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Friday, 10 August 1906


Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) . - The intrusion into the debate of the question of land taxation, to which no reference is made in the Budget statement, will not cause me to stray from the track for more than a few minutes. In reply to the honorable and learned member for . West Sydney, I would point out that the measure introduced into the New South Wales Parliament by the right honorable member for East Sydney provided for a tax of id. in the £1, but not without exemption. At that time the Labour Party, with which the honorable and learned member was connected, resisted the exemptions which were provided for. To-day the honorable and learned member, who stated that if the honorable member for Parramatta would introduce land taxation proposals with no exemptions he would support him, is now advocating a scheme which provides for extremely large exemptions - exemptions which are totally opposed to his own principles.


Mr Hutchison - The honorable member must admit that the position under Federation is slightly different from that under the States.


Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - There is no difference whatever. If the Federal Government has power to tax land worth more than £5.000, it also has. power to impose taxation upon property of less than that value.


Mr Hutchison - We must leave something for the States.


Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - The Labour Party are acting without any consideration for the States. There was an excellent reason for the introduction of the land taxation proposals into the New South Wales Parliament. At that time a state of affairs existed which I do not think obtained in any other part of the world. All the land outside of the municipal areas, which were very small, was not subject to *the payment of one penny of taxation by way of return for the benefits derived by the owners from the expenditure upon roads, railways, and other public works. Surely, then, there was a reason for the introduction' of the measure to which I have referred.


Mr Tudor - Most of the land in Victoria is in much the same position as the honorable member has described.


Mr Wilson - That is totally incorrect. We have our municipal taxes all over Victoria.


Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - What is the declaration of the leader of the Labour P arty to-day ? He does not desire to raise revenue; he purposes that the Commonwealth shall assume the dutv of deciding the land policy of the different States.


Mr Fisher - The honorable member might quote the actual words used by the honorable member for Bland. He stated that the primary object of the proposal would be to break up the large estates, but that the revenue would be considerable, notwithstanding.


Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - The honorable member is referring to an addition that was made at a later stage.


Mr Fisher - In his first statement, the honorable member for Bland said that the proposals were intended, primarily, to burst up the large estates.


Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - I have read the printed words of the honorable member for Bland, to the effect that he did not propose taxation for revenue purposes, but with the object of breaking up the large estates.


Mr Fisher - I know what was stated on the first occasion, whatever may have been reported.


Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - I only know what the honorable member was reported to have said. He has not denied it. However, if I accept the assurance of the honorable member for Wide Bay that it was stated that the primary object was not revenue, but policy, that means that it was proposed to take away from the States the management of their own land policies. It was intended that the superior authority, with greater powers of taxation than the States, not as regards la-nd merely, but generally, should impose taxation, not for the purposes of revenue, but with the object of deliberately taking away from the States the control of their land policies. I have no hesitation in saying that it was the intention of the Constitution to leave that matter in the hands of the States. I wish to point out that the Labour Party of New South Wales - and I speak of that State because the honorable and learned member for West Sydney specially referred to it - although thev did not, in the first instance, support the Closer Settlement Bill, afterwards gave their adherence to it. In reply to the objection raised that it would be unfair to the owners of property to provide for the resumption of their land by the State, it was urged, and very properly so, that it was not unjust when it was necessary, in the public interest, for the State to step' in and pay an owner a fair price for his land. That was what they argued then, but now they are turning round. The closer settlement measure referred to is in force now in New South Wales. And yet the members of the Labour Party, instead of depending upon it for such resumptions as *re necessary, entirely renounce their previous statements that the owners of land shall be paid for that which they have honestly owned, and propose to tax the owners till they dispossess them.


Mr Higgins - Was not the bursting up of big estates one of the objects with which the right honorable member for East Sydney introduced his land taxation measure?


Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - I never heard of such a policy being advocated by him in that regard. The proposal was for a revenue tax, which was to be paid by owners in return for benefits received by them.


Mr Higgins - But there was a distinct object in view, namely, to prevent the holding of large estates for a long period.


Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - If that was the object in view, why not let the tax operate?


Mr Higgins - We find fault with the right honorable member for East Sydney, and the right honorable member finds fault with the Labour Party.


Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - No. doubt the right honorable member for East Sydney did say that if there were no taxation upon land, it would tend to the aggregation of large estates.


Mr Higgins - He said a little more than that.


Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - The Labour Party now propose to put an impost upon every estate throughout the Commonwealth, in addition to the State taxes and the shire taxes. The honorable member for Parramatta has just handed me a quotation in which the leader of the Labour Party is reported to have said that he was prepared to support the imposition of a tax of several twopences in the pound


Mr Wilks - Where did he make that statement ?


Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - At a labour demonstration, at which speeches were delivered by members of both the State and Federal Legislatures. Then we have been called upon to emulate the example of New Zealand. In this connexion, I would point out that the graduated Land tax proposed by the Labour Party is much higher than is the tax in New Zealand. It begins at £d. in the pound, and progresses at the same rate, whereas the New Zealand tax begins at one-eighth of a penny in the pound, and progresses in a similar ratio. Then it must be recollected that New Zealand has iii its own hands the land policy of that country. There is not a Federal Government there, and it does not pile a third tax on to a State tax and a shire tax, and consequently it is impossible for us to institute an analogy between its position and our own. But behind this proposal there is a desire to bring about land nationalization. The intention of the Labour Party is not to stop at dispossessing the owners of big estates, but to nationalize the whole of the lands in Australia. The honorable member for Gwydir would not refer- to that matter. He said that that was not the policy of the Federal Labour Party. Need' I point out that it is the policy of a branch of the same party. The two bodies meet in conference, although they decide upon their State and Federal platforms separately.


Mr Tudor - Thev do not meet in conference.


Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - Was not the honorable member for Bland present at the Victorian conference, and did he not endeavour to induce that body to alter its proposals?


Mr Hutchison - The South Australian organization has not adopted the principles which were adopted by the Victorian conference.


Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - I do not know anything about that. I wish also to point out how crude is the proposal to levy a heavy progressive land tax upon large estates. In the first place, the taxation upon amounts which might be regarded as considerable is comparatively small, but as it progresses it becomes exceedingly heavy. What estates will the imposition of such a tax force from the hands of their present owners? Will it not Le those estates which pay the least - estates such as exist in the western portions of New South Wales, and which give their owners very poor returns? The tax may be levied upon the value of the land ' during good seasons, and as the result of its operation during bad seasons, the holders of these lards may be compelled to sell.' Of what use would such lands be .for the purposes of closer settlement? It would be cruelty to put small settlers upon them. Whilst the. proposed tax may make the better class of lands groan under the burden, it will not dispossess their holders. But the owners of the poorer lands in the drier areas will be forced to part with them.


Mr Higgins - If the lands are very poor, their values will fall within the amount of the exemption.


Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - But their values may be assessed in good seasons. As a matter of fact, the assessment of the western lands of New South Wales - as the result of an inquiry by a Royal Commission - have recently been reduced, because they were made during good seasons.


Mr Higgins - I do not think that the proposed tax would touch the lands to which the honorable member refers.


Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - It would certainly not touch the rich lands. That fact is proved by the experience of New Zealand. In that country, these rich lands ' yield, owing to the steady rainfall, a regular revenue, but the progressive land tax has not effected the dispossession of their holders. Such a tax in Australia would simply force the poorer lands out of the hand9 of their present! owners, and - as they would be useless for small settlers - they would merely become breeding grounds for vermin. Coming now to the Budget itself, I wish to say that the Treasurer has brought before us some very large problems connected with 'the finances of Australia. The approaching termination of the bookkeeping period makes his Budget a very important one. I think that the attention of the Committee should be called to this matter, so that we may decide whether we shall continue to drift under our present conditions, or whether we shall approach' nearer to a real Federal union upon safe financial lines. The memoranda prepared by the Treasurer and the honorable member for Mernda - whose financial ability I acknowledge - are of very great assistance to honorable members in considering this subject. Their schemes have evidently not been framed from any party stand-point. While we may take exception to those schemes, we must acknowledge the very close study which their authors have given to this question. Of course, it is much easier to object to a scheme than it is to formulate one to which no exception can be taken. The Treasurer has stated that he would welcome any suggestion that might be placed before him in this connexion. For that reason, I have given some attention to the matter, and I desire, as briefly as possible, to place the result of my labours before the Committee. I regret that the Treasurer has not put forward anything in the nature of a proposal for the prompt abolition of the bookkeeping system.


Sir John Forrest - Does the honorable member mean before the period covered by the Braddon section?


Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - I mean at once. That provision was made in all good faith and for good cause. It has fulfilled its part. We know now what .is the effect of the bookkeeping system, and we can see how far any departure from that system would affect the different States.


Sir John Forrest - The system is not a source of very much trouble.


Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - It is a source of enormous trouble to persons who have to pass entries for goods. The goods cannot be checked, and consequently there is no guarantee that the full returns are given at all. As a matter of fact, so much trouble is involved, that in some cases, I am sure, the goods are forwarded without the information required under the existing system being obtained.


Sir John Forrest - Between New South Wales and Victoria, very little trouble is experienced.


Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - If it is desired to forward suits of clothes, for example, it is necessary to ascertain the duty paid upon the buttons, bindings, cloth, linings, &c, to pass a number of entries, and upon the figures supplied the financial adjustment is made.


Mr Fisher - And it is all against the smaller States.


Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - Yes. I quite agree that there must be a considerable amount - which is not accounted for - due to the smaller States. Persons who are obliged to pass entries for goods which are being forwarded from one State to another, tell us that the operation is infinitely more difficult to-day than it was prior to Federation.


Mr Harper - It involves the employment of an increased staff.


Sir John Forrest - Not as between Victoria and New South Wales.


Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - If a good arrangement can be made between two States, why cannot a similar arrangement be made between all on a per capita basis? Having ascertained what would be the effect upon each State of a per capita distribution of the Customs and Excise revenue, the time has surely arrived when, even if there is a loss by one State or another, as long as that State can afford it we should be prepared in the meantime to face that loss. Events such as the growth of population in one State or another will cause a variation from year to year, and we should accept any immediate loss in a truly Federal spirit, and try to some extent to spread the burden.


Mr Higgins - Would the honorable member apply that remark to Western Australia ?


Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - I should grant special consideration to Western Australia, because I recognise that, having regard to its small population, we could not expect it to bear what we can expect of the larger States.


Mr Mahon - The honorable member would also take into account the fact that it is receiving nothing out of Federation ?


Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - I shall not say that it is receiving nothing out of Federation.


Sir John Forrest - New South Wales is getting all of it.


Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - I do not think it is; but still Western Australia is not deriving as much benefit from Federation as some of the other States are. . I have prepared the following statement of my proposals : -

That the book-keeping system terminate on the completion of the five year period, and the distribution among the States of surplus Customs and Excise revenue on a fercapita basis be adopted.

The book-keeping system was only intended to be in operation temporarily. Its usefulness as a safeguard against the too severe dislocation of the finances of some of the States, and as an indicator of the course of trade, can now be estimated. Its cost to the Department of Customs and to the public ; the enormous labour and worry involved ; the complexity of analysis when the component parts of some manufactured article of Inter-State trade are subject to different duties; the difficulty of attaining even approxi- mate accuracy in the returns rendered to the Customs, and the impossibility of any thorough check by the Customs without a large staff, and border Custom-houses, can also be appreciated. As a precaution, when what was regarded as more or less a step in the dark was being taken, its adoption was justifiable, but its continuance after it has yielded its information is not desirable unless it be shown that, without it, seriously inequitable results would arise.

It is submitted that any reasons which can be given for its continuance now would be almost certainly applicable to any future proposals for abolition, and, if they are to have sway, a most objectionable handicap on Inter-State exchange will be permanently grafted on "to Commonwealth finance. On these grounds, as well as for the simplification of the financial system, the removal of the present uncertainty as to the amount which the States may expect to receive from the Commonwealth, and the cessation of the necessity for the Commonwealth - when requiring extra revenue - having to raise four times the amount, and to hand over three-fourths to the States, which the latter may not need, the following is proposed : -

That there be a -per cafita distribution of Customs and Excise revenue after the expiry of the book-keeping period. This is a distinct proiosal independent of any decision regarding the Braddon section.

As a further proposal dealing with the Braddon section, it is suggested that when the fer cafita distribution begins, the operation of the Braddon clause be suspended, if it can be legally done by agreement with the States; or failing such agreement, it be allowed to lapse at the end of its present currency. When it is suspended, or lapses, a fixed sum of, say, £6,783,959 of Customs and Excise revenue be returned to the States. This is a sum between the Treasurer's estimate of the three-fourths share of the States of Customs and Excise revenue in 1906-7, and his estimate of what they may actually receive in the same year.

As the Commonwealth must soon absorb all its quarter of the net Customs and Excise revenue, and as, in the proposed distribution, what will probably prove, during the next few years, to be three- fourths or over, has been allotted to the States, the latter are not likely to lose by this arrangement, especially as without agreement the Commonwealth can use, or deal with as it sees fit after the Braddon clause expires, the three-fourths now allocated to the States, and that even without making any provision for the debts. The effect on the 1906-7 estimate is shown in the following figures : -

 

Under my proposal, as opposed to the Treasurer's estimate of distribution, New South Wales would lose , £351,190.


Sir John Forrest - That is a big loss.


Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - And, as a representative of New South Wales, I am supporting it. Then, again, under my scheme, Victoria would lose £25,225. On the other hand, Queensland would gain £103,582, South Australia would gain £100,101, Western Australia would lose £59,136 and Tasmania would gain £66,542.


Sir John Forrest - Why should Western Australia lose anything, as compared with South Australia and some of the other States ?


Mr Higgins - She could well afford it.


Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - She would lose under a Tariff of herown, because her population is changing.


Mr Higgins - I have come to the same conclusion as the honorable member has in regard to a sliding scale for Western Australia.


Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - I am pleased to hear it. My statement continues -

The foregoing comparison is based on a lower return to the States than that estimated by the Treasurer for 1906-7.


Sir John Forrest - I am going to give the States what they receive already.


Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - Under the right honorable member's scheme we should _ have to continue to do so for all time.


Sir John Forrest - No.


Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - I am afraid that the right honorable gentleman is not extending to my proposal that consideration that he promised to give to any scheme that might be submitted -

 

The proposal in the first comparison shows a gain of revenue to the States whose finances have been most strained by Federation, and a loss to the larger States, especially New South Wales, also some loss to Western Australia, which includes her loss by the abolition of the special Tariff and would probably occur were she under a Tariff of her own. It was recognised before Federation that theper capita division that must sooner or later come would probably mean a loss to New South Wales, and the loss was generally estimated as very much larger than that shown herein. Against the loss must be placed the relatively larger increase of population in New South Wales, which, if continued, will, on a fer capita distribution, give her a larger proportion. There is also the probability that her coal, and large population, will bring a more than proportionate increase in home production, and consequent reduction of the consumption of dutiable articles, and of the duties returned to her, as well as an increase of her debit for Inter-State adjustment were the present system continued. Then if, as is probable, the Commonwealth undertake old-age pensions, New South Wales will have her revenue freed to the extent of, say,£500,000 per annum, and Victoria, say,£200,000 per annum.

It is quite true that New South Wales would make a considerable loss in the one year instanced, but as, under the existing method of distribution, there are considerable fluctuations, that loss would vary, and in some years might disappear. It was always urged before Federation that under distribution on a -per cafita basis New South Wales must necessarily lose, as compared with some of the other States, and the estimated loss at that time was infinitely greater than would result under my scheme. Under present conditions, I think that she can perfectly well bear the loss that I have indicated. It has to be remembered that, if she increases her population in larger proportion than the other States, as she has been, doing lately, she will obtain a larger proportionate return of revenue on a per capita basis. Then her manufactories, having regard to her coal supplies, are sure to increase. This will lead to a reduction in her consumption of dutiable goods, and consequently to a reduction in the Customs revenue returned to her. Further ora, if the Commonwealth, as is proposed, adopts an old-age pension scheme, she will be relieved to the extent of. about£500,000 per annum, and Victoria will receive relief to the extent of ^200,000 per annum. I make two distinct proposals, one of which relates merely to what should be done in the event of our discontinuing the bookkeeping system and adopting the per capita distribution, the other combines that with the suggested amendment of the Treasurer of the Braddon section. The last figures I gave show the result of taking the Treasurer's expected surplus and distributing it per capita, instead of on the present basis. But there is another proposal. I propose to take an amount in order that, if possible, we may arrange for the suspension of the Braddon provisions. Whether that is constitutionally possible by agreement with the States, I cannot say.


Mr Higgins - They will not agree.


Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - They might agree if they were secured for that amount. I propose that £6,700,000 - a sum between the three-fourths to which the States are entitled, and the amount which the Treasurer expects to return to them in 1.906-7 - should be set apart for this purpose. We cannot profitably take over the debts of the States at- once. We cannot convert' them and make them Commonwealth debts. It would be an absurd thing to- try to do so, and would be of no advantage, except to the present holders of stock.


Mr Harper - We can only look to their ultimate maturity.


Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - It can be done only as the debts mature.


Mr Higgins - The Constitution must be altered to allow that to be done.


Mr Harper - Not necessarily. It may be done with the consent of the States.


Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - I am inclined to think with the honorable and learned member for Northern Melbourne, that, under section 105, if anything less than the whole of the debts existing upon the inauguration of the Commonwealth are taken over, they must be taken over on a per capita basis, and that cannot be done, if we convert them only when they fall due. I think, therefore, that that section requires alteration. But there is nothing to prevent the adoption of the very good plan suggested by the honorable member for Mernda.


Sir John Forrest - He would take over the whole of the debts.


Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - I do not propose the taking over of the whole of the debts, but the partial adoption of the honorable member's scheme. Instead of taking over the debts, which we cannot profitably do, we might make ourselves responsible for interest, as the honorable member for Mernda suggests, and the amount to which I propose that we should make ourselves .responsible for interest is £6,700,000.


Mr Higgins - If we make ourselves responsible for interest, the effect will be the same as if we took over the debts.


Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - In what way ? .


Mr Higgins - I understand the honorable member to say that, in place of taking over the debts one by one, as they mature, we should make ourselves responsible for the interest upon them. That would have the same effect upon the market as the taking over of the debts themselves.


Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - No; the honorable and learned member is wrong in that. Under my proposal, and under that of the honorable member for Mernda, if modified a little, the States could, if thev chose, pay the interest themselves, and allowance for the payment could be made in the Commonwealth figures.


Mr Harper - Or it could be paid through the High Commissioner's office.


Mr Batchelor - What would be the difference between the Commonwealth making itself responsible for the debts of the States and taking over the debts?


Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - The Commonwealth would not be responsible to the bend-holders ; it would be responsible to the States for the payment of a certain amount, just as it is now.


Mr Higgins - That would be equivalent to taking over the debts of the States.


Mr Batchelor - It is all that the bond-holders would want.


Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - The bond-holders already have the security. For instance, some of the States receive from the Commonwealth more than the amount of the interest which they pay.


Mr Batchelor - But, under the honorable member's proposal, the Commonwealth would guarantee to pay interest on the debts of the States.


Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - We should undertake to pay interest out of the States portion of the revenue, or to make an adjustment with the States in regard to it.


Mr Fisher - Has not the honorable member overlooked the fact that the Constitution provides that the Commonwealth shall come to the aid of any State which is in default, and that,, therefore, the credit of the States is absolute?


Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - I do not know whether there would need to be an alteration of the Constitution to carry my proposal into effect. That would be a matter for the law officers of the Crown to consider. But, instead of returning threefourths of the Customs revenue, we should return a fixed sum, and, so that the States might be secure, would agree to absorb it in the payment of interest. The main point, to which others are subsidiary, is this : I propose, as the honorable member for Mernda proposes, that the sum shall be fixed. He has mentioned £6,500,000, but I am able to be more liberal, and put down the amount of £6,700,000, because I do not propose that we should provide for the whole of the debts as he does.


Mr Harper - The honorable member would leave it to the States to provide the balance of the £8,500,000 payable annually in interest.


Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - Yes. The honorable member for Mernda goes further than I do, as I fear that there may be some hampering of our finances. Therefore, I would simply allot the fixed amount which I have named, which is about what the States expect to get.


Mr Batchelor - Would the honorable member allot that amount for a term of years ?


Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - It would be a fixed sum, to be absorbed by interest. I propose that the Commonwealth should float loans for the States as they require them, either for renewal or as new loans; but the Commonwealth alone should be allowed to go to London.


Mr Crouch - Does the honorable member make that a condition?


Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - Yes.


Sir John Forrest - If the revenue from Customs and Excise increased very much, would the honorable member give the States any more?


Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - We could do as we chose about that.


Sir John Forrest - That would not be in the agreement.


Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - It would not be in the agreement


Mr Batchelor - Would there not need to be an occasional revision and alteration of the amount?


Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - The Commonwealth should be free in time to deal with its own finances. Having done all that the Constitution contemplates, and absorbed a very large sum in the payment of interest on the debts of the States, or credited the States with a sum which would enable them to pay interest, the Commonwealth should be perfectly free. We have every reason to know that the States will be considered, but. having been guaranteed to the amount I have named, and the rest of the debt being gradually taken over as it falls due - which would be part of the arrangement - the States would have got all that they could properly expect, and the Commonwealth, having given them all the security which they could reasonably ask for, would be free in regard to its own finances. It must have such freedom sooner or later. We cannot always be bound by conditions. I have not time to deal with these matters as clearly and fully as I should like; but my memorandum in regard to the debt and to the transferred properties will give honorable members information as to exactly what I propose.


Mr Fisher - The matter is sufficiently important to justify the honorable member in taking his time in dealing with it, even though a week were required.


Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - I am merely briefly outlining my proposals now, but when honorable members read them as I have set them forth at length, thev will see clearly what my intentions are. The Treasurer makes no provision in regard to the transferred properties.


Sir John Forrest - I have already done so. I gave my views on- that subject before.


Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - I used the argument at Hobart, that, as the properties have passed only from one trustee to another, there need be no payment of compensation. The States, however, contend that there is a difference in the per capita value of the property, it being less in some States than in others, and that, having gone into partnership, they should each be credited with what they put in as partners. Personally, I do not see any serious objection to the proposal of the Treasurer as regards dealing with balances only, though the States have absolutely refused to ac- cept it. Of course, we can override their decision, but if we can come to an agreement with them under which their requirements' will be fulfilled, and they will be satisfied, we should try to do so, providing that we do not injure the finances of the Commonwealth. They argue also that part of their debt was created in providing for properties which have been transferred to the Commonwealth, and that it is not fair that that portion of their debt should remain, or that they should be liable for that portion of their debt and interest, after having parted with the use of the properties in regard to which it was incurred. Some of them would like to get cash for their properties, but that idea, is now generally abandoned. It would be a most improper method of settling the matter. I suggest that the transferred properties should be paid for by the Commonwealth taking over the debts of the States, proportionately to the properties, as they fall due, at the rate of £1,000,000 per annum. Of course, there would not be £1,000,000 worth of debt that could be so treated falling due every year, but we could arrange for the transference of the States debts to the Commonwealth at that rate.


Mr Knox - How would the honorable member distribute the indebtedness? How would the honorable member arrange in regard to the individual States?


Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - The debt taken from each, State would be proportionate to the properties handed over, and the interest would be distributed -per capita. The trustees of the property would in this way have the debts incurred in connexion with it transferred into their own names. What I propose could be done without a strain' on the Commonwealth, and the interest on the debt would be paid out of the Commonwealth share of the revenue, instead of out of the States share.


Sir John Forrest - The transferred properties of some of the States are worth more than those of the others. How would that difficulty be met?


Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - The transferred properties would be paid for by the transfer of the debts. If the Victorian properties were worth ,£4,000,000, Victorian debts to that amount would be transferred to the Commonwealth, and if the South Australian properties were worth £.1,500,000, South Australian debts to that amount, as they became due, would become Commonwealth debts.


Mr Knox - But how would the £1,000,000 be distributed annually?


Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - There would be no annual distribution, but an amount would be devoted for the purpose at the rate of £1,000,000 per annum. We might have to wait two or three years for a debt to fall due which would absorb the amount available. We take up the debts of the States until the whole of their claims for their transferred properties are obliterated. They will become the Commonwealth debts, and the interest and sinking fund will be provided for out of the Commonwealth share of the revenue. I do not go as far as the honorable member for Mernda in the provision for taking over the interest of the State debts, because I think that,, with the developments which are likely to take place in the future, we should be unduly hampered. I think that we could carry out the scheme I propose without any difficulty. If therevenue largely increased in the future we could be liberal in distributing among the States the money that we were not bound to hand over, in the same way that we have been liberal in the past in distributing our surplus over and above the three-fourths of the Customs and Exciserevenue to which the States have been entitled.


Sir John Forrest - But the States refused to accept a lump sum for all time.


Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - As the time for the expiration of the Braddon! section approaches, the States must recognise that unless some special arrangementis made there will be no liability on thepart of the Commonwealth to do anything. I wish to secure to the States the liberal amount of £6,700,000 for the payment of the interest on their debts. We should absorb the great bulk of the interest on their debts1, and the whole of the loans would be taken over as they fell due. The Treasurer further suggests that the period during which the Government should undertake to guarantee an annual payment to the States should extend till 1920, and thereafter until Parliament otherwise provides. All the Treasurer really proposes is to continue thebookkeeping period, and to extend theBraddon section, with one variation, namely, that the Commonwealth should bein a position to ear-mark certain revenue, and devote it to any purpose desired'.

Then he suggests that if there be any surplus after that purpose is fulfilled, threefourths shall still go to the States The ear-marking of revenue should only be resorted to when no better proposal can be made. The system would be very complex, and might be attended with some extraordinary results. First of all, antagonistic interests might be created. Suppose, for instance, that a duty were imposed upon kerosene, and that the revenue derived from it- were ear-marked for the use of the Commonwealth. Suppose, further, that a proposal - such as has been acted uponin the United States, and which it ds said 'has proved the greatest blow to the Standard Oil Trust - were made for freeing from duty all denatured alcohol used in the arts and manufactures, and for driving and propulsion. It would be manifestly against the interests of the Commonwealth, but it might admirably suit the States, if the duty were abolished. That is only one instance, and hundreds of a similar character might be quoted. We should not create rival and differential interests between the States and the Commonwealth dn regard to the revenue. Again, I would point out that if a certain duty were increased from 15 to 20 per cent., and the 5 per cent, additional duty were ear-marked for Commonwealth purposes, the. higher duty might bring in no more revenue than that realized by the lower impost. I should like to know whether the Treasurer would still annex one-fourth of the total amount raised.


Sir JOHN FORREST (SWAN, WESTERN AUSTRALIA) (Treasurer) - Yes.


Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - Then the right honorable gentleman would be compelled to pay less to the States.


Sir John Forrest - But the States would have a fixed sum.


Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - There would be constant disputes between the States and the Commonwealth in regard to such questions as I have indicated. The States might say that the Commonwealth had no right to deduct the extra 5 per cent, duty, because the increase of the duty had not resulted In an addition to the revenue. I would point out, further, with regard to the Treasurer's proposal relating to the payments to be made to the States, that he might create a deficiency in the Commonwealth finances in one year, and be precluded from making dt good out of a surplus during the next year. If a State had a de ficiency one year, it could make it good out of the next year's surplus, but the Commonwealth Treasurer could not do that, because he would still have to distribute the revenue amongst the States in the proportion set forth, and to add threefourths of all surplus over that. I am sorry that I have not been able to deal with the Treasurer's proposals as fully as I should have liked. 'I have, however, compiled a condensed statement of my suggestions, which is as follows: -







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