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Thursday, 25 May 1939

Mr LAZZARINI (Werriwa) .- Whilst I am not opposed to the principle of the amendment moved by the honorable member for Martin (Mr. McCall), I am opposed to it for the simple reason that it will not accomplish what the honorable member seeks to accomplish. ' In the first place, I" am opposed to the allowance of a profit of 6 per cent.

Mr Fadden - Six per cent, is the maximum.

Mr LAZZARINI - That is all hocuspocus. As an accountant, the honorable member knows that, even if the amendment were adopted, a firm would be able to make a profit of 60 per cent. He also knows that, as the bill is drawn, the Government need not impose the limit provided in the amendment, for sub-clause 2 affords a let-out. For this reason, the Deputy Leader of the Opposition (Mr. Forde) proposes to move an amendment which will make it mandatory on the Government to impose a limitation on profits. I propose to support that amendment.

Mr Fadden - And I shall support it.

Mr LAZZARINI - The amendment to be moved by the Deputy Leader of the Opposition will make it mandatory upon the Government to live up to its statutory obligation in this regard. We, on this side, will be the watch dogs, to see that it keeps a check on profits. I agree with the honorable member for Lilley (Mr. Jolly) that, if a limitation of 6 per cent. were placed on profits, a contractor could, as the remainder of the measure is now drawn, make 60 per cent, profit if he secured ten contracts.

Mr Fadden - Not on a -basis of turnover.

Mr LAZZARINI - Yes. We, on this side, wish to force the Government to check profits. If the amendment to be moved by the Deputy Leader of the Opposition be agreed to, we can then say to the Government, "It will be your responsibility under this mandatory clause to check profits, and if you do not" do so, you will hear all about it from the Opposition ".

I propose now to deal with the remarks made by the Minister for Supply and Development .(Mr. Casey) .last night. I often wonder why honorable gentlemen opposite can talk, both inside and outside of this chamber, about the patriotism of these contractors in peace or war, particularly when we have a wealth of evidence concerning the methods by which they fleeced ,and bled this country at a time when it was fighting for its life. When the honorable gentleman suggests that these interests have undergone a change of heart, or have changed their methods, and will not go for as much profit now as they did in the Great War, he would have us believe that he is one of the " innocents abroad ". But he is too well connected with big .business not to know that no such change has taken place. I propose to give specific instances of profiteering at the present time; and the Minister knows as much about them as I do. He talks about " honorable " accountants who will advise the Government. He describes them as "honorable ", because they hold prominent positions in the business world. For the most of their time, they are engaged in dishonorable undertakings, such as the cloaking of profits of their clients in order to evade taxes.

Mr Fadden - That is libellous.

Mr LAZZARINI - It is true. We have been told by men like Portus, and the rest, that many young men leave accountancy firms because they are obliged to keep two sets of books, one to be locked up in the safe, and the other to be kept for taxation1 purposes. A lot of these firms engage men who were previously employed in the Taxation Department, because they are fully conversant with the methods of the Commissioner of Taxation. They are induced to join private accountancy firms in order to help in the evasion of taxes. I know of certain firms in Sydney which have their own: methods of making out income tax returns, but in order to reduce the tax payable by their clients, engage officers of this kind to water down the return, and, for this service, the latter are paid fees ranging from £10 to £30. In many cases they succeed in halving the amount of tax. This practice is going on all over Australia. Expert crooks are being employed to fake books in order to enable big businesses to evade taxes. Sometimes they are caught. For instance, a man was fined £300,000 in Sydney recently for an offence of this kind. We all remember the case of the Abrahams brothers, in which a previous government took a hand in the unmasking of roguery. I have no confidence in these accountants; nine times out of ten they prove the truth of the saying, " Figures don't lie, but liars can figure ". The Minister also spoke of manufacturers who will not seek to make profits out of the Government's defence contracts, but will be actuated solely by the desire to help their country. During the Great War we saw how the Sydney Morning Herald, one of the newspapers which sooled on our young men to the front, and which, incidentally, holds a big parcel of shares in the Broken Hill Proprietary Company Limited, raised its price for in memoriam advertisements by 400 per cent., and thus exploited the mothers and widows of our dead soldiers. I was in business during the Great War, and I know firms which had thousands of yards of black Sicilian in stock ; the price had been ls. Sd. a yard but, because it was old fashioned, it had been written down at the rate of 3d. a year until it represented to them about ls. a yard. But this material was pulled out of their cellars and sold at 10s. a yard to the widows and mothers of soldiers who had been murdered on the battlefield. Similar instances of profiteering might be given in connexion with the woollen industry. Let us examine the patriotism of a manufacturer like Henry Jones of Tasmania. After recovering all of his investment and allowing for taxes imposed under the war-time profits legislation, that gentleman made £400,000 out of contracts to supply jam to the Government during the Great War. However, I do not ask the Minister to take my word on thesematters. When the honorable member for Bourke (Mr. Blackburn) was a member of the Victorian Parliament, he was supplied by the State 'Treasurer (SirAlexander Peacock), in answer to a question, with a table of figures showing that various firms, identified by symbols, had; made profits ranging from 115 per cent.. to 4,000 per cent, in one year during theGreat War. Those figures can be found, in Commonwealth Hansard, for the 10th August, 1917, Vol. LXXXII.. page 998. I ask the Minister to study those figures. After doing so, I hardly think he will suggest, for one moment, that these robbers will not do the same thing to-morrow, if they get the opportunity, as they did during the Great War. I, personally, should like tosee thoroughly investigated the contracts already let for the supply of boots or any other article to the Defence Department. When the Minister speaks of the patriotism of these people, he will not pull the wool over the eyes of honorable memberson this side, because this country has had bitter experience of the profiteers. The Government now suggests that opportunities, for profiteering will be considerably limited because of the safeguards which have been provided for the checking of profits on raw materials. I ask the Minister what check did the Government put on the contract let to the Broken Hill Proprietary Company Limited when that company itself, case hardened as it is, felt too ashamed to take the Government's £1 10s. for shell cases and handed back 7s.?

Mr Casey - I shall answer the honorable member in detail on that point.

Mr LAZZARINI - I shall await the honorable gentleman's reply. The Government proposes to go around the country seeking out these profiteers and begging them to collaborate with it in the supervision of contracts for supplies of defence material?.-

The history of every country, including Australia, Great Britain, Germany, France, Italy and the United States of America shows that big business takes every opportunity to make excessive profits on munitions as on everything else. Very little competition exists in big business. Possibly a certain degree of competition may still occur in the supply of boots, clothing and some other similar articles, but even in connexion with these it is well known that firms arrange what are known as a "gentleman's agreement". Sometimes it will be agreed that one firm shall obtain one contract on condition that another obtains the next. By this means contracts are distributed, and to a large extent, prices regulated ; but whatever competition may occur in retail business, practically none exists in the wholesale trade. To-day wholesalers and manufacturers generally not only arrange prices amongst themselves, but they also fix retail prices. If a retailer dares to sell certain goods at less than the fixed price he is refused further supplies. This procedure affects hosiery, underwear and clothing of various' kinds. We cannot anticipate that any different procedure will be applied to the furnishing of goods to the Defence Department.

Nevertheless, I shall be interested to see what steps the Government intends to take to check profits. We shall be willing to consent to a mandatory clause authorizing the making of a check on profits, but we shall consent to nothing that will enable manufacturers to put a loading on their overhead costs. The only effective way to deal with this business, in my. opinion, is for the Government to be its own manufacturer. I ask the Minister to declare specifically, when he replies to these remarks, whether profits are to be allowed on watered capital and bonus shares. If a company has watered its stock until it has a nominal capital of £1,000,000, but an actual paid-up capital of only £100,000 or so, and the Government allows profits on the basis of £1,000,000, the company will be in a very happy position. If profits are allowed on inflated stock a declared profit of 5 per cent. may actually become a profit of 25 per cent., 30 per cent. or 40 per cent. In the case of the Broken Hill Proprietary Company Limited, the profit will be very much higher than that, for the honorable member for Kalgoorlie (Mr. Green) indicated very clearly last night the degree to which the company's stock was watered. We also know that the capital of many coal-mining enterprises has been watered to an extraordinary degree. In one case an original capital of £60,000 or £70,000 has been inflated so greatly that the company now has capitalized reserves totalling £3,000,000.

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