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Friday, 19 March 1926

Senator CRAWFORD (QueenslandHonorary Minister) . - I have already informed the committee, by interjection, that information as to the amount involved is not available, and that to obtain it would take considerable time and involve great expense, as it would necessitate an examination of thousands of assessments. I cannot see that the amount involved is at all material to the issue. We have to decide whether it is right or wrong to validate the repayment of taxation collected on bonus shares. It is immaterial whether a few. pounds or ?100,000 is involved; it is a question of whether the clause is right in principle. Complaints have been made because I did not give the Senate more information in moving the second reading of the bill, but I felt at the time that I gave all that was necessary, particularly as the measure does not deal with the principle of taxing bonus shares. That matter was dealt with in the consolidating bill passed in 1922. This is simply a short amending measure to give effect to the intentions of Parliament, and also to the recommendations of the Royal Commission on Taxation which reported that bonus shares should not be taxed first in the hands of the company and then in the hands of the individual shareholders. It has been said that profits should be distributed by companies in the form of dividends as earned, but anyone with commercial experience will recognize that that would be wrong. One of the reasons why Australia is so prosperious at present is that companies as well as individuals have not distributed all their money as it has been made, but have placed a certain amount to reserve, and as their businesses 'have expanded have converted their reserve funds into capital and issued what are. termed bonus shares. That is not watering stock, as alleged by Senator Findley, because for every share issued an equivalent in cash is retained in the business of the company. I believe a majority of senators are of the opinion that we ought to encourage rather than discourage such a practice, because as the businesses of the country expand increased capital will be necessary to conduct them, and that will be obtained very largely by joint stock companies placing a reasonable amount to reserve every year and. issuing it from time to time in the form of bonus shares. It would be unfair to tax bonus shares in the hands of shareholders, because although a certain amount may be placed to reserves from year to year, and taxation paid on it by a company, bonus shares may be issued perhaps once in ten years, and taxation on those shares would probably have to be paid by the holder in one year. In such cases his rate of tax might be three or four times greater than if the amount represented by the bonus shares were added to his income year by year as earned by the company. The purport of the bill is to make retrospective the law in regard to bonus shares as was intended when the consolidating bill of 1922 was passed. It was believed at that time that the provision had a retrospective effect, but as it was decided otherwise by the High Court in the James case, this amending measure is submitted to correct the omission inadvertently made.

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