is trading partly in the country and partly overseas «—There are certainly some difficulties, but I do not think they are insurmountable.

43