Mr. LAWSON:

Seventy-four per cent of

the mining stocks traded in in Ontario on the Standard stock and mining exchange are selling at under $3.

Mr. LAWSON:

I am indeed reluctant to

have anything further to say on this subject by reason of the length of time I devoted to it last week, but to-night the Minister of Finance has made two statements which I cannot allow to pass. One is obviously an error, the other is misleading. If I remember correctly, in the case cited by him to-night, he quoted figures to show that the province of Ontario had derived something like four or five times more revenue from the transfer of shares than the amount received by the Dominion treasury.

Mr. LAWSON:

I am not quarrelling with

that. I am going to read the Ontario act to show that the statutory provision is exactly the same as in the Dominion statute.

Mr. LAWSON:

Mr. Chairman, immediately prior to the rising of the committee last evening I was endeavouring to point out that 74 per cent of all stocks traded in on the Standard mining exchange were stocks selling at. a price under $3; that the rate of taxation, even under the amended proposal made yesterday evening by the Minister of Finance, resulted in a rate of taxation varying from 10 iper cent to 3/100 Of one per cent; that the small investor was penalized by having to pay in tax to the government a much larger percentage on his investment than was the man of larger means, and that the new taxation as proposed, calculated on the basis of one day's trading on one exchange by eleven brokers, meant an increase in tax of $20,228.32.

I stated last night that I would endeavour to make a recapitulation in view of the suggested amendment of the Minister of Finance; but unfortunately the data from which such a recapitulation can be made is not available in this city, and hence I shall have to quote another figure which I do with the full realization that it will be to some extent reduced by the new proposal of the Minister of Finance. It has been conservatively esti-

Special War Revenue Act

mated that the imposition of this new tax would produce, on shares of Ontario mining companies alone, an annual amount of $5,000,000. That amount of $5,000,000 would equal approximately 40 per cent of all the dividends paid by all the silver and gold mines operating in Ontario last year. The result of the imposition of that tax will be, I believe, to drive the financing of all new mining properties into the hands of the organized concerns and to prevent the ordinary prospector and the small investor from sharing the profits which may accrue from such investment. I endeavoured to point out that its effect, by reason of curtailment of market, would 'be to curtail the mining industry, and I would call attention to the fact that if the mining industry is curtailed, the effects are wider than the results merely on that industry. Last year, in seven out of the twelve months, the mines produced the greatest amount of tonnage carried on our railways, and during the high peak in the month of October, they produced 5,426,255 tons. In most, if not all of the provinces of this Dominion, we have a Transfer Tax Act, but every one of them has been based upon the principle that there shall be the same per cent of investment paid in tax by the small investor who invests in the small priced issue as shall be paid by the large operators who can afford to invest in the higher priced issues, and that the same per cent of tax shall be applicable to mining stocks which are the lower priced, issues as is applicable to industrial stocks which are the higher priced issues.

The question whether there should be an increase in the amount of tax imposed by the Dominion upon the transfer of shares is one of individual opinion. At the moment I am not directing the attention of the committee so much to the quantum of the tax as to the inequality of the rate of tax in this proposal. To my mind it would be just as logical for the government to argue that the whole ascending scale of percentages imposed in connection with income tax should be reversed as it is to impose the scale of taxation now proposed, because in the result it would be exactly the same. In effect by this proposal the government says to the small investor who buys the cheap issues, the lower priced issues: You, by reason of purchasing that lower priced issue, should pay in tax to the government a larger proportion on your investment than should the large corporation. Last night we were treated to some vain boastings by hon. members opposite as to the advantages conferred on mining in this

country by this beneficent government. It will be interesting to observe by what argument the government will attempt to persuade the mining industry that it receives any benefit from the imposition of this unequal tax, or !by what reasoning it will endeavour to convince the small investor that he is not being discriminated against in favour of organized wealth. Surely this proposal has not had from the government the thoughtful consideration which it deserves. If it has had consideration, then one can only conclude that this is another evidence of an unfair burden of taxation being imposed upon the masses, and a remission of taxation upon the wealth of' this country. If it has been considered at all, this is further evidence of allegiance by the government to that modern and expressive, though ungrammatical plagiarism " Them that has, gits."

Mr. 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

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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.

Progress reported.