Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
Wednesday, 16 March 1927

Senator GRANT (New South Wales) . - I do not suppose that any question has come before the Commonwealth Parliament for many a long year, that has aroused keener discussion, not only in the Federal Parliament, but also in State Parliaments, and at conferences innumerable, than the division of spoils collected sit the Customs House. The whole of this trouble arises from the fact that Australia imports a large volume of goods made in low-wage foreign protectionist countries, and in coming through the Customs House those goods have to pay tax. It, is estimated that no less than £44,500,000 will be collected by the Commonwealth this year through Customs and excise duties, and it is no wonder that the various State Treasurers and some other people are most anxious to get their hands upon such a tidy sum of money. What a glorious position various State Treasurers would be in if the Braddon section still remained in force ! Instead of getting a miserable 25s. per head, which amounts to less than £8,000,000 per year, the States would get three-fourths of the total revenue - about £33,000,000- now collected by the Commonwealth out of Customs and excise duties. But I think the time must come - I do not say it ought to come now - when there should be a complete separation of the finances of the Commonwealth from those of the States. I have often wondered what is meant by " State rights." I now realize that the States are like hungry dingoes around a bone, the largest end of which is held by the Commonwealth, and that if the Commonwealth retains its hold the States will have to look for some other means of sustenance. I was glad to hear Senator Greene, a staunch protectionist, say that the Customs House was used principally to tax the poorer section of the community. Ostensibly, the Government believes in encouraging Australian industries; but the only industry which it is protecting is that of land-owning. It is determined to obtain all the revenue it can from the Customs in order to avoid the necessity of imposing direct land value taxation. Senator Greene appeared to be concerned with the position in which the States will be placed if this bill is passed, but they are not likely to be embarrassed. They will merely be compelled to obtain sustenance elsewhere. The total amount of the subsidies paid to the States for the year 1924-25 from the spoils collected at the Customs House, was, according to the latest Commonwealth Year-Boole, £7,472,779. Does any one with a knowledge of economics seriously suggest that the withdrawal of such a sum would ruin the States? I do not know why the Government has decided to bring forward this proposal with which is associated one to repeal certain forms of direct taxation, including the land value tax, which in many respects is imperfect. I would welcome the repeal of the Federal income tax, because I cannot conceive of anything more stupid than to impose a tax on incomes. A man should be entitled to retain what he earns for his own use. The Commonwealth Government and the States, true to the idea of taxing industry and penalizing those who produce wealth, have determined to continue to tax incomes. I should welcome the Commonwealth withdrawing from the field of income taxation and leaving that, field to the States if there were not other factors to be considered. An income tax is bad; but an entertainment tax is even worse. Why should a person who wishes to attend the theatre or a picture show be compelled to pay a tax? The Government also proposes to leave the collection of the estate duties to the States. I do not know how any self-respecting man can collect estate duties. If the bread-winner of a family dies and leaves his estate to his widow, a representative of the State Treasury insists upon her contributing estate duty ranging from 1 per cent. to 15 per cent. according to the value of the estate. When the unfortunate widow has complied with his demand she is immediately pounced upon by the Federal Taxation Commissioner, to whom she is compelled to make a further contribution. It is difficult to get a self-respecting citizen to act as hangman ; but there are many who are willing to act as taxation commissioners and compel a woman to part with the hardearned cash of her deceased husband. I am entirely opposed to the Government vacating the field of land value taxation, as that is a field in which it can legitimately operate. A return published in 1915 showed the value of the estates in the Commonwealth to be approximately £455,000,000; but it is more than double that to-day, and I suppose £1,000,000,000 would be a fair valuation. Notwithstanding that the owners of this enormous wealth pay to the Commonwealth revenue a nominal sum of only £2,000,000, the Government proposes to retire from the field of land taxation.

Senator Thompson - The honorable senator is overlooking the land taxation levied by the States.

Senator GRANT - The States at present have sovereign powers to tax land which some of them are exercising, but, generally speaking, only to a very limited extent. If one were to suggest to some of the State Treasurers that they should collect further money in the form of land taxation, they would be staggered. They are most anxious, however, to receive their share of revenue collected at the Customs house, because, as Senator Greene suggested, the bulk of it is paid by the poorer section of the community. The figures given on page 369 of the Commonwealth Year-Book show that the States would not be placed in a parlous, chaotic, or insolvent position, if the per capita payments were withdrawn. The land tax collected in the various States for the year 1924-25 was -


The total amount of revenue collected from that source represents the nominal sum of £1,300,374, while the States' share of the Customs and excise revenue is £7,472,779. The States representatives are afraid that, if the subsidies they receive are withdrawn, they will have to impose a tax on the land-owners, who are best able to pay taxation. The land in New South Wales is estimated to be worth £250,000,000, whereas its actual value is probably £500,000,000; but the land-owners there paid in 1924-25 only £2,569. When the New South Wales Government was recently considering a child endowment bill there was considerable hesitation in suggesting the imposition of a tax amounting to £6,000,000. That has not yet become law, but the mere retention by the Commonwealth of the taxation derived from the people of New South Wales would not ruin that State. I have not found one person outside Parliament who is concerned with the fate of this' bill. Travelling inthe train the other day I asked six commercial travellers their views regarding it, and they replied that they did not care whether the per capita grants were withheld or not. I know of no public meeting at which a resolution either for or against the Government's proposal has been carried.

Senator Findley - They will care when additional taxation is imposed upon them.

Senator GRANT - When the Fisher Government imposed additional taxation the people raised no objection. If in New South Wales additional taxation were imposed by the State Government to-morrow, I do not think that it would result in that Government being turned out of office.

Senator Crawford - Is the honorable senatorsupporting the bill ?

Senator GRANT - No. I shall oppose it because the Government's proposal to retire from the field of direct land value taxation does not meet with my approval. Honorable senators should approach a question of this nature in a non-party spirit. Take any twenty men we may meet in the street, and we shall find that they care little or nothing about the per capita payments; indeed, they care very little about politics. For a considerable time the States unquestionably have had a constitutional right to a share of the Customs spoils. Those astute gentlemen who framed the Constitution were not members of the Labour party; they were all Tories, and certainly were not liberal-minded men. They laid it down definitely in the Constitution that for a period of ten years after the inauguration of federation the States should share in the Customs revenue to the extent of three-fourths of the spoils. "When the Fisher Government reviewed the situation, instead of the States receiving three-quarters of the revenue derived from Customs and excise, the basis of payment was altered to provide for a grant from the general revenue of 25s. per head of population. It cannot be gainsaid that from that time the States have had a perfect right to that payment. That arrangement has continued until the present time; but now the Government proposes to repeal the Surplus Revenue Act of 1910. Clause 2 of the bill is important in that it proposes the repeal of sections 4, 5, 6, and 7 of that act as from the 30th of June, 1927. Section 4 of the Surplus Revenue Act of 1910 reads-

The Commonwealth shall during the period of ten years beginning on the 1st day of July, 1910, and thereafter until the Parliament otherwise provides, pay to each State by monthly instalments or apply to the payment of interest on debts of the State over by the Commonwealth, an annual sum amounting to 25s. per head of the number of the people of the State.

That money does not necessarily come from the Customs House, or from excise duties; it may be derived from any source. Yet almost all honorable senators look to the Customs House to supply the revenue from which these payments shall be made. Senator Greene, who may be described as the High Priest of Protection, had the honesty to admit, and Senator Barwell practically admitted, that Customs taxation fell most heavily on the poorer sections of the community. Land values taxation would fall most heavily on the wealthy and be felt least by the poorer sections pf the community. The reason that members of the Government are such ardent protectionists is not so much that they desire to protect Australian industries, and to create employment, as that they do not desire that the wealthy people in the community shall bear their fair share of taxation. So ineffective is the tariff as a means of preventing the importation of foreign goods, that the revenue from Customs and excise this year is expected to exceed £44,000,000. That should be sufficient to convinoe honorable senators that a policy of protection is a complete failure except as a means of obtaining revenue.

Senator Thompson - The honorable senator is out of step with his party.

Senator GRANT - I am not. I intend to vote against this bill. I am tempted to believe that the existencein five of the States of Labour Governments underlies the Government's proposal to withdraw the per capita payments because it desires to throw upon the State Governments the onus of imposing taxation in other directions.

Senator Pearce - The proposal was put forward in 1923 when there were Nationalist Governments in three of the States.

Senator GRANT - I do not charge tho Government with having introduced this measure with that object; but there are times when such' thoughts present themselves.

Senator McLachlan - They are unworthy thoughts.

Senator GRANT - I find difficulty in expressing them. Yet the fact remains that there are five Labour Governments in the Commonwealth. The States contend that the continuation of the per capita payments is necessary, otherwise they will have to seek revenue by taxing the people in other directions. The difficulty of aggregating incomes to which some honorable senators have referred, would be avoided by imposing an increased land tax. There is no reason why the Commonwealth should retire from that field of at least direct land value taxation. The Great War placed a heavy financial burden on the Commonwealth. The interest on its war loans is approximately £20,000,000 per annum, while maternity allowances represent about £600,000, and old-age pensions about £8,000,000 per annum. In addition, the Commonwealth has to meet heavy expenditure for defence, provide bounties to assist various industries, and meet its commitments in connexion with its national roads and housing schemes. By imposing additional taxation on the poorer sections of the community through the Customs House, the Government proposes to make roads through the lands of wealthy landowners, thus increasing the value of their asset. It is impossible to estimate what the requirements of the Repatriation Department may be in the course of a few years. At present its expenditude is between £7,000,000 and £8,000,000 per annum, and it is steadily increasing. In the circumstances, for the Commonwealth to retire from the field of land values taxation would bo suicidal. It would mean a reduction of the old -age and war pensions, which no one desires. On the contrary, the Government would do well to be more liberal towards those who have suffered directly or indirectly because of the war. It is true, as some honorable senators have said, that the financial re- sponsiblities of the States are enormous. They have to maintain many thousands of miles of railways and tramways, provide education for the children, and nolice protection for the whole continent. One honorable senator said that the States also had to control the local governing bodies. Those bodies can look after themselves. They do not lean upon the States but take the necessary measures to raise their own revenues. At all events the local governing bodies in New South Wales rely upon their own resources. It has also been said that banking institutions are under the control of State Governments; but usually the banks are able to look after themselves. Another suggestion is that the upper houses of State Parliaments will veto legislation for the imposition of direct land values taxation. Since land taxation for revenue purposes is a nominal impost in all the States I feel sure that if any State Government put up a strong light against the conservative element of the upper houses its views would eventually prevail. It has been stated that the Government intends to retire from the field of direct taxation. To some extent it has retreated from that position, but in view of the possibility mentioned I do not feel inclined to support the measure.

Senator Thompson - The subject of land taxation is not now before . the Senate, so the honorable senator oan vote for the bill.

Senator GRANT - I know that the subject mentioned by the honorable senator is not now before this Chamber, but I take a sufficiently wide interest in projected legislation to know that certain proposals are before another place, and, since the Government has given an indication of its intention to retire from certain fields of direct taxation, and in view also of the fact that there arefive State Labour governments in office, I do not feel justified in supporting a measure of this kind. I intend to oppose the bill.

Debate (on motion by Senator Mclachlan) adjourned.

Suggest corrections