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Thursday, 8 December 1927

Senator GRANT - That is all right.

Senator KINGSMILL - The honorable senator may think it is. I do not. English investors do not lend money for the good of their health or sport. They expect to receive the agreed upon rate of interest. When ' they take up debentures in an Australian company a definite contract is made as between the company and the English debenture holders. The Commissioner of Taxation, however, claims the right to levy taxation on the interest received by the English investors, and since the English courts have ruled that it is not recoverable from the absentee debenture holder, the commissioner levies the tax on the company as the collecting agent. Therefore the burden falls upon the Australian shareholders.

Senator Sir Henry Barwell - And if the capital earns profits those profits are taxed in addition.

Senator KINGSMILL - That is so. This impost, is really a tax on working capital.

Senator Herbert Hays - It has not been ruled that the tax is not recoverable in Australia?

Senator KINGSMILL - No, and that is the reason why the provision is irksome to Australian shareholders. It affects somewhat seriously the Emu Bay Railway Company in the honorable senator's State, because although it is a losing concern that company has to pay a tax on the interest due to the English debenture holders.

Senator Herbert Hays - In other words the company is not allowed to deduct from the amount of interest the tax chargeable to the British debenture holders ?

Senator KINGSMILL - No. It is an obvious absurdity in our taxation legislation, because while the company is authorized to deduct the amount of tax, the English courts hold that it is not recoverable from the absentee debenture holders. It is to correct this anomaly and to remove this injustice upon Australian shareholders that I am asking the committee now to agree to my amendment. Notwithstanding what the Leader of the Senate has said as to the probable fate of this amendment, if it goes to another place, I think it is well worth a trial, especially as some honorable members of that branch of the legislature have since admitted that they voted under a misapprehension as to the intention of the provision. I may ┬╗add that if we can secure the inclusion of this provision in the bill Australian investments will be much more attractive to British money-lenders. This is the more important in view of the fact that some difficulty may be experienced in obtaining in Australia the necessary capital for these concerns. I hope that the Leader of the Senate will not put undue pressure upon his supporters to defeat the amendment. He has practically .said that the present condition of affairs is indefensible. Because a week ago a majority of honorable members of another place favored the withdrawal of this provision, it does not necessarily follow that that majority exists now. They may have given the matter further consideration. If the honorable member, to whom I have referred, voted under a misunderstanding, there may be many others in a similar position.

Senator Sir George Pearce - No vote was taken.

Senator KINGSMILL - Then I am further encouraged to ask honorable senators to make another attempt to remedy what I consider is an anomaly with respect to the legislative aspect, and an injustice to Australian shareholders in companies that have raised a portion of their capital by way of English debentures. I hope that my amendment will be carried.

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