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34 Tax Memo 1 (1963)

handle is hein.journals/taxmmo34 and id is 1 raw text is: TAX MEMO No.34 August, 1963 SUMMARY OF RECOMMENDATIONS submitted to The Royal Commission on Taxation This Memo is a summary of the main recom- mendations contained in the nearly sixty briefs sub- mitted to the Carter Commission during its first run of public hearings. Hearings in the Atlantic Provinces and Western Canada are now being held. Preliminary briefs concerned mainly with fiscal and tax policy have not been included in the survey; these are the briefs presented by the Chamber of Commerce, the Tax Study Group of Queen's, the Canadian Manufacturers' Association, the Canadian Labour Congress, the Canadian Institute of Chartered Accountants, the Canadian Bar Association and the Tax Foundation itself. Those summarized here come from all kinds of sources-associations (both business and professional), corporations and individuals; and there is naturally a bewildering variety of suggestions. Recommendations made in the briefs have been classified according to headings, though there is inevitably a certain amount of overlapping. The Memo does not purport to be exhaustive or to mention every point made; but from it an overall picture emerges of what many Canadian taxpayers are thinking. Corporations THE CORPORATION INCOME TAX The corporation income tax came under heavy fire in these briefs, one of the most interesting dis- coveries being that advocacy of its reduction, or even abolition, was not confined to people associated with corporations. Two main-and related-lines of argu- ment appear-that the corporate tax hampers Canadian industry abroad, and that in any event it is passed on to people. Canada was described as a developing country that needed growth incentives, and as a free enterprise country in which the Gross National Product was essentially the sum of the output of all its corpora- tions. Companies, therefore, must prosper and must be efficient, and operating costs must be kept as low as those of other countries. It seemed to be generally accepted that the corporate tax is considered as a cost of production, and as such it is thought to hinder Canadian industry abroad in competition with other countries. Moreover, the tax-and particularly the high rate of the tax-causes many business and investment deci- sions to hinge on the tax angle rather than on what might be the best economically or industrially. As one brief put it, with the high rates established in World War II, for the first time tax considerations, rather than the market place, became paramount in many business arrangements. One brief made an arresting comparison between the age of automation and the Industrial Revolution of the 19th century. Both developed so rapidly that the world was not ready for them-economically or psychologically. Rapidly increasing productivity brings its problems, mainly because it is achieved by the use of more capital and less labour; so the propor- tion of national income distributed to capital owners should rise and that to workers as such should fall. This points up the necessity for a broader base of capital ownership amongst our households, resulting from decentralization of equity ownership. The cor- porate tax, it was said, plus the high individual tax, causes concentration of wealth in fewer hands, by giv- ing companies incentives to finance growth internally, without the issue of new equity securities. Additional copies of this Memo may be obtained at a price of 254. © 1963, Canadian Taz Foundation CANADIAN TAX FOUNDATION

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