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Friday, 16 July 1920

Mr GROOM (Darling Downs) (Minister for Works and Railways) . - I desire to make one or two observations in reply to criticism which has been directed against the Government from the opposite side of the chamber. I wish first to deal with certain remarks which were made last night by the honorable member for West Sydney (Mr. Ryan) upon the subject of profiteering. I desire to deal first with the points raised by the honorable member regarding the powers which he says this Parliament possesses to deal with profiteering. We should know exactly where we stand in this regard. The honorable member has frequently stated here and elsewhere that we possess ample powers under the Constitution to deal with this matter. He has at times given a careful analysis, and has boiled the question down to the point that the matter can be effectively dealt with by the Government under two powers. He referred ' to the powers of taxation and of census and statistics - and he restricted it to these two.

Mr Ryan - I did not.

Mr GROOM - The honorable member can submit others if he so desires, and I shall be prepared to deal with them. He confined his remarks last night principally to the powers of taxation and of census and statistics, and declared that under these two powers we have ample authority to deal with profiteering. May I remind the honorable member that the points hehas raised are not new to members of this House. Since the inception of the Federal Parliament, Governments have realized that the powers they possessed were inadequate if they were to deal effectively with a number of subjects of pressing importance. I ask honorablemembers to realize that all the powers the honorable member mentioned, and even those to which he did not refer, have been closely examined from time to time to ascertain whether the Government could not exercise wider authority. What was the result? We found that the Federal powers were limited, though it wasthought that authority could be exercised in some indirect way. The first power the honorable member referred to, that of taxation, was fully inquired into, and a Bill was passed by this Parliament io exempt the payment of Excise duties in the case of firms that had complied with certain industrial conditions. Leadingcounsel, men of high repute, believed that this Parliament had that power, and it seemed, according to the American cases, that they were right. The Act was challenged, and its validity was considered by the High Court in what was known as Barger's Case. The Court made a very close and careful examination, and came to the conclusion that, so far as taxation was concerned, the taxing power could not alone be regarded, but the Constitution had to be taken as a whole. The Court came- to the decision that the Constitution did not, under the taxing power, confer upon this Parliament the power to invade the internal domestic affairs of the States.

Mr Riley - Is the Minister referring to what was known as the McKay Case?

Mr GROOM - Yes. In giving his judgment in the case of the Common- wealth v. Barger, the Chief Justice said -

The primary meaning of " taxation " is raising money for the purposes of government by means of contribution from individual persons. Taxation differs from exaction in that the obligation to contribute depends upon prescribed differentiations of the persons from whom, or the things in respect of which, the contribution is to be made. The power to tax necessarily involves the power to select the subjects of taxation. In the case of things the differentiation or selection is, in practice, usually made by reference to objective facts or attributes of the subject-matter, so that all persons or things possessing those attributes are liable to the tax. The circumstance that goods come from abroad, or from a particular foreign country, or that particular processes or persons have been employed in their production, or that they possess certain ingredients, are instances of attributes which have been chosen for the purpose of differentiation. In a State possessing plenary powers of legislation, any condition whatever may be. imposed as a basis of selection for taxation purposes, and it is immaterial whether the differentiation, should properly beregarded as an exercise of the power of taxation or of some other power. But where the competency of Parliament is limited, as in a Federal State, to specific matters, it is material, and indeed necessary, to inquire whether an attempted exercise of the power of legislation falls within some one or more of the enumerated powers. . . . We are thus led to the conclusion that the power of taxation, whatever it may include, was intended to be something entirely distinct from a,power to directly regulate the domestic affairs of the States, which was denied to the Parliament.

Mr Ryan - I did not suggest taxation to regulate the domestic affairs of a State.

Mr GROOM - The honorable member for West Sydney said that this Parliament possessed power to deal with profiteering in such a way as to make it unprofitable, and that is the proposition he put before the House. If the honorable member will closely examine the decisions that have been arrived at, he will find that this Parliament cannot deal effectively with profiteering under its present powers. If the honorable member suggests that persons who are profiteering by means of sales conducted within a State should be subject to a tax, he will find that the Act imposing that tax will not be held to be a taxing measure if its object is to interfere with internal affairs solely and wholly within the jurisdiction of a State.

As regards trusts, combines, and monopolies, I think that it will be generally admitted that members on both sides of the Chamber are absolutely opposed to such organizations when they are operating detrimentally to the public interest. This Parliament endeavoured to legislate upon that subject, and it was thought that it could be done under several powers. It was thought that, ' in the matter of Inter-State trade, we had wide jurisdiction. We have jurisdiction over external trade, and it was also thought that we had. power over certain corporations. Legislation was accordingly drafted in an endeavour to meet the situation. This Parliament in 1906 passed an Act entitled the Australian Industries Preservation Act.' sections 5 and 8 of which read - 5. - (1) Any foreign corporation, or trading or financial corporation formed within the Commonwealth, which, either as principal or agent, makes or enters into any contract, or engages or continues in any combination -

(a)   with intent to restrain trade or commerce within the Commonwealth to the detriment of the public, or

(b)   with intent to destroy or injure, by means of unfair competition, any Australian industry, the preservation of which is advantageous to the Commonwealth, having due regard to the interests of producers, workers, and consumers, is guilty of an offence. 8. - (1) Any foreign corporation, or trading or financial corporation formed within the Commonwealth, which monopolizes or tends to monopolize, or combines or conspires with any person to monopolize, any part of the trade or commerce within the Commonwealth, with intent to control, to the detriment of the public, the supply or price of any service, merchandise, or commodity, is guilty of an offence.

In addition, certain powers relating to investigation were included in an amending Act, and those powers were challenged. Eventually the matter came before the High Court, and it was ruled that the power of the Commonwealth in this connexion is very limited, and such as is, to my mind, absolutely inadequate. The Court took the view that, as far as corporations were concerned, Parliament could deal with the conditions under which they were allowed to carry on business in the Commonwealth, but as soon as those corporations came within the domain of trade and commerce within a State they passed out of Federal control absolutely. The Court, therefore, declared these sections 5 and 8 ultravires.

Mr Ryan - Does the Minister say that the Government have not the power by means of taxation ?

Mr GROOM - I thought I had made the position, perfectly clear. As far as this class of corporations and the Federal powers were concerned the Court has held that, when it became a matter of trade within a State, corporations passed out of Federal control.

Sir Robert Best - There is unlimited power to tax, providing it is bona fide.

Mr GROOM - That is another matter. Where we have direct power conferred upon us we can exercise it; but when we seek to impose conditions which invade the domain of the States our position is as it was in the industrial case when the Court held that our Statute was ultra vires.

Mr Brennan - You should use the. powers you possess effectively.

Mr GROOM - We are limited by the decision of the Court in the case T have quoted. Chief Justice Sir Samuel Griffith and the late Mr. Justice Barton have ruled -

Section 51 (xx) of the Constitution confers upon the Commonwealth Parliament power to prohibit foreign corporations, and trading, and financial corporations formed under State laws from, engaging in trade and commerce within a State, as distinguished from trade and commerce between States or with foreign countries, or to impose conditions, subject to which they may engage in such trade and commerce, but does not confer upon the Commonwealth Parliament power to control the operations of Bud corporations which lawfully engage in such trade and commerce.

The powers are perfectly clear, and there is a whole series of decisions on similar lines, particularly in relation to the Bootmakers and the Union Label cases. Later on, when the Commonwealth passed certain land taxation laws, it was held that the Commonwealth Parliament had. no authority in the name of and under guise of taxation to interfere with civil rights or domestic relations. The position is perfectly dear that taxation powers must be used for the purpose of taxing, and not to control or regulate matters concerning the internal trade of the States.

Mr Ryan - That is all I am suggesting.

Mr GROOM - The honorable member is suggesting more. Let us take the next point. The honorable member says that this Parliament has power under the provisions relating to census and statistics., and claims that we can under those provisions effectively deal with profiteering. What is the power relating to census and statistics 1 It is clear that, under that authority, we can obtain returns relating to a very wide area of subjects. Many returns are now furnished under the State laws ; but the power we possess does not give us authority to authorize complete investigations on all matters affecting ordinary trade operations. It is not an investigating power such as is possessed by a Royal Commission. The provision relating to statistics is intended to relate to subjects that are well known to us.

Mr Ryan - Why is it not a power similar to that possessed by a Royal Commission ?

Mr GROOM - Our power under the provision relating to statistics is well known. It was never intended that that provision would enable us to appoint persons to make investigations, as is done by Royal Commissions, in connexion with operations within a State. Let us take the two points raised by the honorable member together, and see how he proposes to deal with profiteering. It is rather interesting to see what is proposed under the census and statistics power. '. It is proposed to require statistics of the cost of production of goods manufactured in Australia, and of landed cost of imported goods ; also statistics of profits accruing to trading corporations. It is suggested that the Government, having obtained this information, may, under the taxing power, tax persons or corporations in respect of profits and dividends. This, it .is said, would be an effective way to deal with profiteering, but what would its effect be upon the industries of Australia? What a delightful scheme this : to call upon all those persons connected with industries and trading concerns throughout Australia to furnish statistical returns in addition to those they are already obliged to make under the Income Tax Assessment Act and other Statutes. The whole of their time would be occupied in making returns. Under his scheme, both innocent and guilty would be called upon to furnish returns.

Mr Ryan - Everybody need not be asked to do that.

Mr GROOM - Then, who would be asked to make returns ?

Mr Ryan - The Government could select those they thought were guilty of profiteering.

Mr GROOM - Well, that is interesting. Apparently the honorable member would expect the Minister to select some firm, and say, in effect, "I think you are guilty of profiteering, and so I shall call upon you to make returns." Of course, the honorable member for West Sydney knows that this would be an absolute perversion of the statistical power, which is designed, primarily, to collect statistics relating to the social, commercial, vital, and other conditions of the country, so as to enable the Parliament to legislate with wisdom and justice. But let us carry the honorable member's argument a little further. Because production may return substantial profits, it does not necessarily follow that the producer is profiteering.For instance, a man engaged in mining may strike a rich natch and secure handsome returns. That would not be profiteering. Then, again, a man engaged in production may strike a good season and get a big return. Would the honorable member for West Sydney say he was profiteering because of the margin between the cost of production and the returns? Yet, according to his line of reasoning, the producer, in such circumstances, would be under suspicion. He urges that the profiteering section of the community should be reached, in this way, by the taxing method. Nobody knows better than the former Minister for Trade and Customs (Mr. Tudor) that the taxing law must be general in its operation, and therefore, the idea advanced by the honorable member for West Sydney tumbles to theground hopelessly. I think that on a previous occasion he suggested that there was a further way of hitting the profiteer, namely, by prohibiting exports. What an excellent method ! Let us assume, for the sake of argument, that some produce merchant was guilty of profiteering. In order to punish him the honorable member for West Sydney would punish the whole of the farmers of Australia by prohibiting; the exportation of their produce.

Mr Jowett - That is the object.

Mr GROOM - I think I have covered" most, if not all, of the grounds referred to by the honorable member for West Sydney, I again remind the House that the Government did make an attempt, by means of taxation, to deal to some extent with the profiteering problem. Parliament passed a war-time profits tax. What was the effect ?

Mr j H Catts - Sir William Irvine declared that the Act allowed all the big men to escape.

Mr GROOM - Yet the Bill was first introduced by a member of a Labour Government which honorable members opposite supported.

Mr J H Catts - It was not.

Mr GROOM - Yes, it was; and I also remind him that Sir William Irvine's statement was, not that the Act did not get at the excess profits, but that it left untouched the rich men, who had big incomes before the war. And Sir William Irvine was right. I have the latest figures dealing with taxation raised under that Act. These show that, in 1917-18, £680,000 was collected; in 1918-19, £1,206,000; in 1919-20, £2,569,000, or a total of £4,450,558. Both parties in the House agreed upon the main principles of the Act, and it was thought that the Government would be able to get at excess profits made during the war. We now know that in its incidence and operation the Act has wrought some hardship, as was inevitable, considering the nature of the measure. Experience teaches us that any taxing measure aimed at the profiteers may hit a few, but, at the same time, it may touch many innocent persons, and do serious injury to their legitimate interests.

The criticism by the honorable member for West Sydney was that the Government had ample power to deal with profiteering. I have shown that we have not. Let us test this matter in another way. Profiteering has been defined as unreasonable and unfair profit, that is to say, any excess over what is reasonable and fair profit. Now, as to the Commonwealth power, I may point out that in New South Wales there are over 2,000,000 of the population of Australia; in Victoria, over 1,000,000; in Queensland, 725,000 ; and smaller numbers in the other States: This means that the amount of trade "within the States is very large indeed. The volume of our Inter-State trade is not so great. That, however, is the only area within which we may have the power to punish anybody guilty of unreasonable and unfair trading profits, and experience shows that it is a comparatively simple matter for any trader to evade the operations of Commonwealth legislation regarding Inter-State trade. During the transport of goods from one State to another, they are subject to the Inter-State power, that is, the Federal power, but as soon as they reach the State of destination, and are distributed among the common goods of that State, they pass completely from the jurisdiction of the Commonwealth, and come under that »i the State. The Commonwealth Government was anxious to deal with combines and corporations where their operations were Inter-State, but when the Act to which I have referred was passed, those organizations that were then within the purview of the Commonwealth law dissolved and became organizations within the State area of control, thus passing completely beyond our power. That is the position in which we found ourselves.

I have shown the power we possess and its limitations. In order to deal effectively with profiteering the body charged with that responsibility must have the power to investigate. Under the English Act there is a Central Committee - the Board of Trade - with certain powers delegated to local Committees, to investigate particular transactions. In almost every instance there must ultimately be power to invade the realms of State jurisdiction.

Mr Ryan - I do not agree with any of your arguments, but-

Mr GROOM - -I did not expect the honorable member would agree with me.

Mr Ryan - Assuming you are right, have you not power, under the War Precautions Act, to do these things?

Mr GROOM - That Act exists for a time only. The honorable member knows that the defence power is a limited power in times of peace.

Mr Ryan - But did you not, under this power, fix the price of bread ?

Mr GROOM - Certainly, because the High Court ruled that during the war the powers of the Commonwealth were of such a character that we had a right to invade the realms of the State. But we are not now dealing with war-time conditions.

Mr Ryan - Do you say that the War Precautions Act is -not now in operation?

Mr GROOM - It is in operation, of course. . I think the honorable member attempted recently to prove it was not. I think I have shown that the honorable member's arguments are entirely without foundation. However, I sympathize with him.

Mr Ryan - I am looking to the people of Australia in regard to this matter.

Mr GROOM - And so am I, and I may point out that a little while ago the honorable member was not so anxious that the people of Australia should decide thi3 matter, because he deliberately told them not to vote for certain proposals framed to give the Government greater power.

Mr Ryan - But I gave my reasons then.

Mr GROOM - I have shown what our powers are. I do not expect the honorable member to agree with me, but I expect that in his quiet moments he will confess to himself that I am right.

Mr Ryan - You are only succeeding in convincing the representatives of the profiteers that you are right.

Mr GROOM - I am afraid the honorable member is himself the victim of the capitalistic system. With regard to Commonwealth power, I have indicated the nature of the legislation necessary to deal with profiteering, instancing the British Act of 1919, also the Queensland Act of 1920. Profiteering is invariably the result of" individual transactions. Such individual contracts would in the majority of cases be made between parties within a State, and would be subject solely to State jurisdiction. I am not speaking now of war conditions. We are looking to the future, with the war power disappearing, and a general desire on the part of members of all parties to rely upon it as little as possible. If the honorable member for West Sydney had been a member of this House in the last Parliament, he would have heard elo- quent appeals by the Leader of the Opposition and his colleagues for the repeal of the War Precautions Act. When the Government asked for an extension of the Act, honorable members opposite voted against us.

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