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Friday, 25 November 1938


Mr BEASLEY (West Sydney) . - The debate on the budget is one of the most important phases of our parliamentary procedure. The papers presented by the Treasurer give an indication of the Government's financial plans for the ensuing twelve months; they show what taxes are to be imposed, and how the revenues thus obtained are to be distributed. Without taxation, revenues cannot be obtained, and consequently the development and progress of the country would be retarded. I, therefore, propose to make some observations on the subject of taxation, laying special stress on the principle that the barden should be placed on the shoulders of those best able to bear it. This budget discloses that additional revenue is to be obtained by means of increases of the sales tax, income tax, land tax and excise duties. Justification for the heavier im- posts is claimed on the ground that the Government intends to expend larger sums than in former years in providing for the defence of Australia. No honorable member will disagree with the intention of the Government to defend Australia, but there is considerable diversity of opinion as to how that defence can best be provided. That point, however, does not arise at the moment, as 1 propose to confine my remarks on this subject to the raising, rather than the expending, of the money. Whether Australia can best be defended by strengthening the navy or by increasing the Air Force, money for the purpose must be obtained, and, therefore, taxes must be imposed. T propose to deal with the methods adopted in this budget by the Commonwealth Government to raise revenue. The methods proposed will not place the burden upon the shoulders of those best able to bear it.

Before coming to the actual points of criticism which I propose to level I think it desirable to make one or two observations concerning what has happened during the last seven or eight years, and to indicate to honorable members, if for no other purpose than to bring the facts under their notice again, the forms of taxation employed to meet the circumstances which existed, particularly in 1930 and 1931, and also the promises then made of what would happen when the financial and economic conditions improved. In 1930 and 1931 additional taxation had to be imposed. I do not intend to deal in detail with the conditions which then prevailed at that time because they are still in the minds of honorable members; but I shall outline the circumstances which faced, not only this Parliament, but also the State parliaments. The financial resources of the Commonwealth and of the States were so restricted by forces, over which neither the Federal nor the State Parliaments apparently had' any control, that other sources had to be tapped to meet the pressing needs of governments. Those needs concerned mainly a large number of persons who depended for their existence upon the return which they obtained for their labour. The problem of raising revenue became important, particularly to the States and in certain directions to the Commonwealth. At that time the Commonwealth Government introduced into this Parliament for the first time a system of taxation which previously had never been adopted in this country, namely, the sales tax. _ That system had been in operation in the sister Dominion of Canada, and the Government brought to Australia an expert to lay down the basis upon which that form of taxation could be applied. It was declared and generally understood, not only by this Parliament, but also by the electors as a whole, that the sales tax was only a temporary and, in fact, emergency tax. It was also stated most definitely that at the first opportunity it would be repealed. But that promise has not been honoured. The sales tax has produced enormous revenue, and although the rate of tax has varied slightly, it is still in force. In the present budget the rate has been increased to 5 per cent., and it appears to me from the trend of events that this socalled emergency tax, which was first introduced in 1930 and 1931, has become a permanent feature of our taxation. The electors, therefore, think that in such matters very little reliance can be placed upon the promises of governments. However, my chief complaint arises from the fact that if the circumstances warrant a continuance of an emergency tax, such as the sales tax, it is entirely wrong for any government to repeal or reduce other taxes which were in operation for years before an emergency tax was introduced. To use an emergency tax to provide benefits to others is " putting it over " the people and the Parliament, and should not be countenanced. Since 1932 the Commonwealth Government has reduced the land tax in progressive stages by more than 50 per cent., and at the same time it has maintained a system of emergency taxation, which, it was alleged, was imposed only to tide the Government over a period of temporary difficulties. Therefore, it is clear that advantage has been taken of the situation which existed in 1930-31 by some powers and influences to shed their responsibilities and to place them upon others. Power has been exercised by people who have influenced the Government to reduce the land tax by over 50 per cent, and still retain an emergency tax, thereby shifting the burden and responsibility of the sales tax on to the shoulders of a large number of persons who are quite unable to bear it. The Federal Land Tax Assessment Act was passed on the 17th November, 1910, and its objects, according to the debates at that time, were twofold. In the first place it was declared that the tax was to provide revenue for defence and social services. Those declarations coincide somewhat with the proposals embodied in this budget. At that time the representatives of the people in Parliament held the view apparently that where land and property became involved, it was the responsibility of those who owned it to make their contribution in the form of taxes towards the defence of the country. The defence of a country in the main means defending the material things of a country; those who possess them must eventually benefit after a success at arms. For instance, the Common-wealth controls New Guinea under a mandate. I recall those who fought in the Great War, and, after enduring hardships and making great sacrifices, returned to Australia. Although the Commonwealth was given a mandate over New Guinea, how many exsoldiers own any land in that territory? How many have a right to what the terri tory is able to provide for those who have interests there? It cannot be denied that New Guinea has become a source of tremendous profit to Burns, Philp and Company Limited, W. H. Carpenter and Company, and a large American company engaged in sluicing for gold. Before an Australian ex-soldier can settle in New Guinea he must be in possession of sufficient money to ensure that in the event of his being unsuccessful he can be returned to Australia. Studying the subject from the material side - not that I want to argue that all things should be regarded from a materialistic point of view but I am forced to realize that economic factors are determined upon a materialistic basis - landed property and what it provides become a most important factor in our every-day life. Consequently the changed control of a country after the Great War, or in fact any war, naturally affects the ownership of almost everything within it? borders.

As I have already indicated the federal land tax was imposed in 1910 mainly to provide revenue for defence and social services; and in the matter of social services it could very reasonably be argued that, if the conditions in any country are good, the people of that country are likely to be more enthusiastic in regard to its defence. Apart from defence federal land tax was also imposed as a means to break up large estates, but in recent years other methods have been employed by interested parties to overcome this aspect. The object of the tax was clearly expressed by the late Mr. And:drew Fisher, who, in moving the second reading of the bill under which it was imposed, said -

Unimproved value taxation is a sound principle and while the incidence will tend to break up large estates and help to develop the country, from an economic point of view, without any other embarrassing conditions. St is a proper kind of taxation for the purpose of raising Commonwealth revenue.

The late Mr. G. A. McKay, the first Commissioner of Federal Taxation, in giving evidence before the Dominions Royal Commission, said -

The graduated method deals more severely with the owners of the largest landed estates. The reason for the discrimination is twofold. There is the primary object of securing from those deemed best able to bear the impost the revenue needed to meet the growing financial necessities of the Commonwealth in connexion with defence and social betterment schemes. A secondary and very important object is to facilitate settlement.

It will be seen that he declared that the second consideration was to facilitate land settlement. He also said that the tax was primarily for the purpose of meeting defence and social service expenditure. I further declare that the idea behind the imposition of this tax was to attempt to give back to the people some small portion of the immense values which are created by the people as a whole by reason of community effort for the development of the country. Mr. Ure, one time Lord Advocate of Scotland, in justification of this form of taxation, said -

First, I would say that land differs from all other form of property in this that its existence is not due to its owner; secondly, it is limited in quantity; thirdly, it is absolutely essential to existence and production; and, fourthly, it owes its value exclusively to the presence of the market created by the activity of the community.

An illustration of the immense increase of land values due to the activities of the community is provided by the figures relating to the increased values of Sydney properties. 1 quote these instances not because I have a parochial outlook on this matter, and am interested only in it as far as it affects the city from which I come, but also because I believe that these figures reflect the true position that exists all over the Commonwealth. In March, 1914, the firm of David Jones Limited purchased the corner bounded by Elizabeth, Market and Castlereagh streets for £80,000, and on the 12th March, 1920, it purchased the girls' high school site, now occupied by the St. James Theatre and David Jones Limited, for£124,000. One-half of the site was sold to Sir Benjamin Fuller and Mr. John Fuller for £100,000. This land, which originally cost David Jones Limited £204,000, was valued on the 12th July, 1936, by the city valuer at £612,340. The unearned increment in this case is, therefore, £408,304, which represents an increase of 200 per cent, in 24 years. The factors which have contributed to this increase are -

(1)   Growth of population;

(2)   Opening of city railway; and

(3)   Concentration of land value in the centre of the city, due to city through-traffic changes providing for tram and rail concession fares in the middle of the day.

Many suburban business men have complained that the granting of these rail and tram concessions tends to draw people into the city who would otherwise shop in their own suburbs.


Mr Blain - That applies also in country areas, not in respect of a few miles, but hundreds of miles.


Mr BEASLEY - That is so; it does not tend towards decentralization. The appalling conditions that exist in small country towns to-day, owing to the lack of activities brought about as the result of centralization, provides the subject of a very interesting discussion. Whereas, twenty years ago, each little country town was self-contained, having itsown wheelwright's establishment, its own blacksmith's shop, &c, providing employment for the young fellows of the town, to-day most of the work is done in the cities and in the larger provincial towns.


Mr Blain - That is the problem which we should tackle, not unification.


Mr BEASLEY - I think every honorable member will agree that this is a matter of great importance. 1 have often visited country towns and when walking about the streets have wondered how they continue to exist in view of the scarcity of available occupations for the absorption of their residents. The position is becoming more and more acute as the years go by. The lack of avenues for employment in country towns is one of the most serious problems with which country people have to deal. Although I do not represent a country electorate, I am not unmindful of the difficulties of country people in this respect.

Reverting to my point regarding the extraordinary increase, by way of unearned increment, of the value of city properties, as I have shown, it has been brought about by developments which have taken place at the expense of the community as a whole, and not at the expense of the city landowner, except as an individual entity in the community. In order to provide the improvements which have resulted in the acquisition of this huge unearned increment, indirect taxation has had to be increased enormously in recent years. That enormous increase has fallen upon the shoulders of the great masses of the people. In other words, the people have had to contribute in large measure towards this huge unearned increment in respect of city properties. Because these things are happening, I maintain that the principle of calling upon city landowners to pay the full measure of tax should be sustained.

Another illustration of community improvement is provided by the extraordinary increase of the value of a property known as the Hotel Cecil at Cronulla. In a statutory declaration accompanying a relief application under section 66 of the Land Tax Assessment Act, the vendor, Cecil O. J. Munro, M.L.A., declared that the improved value of this asset was £25,000. On the 1st July, 1936, he sold the hotel to Tooth and Company Limited for £60,000. The increase of value in this case was due to the projected construction of the Sutherland to Cronulla railway. Munro made his sale after the State Government had decided to build the line, but was unable to capitalize to the full the effort of this community improvement for his own personal advantage. Still another illustration is afforded by the recent proposal of the Sydney City Council to provide a park at King's Cross. The owner of portion of the land proposed to be taken over is Minerva Centre Limited, of 62 Macleay-street, Sydney. The proposed resumption price was £30,000 ; but the City Council's valuation on the 1st July, 1936, was £20,000. The other piece of land to be taken over is owned by the Hollander Estate, of 64 Macleay-street and Elizabeth Bay-road. The proposed resumption price was £57,200; but the City Council's valuation on the 1st July, 1936, was £18,750. On the 1st July, 1936, the City Valuer, Mr. Baird, valued these two properties for municipal rating at £38,750, yet the council now proposes to pay £87,200 for them. The difference between these two figures shows that land values have increased by approximately 125 per cent, in the short period of two years and . three months. Assuming of course that there is a perfectly bona fide desire on the part of the Sydney :City Council to provide the park, and' that the price demanded for the properties' is' fair, it again indicates how an enormous increase of the value of a property can be created by the community efforts of the people. Therefore, I again repeat that any tendency on the part of the Government to lessen the burden of land tax on the owners of city properties is contrary to the principle that individual members of the community should be called upon to pay for what they have undoubtedly gained at the expense of the community as a whole.

I may not have mentioned before, but I take the opportunity to do so now, that there seems to be a general idea that land tax imposes a burden mainly on the holders of country land, or as is often said, the struggling farmers. The royal commission's report on taxation, how- ever, disclosed that no less than 67 per cent, of the total land tax collections is paid by city owners. I have never been able to understand why members of the Country party in this House invariably approach this question as though only country people were subjected to land tax. After listening to members of the Country party deal with this subject, it would seem that the land tax affects only struggling farmers, whereas, as a matter of fact, struggling farmers pay little or no tax, because they are granted a general exemption in respect of unimproved land of £5,000, whilst in addition there are the claims under the hardship clause of the act; and even if a farmer owns land of a value in excess of £5,000, he has but a small tax to pay.


Mr Scholfield - The owners of city properties can pass the tax on.


Mr BEASLEY - I expected an interjection of that kind. The point is that it does not matter what tax is applied, if a person happens to be engaged in an industry or business of any kind, and has power to fix prices, he can pass any impost on. That tendency to pass additional imposts on is only limited by intense competition of various interests engaged in the same business. I do not think any of us will deny that, under the capitalist system, where authority is vested in an individual, or in a combination of individuals, to fix prices, prices will continue to be so adjusted as to cover imposition of taxes of, all kinds. We have only to consider, for instance, the price fixing by the oil combine. Another glaring instance of price fixing is provided by the fact that when the Sydney County Council calls for tenders for the supply of electrical gear, or cables for its transmission lines, although it may receive tenders from four separate firms, the amount of each tender is invariably the same. Of course, it must he obvious that these interests get together and decide beforehand -on a fixed price. We had an instance of that yesterday, when it was announced that the brick combine in Sydney had increased the price of bricks. The new price will be charged by all of the brick manufacturers in Sydney. It is very difficult to control price fixing under our present system.


Mr Blain - Did I understand the honorable member to say that suburban people had complained that city firms enjoyed ail undue advantage over them by reason of the granting of railway concession fares.


Mr BEASLEY - Yes. The present system of centralization is embarrassing suburban business people, and is making very serious inroads upon the value of their assets and investments. That, I believe, is contrary to the general welfare of the people of the country as a whole. The following table shows the amount of tax that the companies mentioned will pay at the existing rate of 45 per cent, of the former rate, the amount they would have paid at the former rate, and the amount remitted in each case each year : -

 

Concerning those figures I may say, in relation to Sargent's Limited, that the price of meals is just as high as it ever was, and that the wages of the employees are, if anything, lower than formerly. If I could obtain comparative information in relation to Goldsbrough, Mort and Company, Australian Estates Limited, the New Zealand Loan and Mercantile Company, the Australian Pastoral Company, the Australian Agricultural Company, and Clarke and Company, it would confirm the case I am making. The specific figures I have given relate, of course, to city interests.

It has frequentlybeen declared in this Parliament that remissions of taxation invariably result in additional employment. That has not been the case in connexion with remissions of land tax, at any rate, for many of the firms which I have just named have recently expended large sums of money on real estate in Sydney.

I wish now to deal with one or two other aspects of land taxation. More than twelve months ago, I directed attention to the fact that, apparently, especially in New South Wales, big pastoral companies in which absentees were largely interested, and also some other individuals who hold land on what is known as perpetual lease, are able to avoid taxation altogether because the Taxation Department has not evolved a formula to determine the degree of taxation that should be imposed on land held under that particular tenure. This is a serious matter. The failure to impose taxation on large areas held under perpetual lease must result in a serious reduction of revenue for the Government. Although I directed the attention of the Treasurer to this subject more than a year ago, he has, so far, not made any reply to my contentions. It is time that a catechetical reply was furnished.

Crown leases become liable to tax provided that the unimproved value of the leasehold exceeds £5,000. The relevant section of the act provides -

For the purposes of this section - (a.) The unimproved value of a leasehold estate means the present value of the annual value of the land calculated for the unexpired period of the lease at 4½ per centum according to calculations based on the prescribed tables for the calculation of values.

(b)   The annual value of land means4½ per centum of the unimproved value of the land.

That is a very involved mass of words which it is very difficult for the lay mind to understand. I am informed, however, that, in order to provide for the taxation of properties covered by this provision, it is necessary first, to devise a formula, and, secondly, to draft regulations for its application. Apparently, leases held for any term from one year up to 100 years can be taxed because the necessary regulations have been brought into force, but perpetual leases are, apparently, at present not subject to taxation. Very large areas of land are held under perpetual lease, and it is extraordinary that the lessees should have been able, so far, to avoid the payment of any tax in respect of them. I am not able to say whether a perpetual lease means a lease for a term exceeding 100 years. All sorts of legal technicalities are involved. 1 know, however, that dealings in Crown leases excite considerable discussion from time to time. The subject has been very frequently referred to in the Parliament of New South Wales. I urge the Treasurer to give immediate attention to the situation to which I am directing attention. Seeing that the Government is, in these days, in great need of funds for defence purposes, and also for unemployed relief undertakings, it is high time that this source of revenue was drawn upon, particularly as many absentee landholders are involved.


Mr Jolly - Are these leases subject to land tax in New South Wales?


Mr BEASLEY - I regret that I am not familiar with the existing land tax provisions of New South Wales.







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