James Earl Lawson
I had intended offering
some remarks in connection with this proposed amendment to part VII of the Special War Revenue Act, and the proposed reduction in the tax suggested by the hon. Minister of Finance this evening does not in any way change my view of the principle of the taxation; it merely offers, as a sop, a reduction in the burden cast upon the lower priced shares. To my mind this is most inequity able taxation. On the basis of the original proposal one buying or selling the lower priced issues would be paying a varying percentage in tax to the government. On one-cent shares the tax would be 100 per cent; on two-cent shares it would be 50 per cent; on three-cent shares the tax would amount to 33J per cent; on four-cent shares it would be 25 per cent, and so on down the list. I endeavoured to make a rapid calculation upon the proposed amendment, and as I figure it the purchaser will be paying 10 per cent tax on a one-cent share; 5 per cent tax on a two-cent share; 3.33 per cent tax on a three-cent share; 2.5 per cent tax on a four-cent share, and so on. In the case of the higher priced issues valued at $100, the percentage the purchaser will have to pay in the way of tax will amount to only 3/100 of one per cent. Let us consider for a moment the results of a tax of this nature, first, from the public standpoint, second, from the standpoint of the development of the
Special War Revenue Act
mines, and third from the point of view of other far-reaching effects. The average speculator in mining stocks must of necessity speculate in the lower priced issues; it is only those of means who can interest themselves in the high priced issues. As I pointed out a moment ago, if a man sells stock at $100 a share he would be paying to the government 3/100 of one per cent of tthe sale price by way of tax, but if he sells stock at $1 a share he would be paying 1 per cent. This, to my mind, is iniquitous. It will, in my opinion, have an adverse effect in connection with the financing of the mines. I am not unmindful of the fact that, under the act as it stands, the original issue of treasury shares is not taxable, nor will it be under the amendment; but we must bear in mind the basis on which new mining properties are developed and the development financed. In the first place, companies are incorporated in order to get money, and money can be raised only in one of two ways: either you must engage a corps of salesmen who call upon individuals to sell them shares of stock, a method which is exceedingly expensive and which lends itself to all the possibilities of misrepresentation and fraud, or you must- offer that stock through some mining exchange where the divergence and width of the market make possible some fixed price. In order to offer that stock through an exchange, it is customary to have the issue underwritten by a broker or by some individual or corporation interested in the development of mining property. Obviously, for a new stock there is no demand which will produce funds to develop the property unless there is a market for the stock, and there will not be a demand unless the trading in that stock is active upon the market. Activity is obtained by brokers circularizing clients, by publishing the details of the property and its development to date in circulars, magazines, et cetera. The vast bulk of this class of stock consists of low priced issues; the moment you impose upon low priced issues a tax equal in percentage to the amounts indicated, you curtail trading in the market, and the moment you curtail trading in the market, you thereby prevent the company from obtaining the amount of funds which it would otherwise obtain for the development of those mines.
Let me cite a couple of concrete examples. Let us take Crown Reserve Consolidated, one of our mining issues, selling to-day at five cents. Under the original proposal there would be a tax of 20 per cent imposed on every sale. Under the new proposal there would be a tax
[Mr. Lawson. [
imposed of two per cent. It is not possible for that company to re-finance its operations and continue development with a tax at that rate imposed upon all the sales of its stock.
Let me take a more striking illustration, a new property in the Red Lake district. Picard a year ago was selling at 70 cents a share. To-day it is selling at approximately 3 cents a share. This is caused by the company running out of funds, being unable to sell more stock and having a bailiff come in to execute a judgment. That company is supposed to have .reasonable possibilities. It desires to re-finance. What opportunity has it of doing so when by this legislation you prevent an active market for those shares?
May I call the attention of the Minister of Finance to the fact that many of the higher priced dividend paying stocks to-day, were a short time ago selling for 10 or 15 cents a share? A most striking example is Teck Hughes, which as late as 1921 was selling at 16 cents a share and which, I see by to-night's quotation, is listed at $9.60 a share. I took the record of the Standard Stock and Mining Exchange, because it is, I think, the largest mining exchange in Canada. If hon. members will look at the record they will find that there is a trading on that exchange now in 156 issues, of which 112, in other words, approximately 74 per cent, are stocks selling at under $3 a share. I endeavoured to make a computation of the difference the proposed tax would make on the basis of one day's trading. I admit I shall now have to revise it to some extent by reason of the amendment proposed to-night by the Minister of Finance, but I selected the tax paid in one day by eleven out of fifty brokers trading on the Standard' Stock and Mining Exchange. In one day broker No. 1 under the present basis of taxation would pay $190.29, and bear in mind that, in making that payment, he is merely the representative of the public who aa-e investing in stocks. Under the new rate of taxation he would pay, on stocks under $3, $5,901.50, and on stocks over $3, $78.75, or a total of $5,980.25 as against the $190.29 being paid to-day. Let me give you the totals of the computation of the eleven. In one day, on one exchange, eleven out of fifty brokers, who in turn would be charging to the customer the tax payable, would pay $21,037.89 in tax instead of $809.57.
Subtopic: SPECIAL WAR REVENUE ACT AMENDMENT