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184
III.
Ad valorem duty on contract notes and no duty on transfers.
9. Charge ad valorem transfer duty on the sale contract note and no duty on the transfer instrument. This was the Hon. Mr. Shenton's proposal. A copy of his memo- randum is annexed (Annexe C). The proposal appears to involve the following subsidiary proposals :--
(a) Provide that a sale contract note must be made out on every sale. This is
the law at present: see Ord. 8 of 1921, s.26.
(b) Provide that this sale contract must contain :---
(1) The number of shares (not, the numbers of the shares) and the name
of the company.
(2) The price.
(3) The name of the seller.
(c) Provide that the delivery of the shares to the buyer must be accompanied by a transfer instrument, executed by the seller and buyer, containing the same particulars of the shares as the sale contract note, and having on it a certificate by the Collector that transfer duty has been paid.
(d) Provide substantial penalties, against both brokers and principals, for non-
compliance, and for acquiescence in non-compliance.
Transfers by way of mortgage would be charged a nominal fee of $2. This fee would also apply to transfers by trustee to cestui que trusts and by executors to beneficiaries, and also to gifts. "Transactions between authorised dealers of the stock exchanges would be exempt from duty.
10. The advantages claimed for this system appear to be as follows:--
,,
(a) All transfers of shares would pay ad valorem duty, except the special cases of loans, trusts, etc., and except "transactions between authorised dealers. of the stock exchanges".
(b) "In almost all cases the shares would be transferred into the name of the buyer because it would cost the buyer nothing to do so and he would get all the rights of a shareholder", and this would reduce evasion of estate duty.
(c) The blank transfer system could still be used for loan transactions.
(d) "No new taxation is suggested" (But presumably more revenue would be
collected because evasion would be reduced).
(e) The investor who gets his shares registered in his own name, would no longer be at a disadvantage as against the speculator with regard to the payment of duty.
11. The following criticisms have been suggested :---
(a) The proposal would result in an enormous increase in taxation. The fol-
lowing examples have been given—
500 shares at $130
20 cents per $100
Present duty,
i.e., 2 contract notes.
$65,000
130
20
Increase
$110