February 25, 1916 (12th Parliament, 6th Session)

LIB

William Stewart Loggie

Liberal

Mr. LOGGIE:

The other clause refers to incorporated companies, and I think every hon. member clearly understands what an incorporated company is. The minister, however, in his speech the other day said:
It will be observed that incorporated companies are taxed upon a higher basis than individuals and partnerships. The reason for this is that capital in the case of joint stock companies frequently represents intangible assets or capitalized earning power or good will.
Even if that were true, I think that i? we are to put this legislation on the statute book, we ought to be big enough to undertake to arrive at a fair valuation of those assets. That should not be an impossibility; and if it is, the resolution as brought down should be amended before being dis-
. COMMONS
cussed in Committee of the Whole. The minister goes on:
We found it a practical impossibility to go behind the capitalization of companies and endeavour to ascertain the precise cash value of their assets as can be done in the case of individuals or partnerships.
There should not be any great difficulty in doing that, although of course it might not be easy to arrive at the precise value of the assets. But I venture to say that the Government will not be able to arrive at the precise value of the assets of any company or person. Would the minister undertake to say that he will be able to arrive at the precise value of the assets of the J. R. Booth Company of Ottawa, for instance? I do not think he will. And yet he is providing for that being done, for I understand the Booth Company is not incorporated. I do nui, think we should let these apparent difficulties stand in our way. If we are to collect taxes in this way let us treat the people of the whole Dominion alike, let us do the thing fairly and equitably. I maintain that under the present proposals there will be positive discrimination. I of course realize, as the Finance Minister says, that there will.be difficulties, but they should not be insurmountable. We ought to be able to arrive at a fair value of the assets of any company doing business in Canada. The Minister of Finance illustrated the difficulty in this regard as follows:
The cases of railway, public franchises, and so-called holding companies, mining and other corporations, illustrate the difficulty to which I am referring. In addition there is the further fact that shareholders have purchased their shares and receive their dividends upon the basis of issued capital stock.
I do not care one iota what dividends shareholders have received upon the basis of issued capital stock. To me the only fair thing seems to be to put all the companies in Canada on the same basis; we should value the assets of every company in Canada, and form a reasonable fair value of the assets, deduct all direct liability. That would give us the capital on which the money is made, and that, I take it, is what the Government really desire to tax. It cannot possibly be that the Government desire to tax anything other than the earnings of a certain amount of money invested in a business. [DOT]
I think this resolution is unfair in another regard. I have read the minister's speech very carefully, and I cannot see that he has explained why the profits of an individual or partnership should be taxed only above ten per cent, while incorporated com-

panies with the same amount of capital are to have. their profits above seven per cent taxed. Is that fair? Let me give an illus-' tration. Suppose I started an incorporated company twenty years ago, with an original investment of $100,000. That $100,000 is not sufficient to enable me to carry on the business, and I borrow money in the ordinary way of business. Supposing in ten years I have made $10,000 a year. As I am indebted outside, and the business is expending, the money is left in the business with the result that in ten years I have a surplus of $100,000. I go on, and in ten years more have a surplus of $200,000. That gives me a surplus of $300,000 last year, and that $300,000 has earned me $21,000. What would be my position with relation to this resolution? If the resolution carries in its nresent form my position will be this: My original $100,000 will have earned $21,000, and I shall be called upon to pay one-fourth of $14,000, or $3,500, whereas I have earned only seven per cent on the total capital. But the hard part of it is that if I were an ordinary company, I would not have to pay a cent, because I would be entitled to 10 per cent on $.300,000 That is not equitable, and the minister ought to make some announcement before this resolution is passed and amend or add something to it so that we can discuss what the minister proposes to do in order to get out of this difficulty. [DOT]
I do not understand why the minister has arbitrarily fixed $50,000 as the capital for a person and not fixed any sum for an incorporated company. Let me illustrate how unfair that is. Suppose I form a partnership with my friend, Mr. Turriff, in the dry goods business in a town of five or ten thousand people; I invest $30,000-and $30,000 invested in dry goods in a small town will give a very nice stock and will enable us to compete with any other person or firm doing the same class of business. Suppose I make ten per cent, fifteen per cent, or twenty per cent on the $30,000-

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