Following the Minister's pat on the back for himself and his statement that he could go so far as to give double relief, could the whole Part be considered? Is there not an element of double taxation contained in it, in so far as dividends on capital gains are concerned? I take it the Minister has had representations made to him?
SECTION 126.
Question proposed: " That section 126 stand part of the Bill."
Not on this Bill but I had on the Capital Gains Tax Bill as the Bill then was. I pointed out that a company and individual shareholders are distinct persons. It is not appropriate to complain in one case that they are one and the same and in another case that they are separate entities. Many of the complaints which are made about double taxation of capital gains are made by people who urge under other sections of legislation, both this and other Acts, that a company and its shareholders are the same person.
The Minister's plea is rather beside the point. There is another point here, which is that capital gains are gains and tax is levied on them. What amounts to a further tax is taken when it becomes a dividend payable to the shareholder. The Minister is making the point that they are not one and the same person; that is true. On the other hand, there is a great unity of interest in the sense that in a simple case they would be one and the same person to the extent that they were part owners of the concern. I do not wish to delay the Committee by opening up the details of this even on the section we are discussing because they digress quite a way, but would the Minister not consider that there is some validity in that point? If he is applying the uniformity of the Capital Gains Bill could he not bring in an element of relief where the dividends are concerned?
We accept that there are two separate entities, the company on the one hand and the shareholder on the other. The very gain that a person may get arises out of being a shareholder in the particular company and might count as a joint gain if the company had not existed as a separate entity.
However, as the Minister says, representations have been made——
Not in relation to this Bill.
No, but in the beginning of the White Paper.
Yes, on the Capital Gains Tax Bill. Our approach to this matter is that which applies in other countries, which has been studied in relation to this and I am not aware of any country which believes any element of double taxation to arise in these cases.
Does the Minister not think it would be a stimulus, even a small one, to investment in the country if one were to strike out on one's own in this matter and have another look at that provision so as to give the shareholders full credit in respect of tax paid in respect of capital gains?
It could be argued that the law did exist and that we are now implementing it, encouraging the keeping of the money in the company and therefore encouraging investment.
Yes, but the investment depends not only on the strength of the company but also in many cases on the return.
Question put and agreed to.
SECTION 127.
Question proposed: " That section 127 stand part of the Bill."
This section provides rules to deal, for capital gains purposes, with the case where, on a reconstruction or amalgamation, one company takes over the whole or part of the business of another company and that other company receives no consideration for the transfer of the business other than the taking over of its liabilities. The section provides that there will be no charge on the transferor company when it transfers its assets, but the transferee company will be treated as if it had acquired them at the time and at the price at which they were in fact acquired by the transferor company. Trading stock is excluded from the operation of the section.
That could go back over a number of years in the case of acquisition by the transferor?
Yes.
There is no limit of time on them?
None, other than the commencement of the capital gains tax date.
Question put and agreed to.