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Wednesday, 3 June 1942

Senator ARNOLD (New South Wales) (1:56 AM) . - I believe that it is imperative to consider these bills in the light of the present national crisis. We, as a people and not as a series of governments, must measure up to the war situation as it confronts Australia. The national Government is faced with the problem of marshalling Australia's resources of manpower and finance in the most effective way possible for the conduct of the war. It is desirable, in my opinion, that we should have regard for these fundamental facts when we consider the attitude of any Australian government, whether it 'be a State or Commonwealth government, towards the uniform taxation proposals. These measures are part of the necessary means towards an end, which is the most effective method of defending Australia. Consider what this measure, which makes provision for a uniform income tax scheme to operate for the duration of the war and one financial year thereafter, means to the Commonwealth Government as the national Executive of our war effort. The problem of financing the war is one which the Government is attempting to solve by various methods, including voluntary loans, bank credit and taxation. We must not overlook the fact that not one of the belligerent countries is able to carry on the war with voluntary loans and not one of them would attempt to carry on without heavy taxation imposed with the view of restricting the dissipation of its resources in useless spending and preventing inflation. It has been said that inflation cannot take place in Australia because we have legislation to control prices and peg wages, but I point out that inflation can occur in a form other than increased prices; it can take the form of queues of people lining up at shops to purchase commodities which are in short supply. Such a state of affairs could have a serious effect upon the morale of this nation. In Australia, we have now reached a position in which we find it necessary to divert man-power from non-essential industries to the war effort. We have long passed the stage of employing our idle manpower and labour not usually available for work. We must now divert to the war effort the extra money that is being poured into the community. It must be diverted from civilian spending to the Commonwealth Treasury in greater and greater amounts. We cannot finance this war without some disruption of our social system and without making some alterations of our financial methods which were laid down long before there was an Adolf Hitler and 90,000,000 fanatical Germans prepared to spend their last mark to achieve victory over us. If we were to adhere rigidly to those outworn methods we should be sailing with a wind which might easily wreck the ship. What powers does the Commonwealth Government possess to obtain money to finance its war effort? First, it can ask the people to surrender voluntarily their spending' power by contributing to war loans ; secondly, it can utilize bank credit, and thirdly, it can impose taxation. The crux of this discussion is to be found in paragraph 4 of the report of the special committee which states -

The committee is impressed with the urgency of this reform, particularly under war conditions. The expeditious and effective raising of revenue assumes greater importance during a period of national crisis. Income tax is the main source of revenue from which the Commonwealth finances war expenditure and that source is limited. The Commonwealth, therefore, should not be hampered by State laws which prevent the fullest exercise of taxation powers essential to the nation at war. The presence in the field of six States imposing eleven taxes on income at widely differing rates restricts the power of the Commonwealth in raising revenue from income taxation.

In my opinion, the Government has made the best effort possible to obtain money by means of war loans, and has exploited bank credit to the fullest extent that is wise. If the problem were merely one of obtaining money it would not be so bad, because money could be obtained. Unfortunately, it is also necessary to provide a means of siphoning out the additional money that is injected into the economic system, in order to prevent it from being used as civilian spending power. Bearing these factors in mind, we are bound to ask ourselves whether the powers that are now available to the Commonwealth for taxation purposes are adequate for the job of financing our war effort at a time when the only thing that matters is the survival of the nation. That is not merely a matter of opinion, but also it is one of fact. The report of the special committee shows clearly that unless we differentiate between individuals in the various States the Government will be unable to secure by means of taxation all the revenue that is necessary to meet war commitments, and cannot make that discrimination because such action would he ultra vires the Constitution. Therefore it is evident that the powers of the Commonwealth at present are not sufficient to ensure a maximum war effort. Having regard to the financial and economic problems of Australia in time of war, and to the disastrous effect upon this nation of a weak financial policy - inflation and its consequent wreckage - the Commonwealth should not be hampered in the collection of income tax. I do not intend to speak at length on the problems of the States in regard to these proposals, but I do not believe that this scheme will have any great or lasting effect upon the problems of the States in post-war years. However, as the issue has not been raised seriously it is not necessary to defend the measure on that principle. Therefore, I conclude by repeating, that in my opinion, the existing powers of the Commonwealth to collect income tax are insufficient to meet the vital needs of the nation in the crisis which now confronts us and in these circumstances, I believe that the people generally, will agree tha,t in order to retain their security and independence, this measure should be passed.

SenatorSAMPSON (Tasmania) [2.12 a.m. - Before dealing with the bill, I should like to refer briefly to the speech made by the Leader of the Senate (Senator Collings), who, after stating that he had spent his life amongst the workers and therefore knew what he was talking about, said that I had spent my life amongst well-to-do and rich people whom I represented in this chamber. It was rather unkind of the honorable senator to make such a statement, because I have been a worker all my life. I was taken away from school at the age of fourteen and put to work on a farm. After a couple of years of farming I had a go at most jobs. I spent seven years sawmilling as an employee, and for a couple of years after the war, I was manager of a " show " in which I lost all my deferred pay, war gratuity and other assets. That was during the depression of 1921-22 which followed the war boom. Perhaps it is as well that I should point out these things to the Leader of the Senate because I have a high regard for him, and I had hoped that in the course of his speech to-day, he would have told us something about the bill. However, he merely gave us one of his familiar tirades of sound and fury, like a tale told by an idiot, signifying nothing. In the course of this debate we have been reminded continually of the great danger which confronts this country to-day. Honorable senators on this side of the chamber were practically told that they did not know anything about it. This country has been in dire peril for the last twelve years and more, and time and again in this chamber I drew attention to what was threatening us. On many occasions I stressed the fact that it was up to us to make equipment and train our men to handle it; and now honorable senators opposite talk about danger. God knows we are in peril to-day, and nobody knows it better than I do. My only regret is that the writing which was on the wall for every body to see was not heeded. . General Chiang Kai-shek, the Chinese generalissimo, has truly said that if we sweat more in peace we shall bleed less in war. We have paid for our refusal in the past to realize what was coming to us. We did not train our young men in order to give them a chance to fight for their womenfolk and their country. I believe that we shall win this war, but, when I think matters over calmly, I doubt very much whether we deserve to win. Discussing the bill itself, I draw attention to the preamble, which states -

Whereas, with a view to the public safety and defence of the Commonwealth and of the several States and for the more effectual prosecution of the war in which His Majesty ia engaged, it is necessary or convenient to provide for the matters hereinafter set out:

Be it therefore enacted ... as follows: -

In my opinion the preamble provides a fairly good smoke-screen. This measure and the bills associated with it, which are described as embodying the uniform income taxation proposals of the Government, have been dictated by the war and the national peril. The suggestion that these proposals are necessary to meet the demands of national safety is a mere pretence. It cannot be successfully argued that the enactment of these measures is essential to the war effort. Will these allegedly uniform taxation proposals provide one more tank or plane, or give to ns more munitions or Bren gun carriers? Hard economic realities, rather than monetary difficulties are the chief obstacles in the way of a full war effort. No amount of money would enable us to make anti-aircraft guns out of steel which has not been smelted, or to get coal which has not been taken from the earth. What Australia requires for the winning of the war is not money but increased production and man-power. Lack of money has never stopped a war yet, and never will. To suggest that the passage of these bills is essential to the war effort is mere balderdash. Our essential problem is to decide how to obtain the requisite raw materials, how to build and equip the necessary munitions factories, and how to provide all the labour needed and men of fighting age trained to use the intricate modern instruments of war. If we had all the money in the world it would not save us from destruction, unless we had the men, the machinery, and the raw materials required for the manufacture of the munitions of war.

The pretence that these measures are essential to the prosecution of the war has been largely abandoned, and an open bid has been made for what amounts to a system of unification. I believe in decentralization. I tremble to think of what would happen to Tasmania if it were to be governed solely from Canberra. Legislators who are familiar with local conditions are the best judges of what is best for the people. I favour the federal system, which provides for a partnership under which certain functions have been surrendered by the States to the central government. I do not regard unification as practicable in a country having an area of about 3,000,000 square miles. To-day there are seven governments in the Commonwealth. Canada, with an area similar to that of Australia, has ten Parliaments. The United States of America, which has an area of a little more than 3,000,000 square miles, has 49 Parliaments. Brazil is a country similar in size to Australia, and it has 27 Parliaments. Despite our sparse population, if one Parliament attempted to govern the whole of Australia, it would have a very difficult problem. It would be necessary to delegate certain powers to the State authorities, and therefore the Parliaments of the States should be retained. If the present proposals were agreed to, their effect would be harmful, because we are now desperately in need of the closest national unity and the utmost co-operation obtainable between the Commonwealth and the States, as well as complete co-operation between all organizations and individuals. This bill seems to be a somewhat cynical attempt to destroy the very basis of federation. It will produce distrust and dissension, and make effective cohesion well nigh impossible. These proposals are alleged to have arisen from the Commonwealth's need for increased revenue, and from a desire to ensure equality of sacrifice as between file people of the several States. Those are most desirable objectives, but this scheme will not attain them. If adopted, it would intensify and perpetuate the existing inequalities between the States and throw their affairs into confusion.

Having studied the Commonwealth Constitution as a layman, I suggest that this bill, if passed into law, would violate the spirit of the Constitution. Senator A. J. McLachlan and Senator Spicer and other honorable senators skilled in the law, may be able to say whether the bill violates even the letter of the Constitution. If carried to its logical conclusion, legislation of this kind would destroy the federal system. I regard the bill as a party measure, which is not even thinly veiled; it stands naked and unashamed. Regardless of opposition to these proposals, even from supporters of the Government - the bills were opposed by Labour members in the House of Representatives - I believe that the Government, knowing that some of its supporters are unable to vote for the bills without acting contrary to their convictions, is bent on driving them through this chamber with all the force of cast-iron party discipline.

Senator Keane - The voting was 41 to 11 in the House of Representatives.

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