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(c) That it would drive money away from the Colony and be detrimental gen-
erally to business interests.
To meet the objections raised I suggest that the stamping of share transfer docu- ments be abolished altogether; that the present transfer stamp duty be no longer placed on the transfer document but in future be paid in respect of and impressed on the sale contract note, and that in lieu of the stamp on the transfer document, the Treasury im- press a certificate to the effect that the requisite stamp duty has been paid and that such certificate be a discharge to the company concerned from further enquiry as to whether the requisite stamp duty has been paid.
Having regard to the fact that the present contract stamp duty came into force by reason of an arrangement made with the Stock Exchange in 1921 it should be abolished altogether.
That in future the ad valorem stamp duty be payable in respect of all sale transactions whether the shares are actually transferred into the name of the seller or not and that whether the sale is for cash or a forward transaction, but that in respect of all other transactions such as transfer for the purposes of mortgages, temporary loans, transfers in respect of Trusteeships, Executorships and donations of shares a nominal stamp duty of $2 only be charged and the same to be certified in like manner by the Treasury on the transfer document.
For the purpose of effectively carrying out my proposal, it will be necessary to legis- late as follows:-
(a) All sale transactions in the Colony in connection with shares whether nego- tiated by a Member of a Stock Exchange or otherwise must be evidenced by a contract in writing which must contain particulars of the shares sold and the price.
(b) The delivery of shares to the buyer in connection with a sale transaction must be accompanied by a transfer document containing the names of the seller and the buyer, particulars of the shares sold and signed by the seller and buyer, such transfer document having thereon a certificate from the Treasury signed by the proper officer to the effect that the requisite stamp duty has been paid.
(c) Non-compliance with the provisions of the Ordinance must be enforced by
substantial penalties, against agents and principals.
In practice the system will be as follows:--On a sale of shares being entered into the broker or the seller as the case may be will make out a contract evidencing the trans- action and the same will be stamped at the Treasury with an ad valorem stamp for the amount the transaction calls for, and the same will in the usual course of business be either delivered to the buyer or a notification thereof sent to the buyer. When the shares are to be delivered to the seller, the broker or the seller will take the contract to the Treasury together with a transfer document and the Treasury will on production of the contract, stamp the transfer document with a certificate which will be signed by the re- quisite Officer in the Treasury to the effect that the requisite ad valorem stamp duty has been paid. This stamped transfer together with the scrip for the shares will be handed to the buyer who will then be at liberty to either retain the scrip and the transfer document as they then stand or transfer the shares into the buyer's name.
The company whose shares they are, on receiving the transfer document with the Treasury certificate will be exonerated from making further enquiries as to whether the requisite stamp duty has been paid.
Should the buyer not desire to register the transfer, then when the shares are again sold a further contract will be made and a further transfer document certified as before, and so on through each transaction until eventually the ultimate buyer desires to regis- ter the shares in his name, when he will send in to the company concerned the share scrip and the intermediate transfer documents.
Snould the buyer desire to raise a loan on the shares he has purchased, he will hand to the lender the share scrip and transfer document and if the lender is not satisfied with the security as it stands he will send the shares to the company whose shares they are, register the shares in the name of the lender and obtain, if so desired, a new transfer document in the name of the lender or his representative on payment of a fixed stamp duty of $2. It will not be essential for the lender to register the shares in his or his nominee's name as the transfer document can be in blank in the case of mortgages and it will only be in respect of sale transactions that the transferee's name must be filled in the transfer document. When the loan is paid off, the borrower will be able to get the shares transferred back into his name by getting a fresh transfer document certified for on payment of the same nominal stamp duty of $2 or in the case of a blank transfer it can be destroyed.
All transfer transactions whether sale transactions or otherwise will be adjudicated by the Treasury and certified on the transfer document.
In view of the bargain made with the Stock Exchange in 1921, it would be unfair to insist on the present contract stamp duty in addition to the stamp transfer duty and I therefore advise its abolition.
In my opinion the scheme as above set out will have the following results:
(a) The penalties will have the effect of enforcing compliance with the pro-
posed Ordinance.
(b) In almost all cases the shares will be transferred into the name of the buyer because it will cost the buyer nothing to do so and he will get all the right of a shareholder.
(c) In the case of mortgage and loan transactions the system of blank transfer
is preserved.
(d) As in almost all cases the shares will be transferred into the name of the transferee, the identity of the shareholder for the purposes of death duty will not be lost except in cases where the shareholder during his time deliberate- ly intends evasion to take place after his death and I consider that there must be very few of these cases.
(e) The compromise arrived at with the Stock Exchange in 1921 has been pro-
vided for.
(f) The investor and the speculator are placed on the same basis.
(g) No new taxation is suggested in fact as far as the investor is concerned he
will pay less in the future.
I do not suggest that transactions between authorised dealers of the Stock Exchanges should be taxed any more than they are at present.
The Hon. The Colonial Secretary.
I have the honour to be,
Sir,
Your obedient servant,
(Sd.)
W. E. L. SHENTON,
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