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Friday, 15 May 1942

Mr CHIFLEY (Macquarie) (Treasurer) . - I move-

That the bill be read a second time.

This bill is one of several measures required to give effect to the recommendations of the Uniform Taxation Committee. The other measures are the Income Tax (War-time Arrangements) Bill 1942, the Income Tax Bill 1942 and the Income Tax Assessment Bill 1942. It has been suggested to the governments of the various States that they should refrain from imposing taxes upon incomes for the duration of the war and a period of twelve months thereafter. The Government has undertaken to make to each State agreeing to that proposal a grant of financial assistance to compensate for the income tax revenue lost to the State, and this . bill provides the machinery by which those grants will be made. The financial assistance that will be granted to the respective States which do not impose income taxes will be the amounts set out in the schedule to the bill less any arrears of State income tax collected during the year in respect of which a grant is made. The amounts set out in the schedule are -


In the proposed grants, the Government has approached the problem reasonably and even generously so that no charge of interference with normal State functions can be seriously put forward by those opposed to the plan for a single taxing authority. In arriving at the amounts of the grants proposed, the average income tax collections of each State over the past two years has been taken as a basis, and from it there has been deducted the estimated saving to the State in administrative and collection costs consequent upon the establishment of a single taxing authority. As the Government is introducing a widows' pension scheme to commence on the 1st July, 1942, a further saving will be effected in the expenditure of those States whose existing schemes for widows' pensions will be replaced by the Commonwealth scheme. This further saving is estimated to be £427,000 in the case of New South Wales; £30,000 in Victoria; and £8,000 in South Australia. These amounts of further savings to the States therefore have also been deducted in determining the proposed grants set out in the schedule.

At the Premiers Conference held in Melbourne recently, an undertaking was given to the States that the grants of financial assistance which this bill would provide could be increased on a claim being made by any State that its financial circumstances were such asto warrant an increase. The Premiers were invited to make representations to the Commonwealth setting out any disability of that nature which the States might suffer, and were promised that their representations would be referred to the Commonwealth Grants Commission for that body to determine the degree to which the grants provided in this bill should be increased. The Prime Minister (Mr. Curtin) pointed out that the Commonwealth Parliament has not once rejected a recommendation made by the Grants Commission.

In addition to the amounts set out in the schedule to the bill, the Government is providing for a payment of financial assistance to the States equal to the amount of State taxation arrears collected during the currency of the legislation. This payment, with interest, will be made immediately prior to the termination of the measure and will in effect give to the States in that year the amount which they would normally collect from arrears, It has been urged that compensation to the States for retirement from the income tax field should be on a per capita basis. That would seriously upset the budget of some States and in other States provide them with more money than they have budgeted for. Moreover, per capita compensation cannot be regarded as a just basis because of the geographical and physical disparities between States. Those who insist on a per capita system of compensation should also be prepared to agree to per capita war expenditure in each State. That, of course, would be absurd. War expenditure has to be placed where it is most efficiently used, just as our forces must be disposed wherever they are of most strategic value. State rights and State boundaries are an ignoble conception when a nation is in danger.

Debate (on motion by Mr. Fadden) adjourned.

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