Hon E. N. RHODES (Minister of Finance):
Mr. Speaker, with respect to certain phases of taxation proposals contained in the budget, there has arisen some misunderstanding.
I thought I had made it abundantly clear in the statement which I made in the house on the 29th instant, that it was not intended to tax interest on Dominion of Canada or Canadian National Railway guaranteed bonds paid to non-residents.
This exemption was granted because, while there is no doubt of the power of parliament to impose such a tax, as is done in the case of other countries, nevertheless misunderstanding might arise in the mind of the nonresident investor who had purchased dominion securities issued in his own country and payable in his own currency.
In view of the fact that other public bodies and many private corporations have issued and sold abroad securities payable in an external currency with either the implied or stated obligation to pay without deduction, it has now been decided to extend this exemption to all interest payable by any Canadian debtor to non-residents on obligations which by their terms are payable in a currency other than Canadian.
To summarize briefly in order that absolutely no misunderstanding may exist:
(1) The five per cent tax on non-residents does not apply to interest on any Dominion of Canada bonds or bonds guaranteed by the dominion.
(2) The five per cent tax on non-residents does not apply to interest on the obligation of any provincial, municipal, corporation or other debtor payable in a currency other than Canadian.
(3) The five per cent tax on non-residents does apply in the case of interest payable by Canadian debtors (other than the dominion) in Canadian funds and to all dividends.
Hudson Bay Railway
(4) In the case of residents of Canada the tax of five per cent applies on interest or dividends paid by Canadian debtors and cashed in a currency at a premium over par of Canadian funds.
With respect to the requirement that all Canadian residents shall, on and after April 1, file ownership certificates when cashing coupons, I desire to say that suggestions of evasions have given the government some concern and I wish to announce that a special measure will be introduced immediately which will require that all taxpayers shall make a statutory declaration when filing their returns that all such interest has been included.
Subtopic: PROPOSED FIVE PER CENT TAX ON INTEREST AND DIVIDEND PAYMENTS TO NON-RESIDENTS