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Wednesday, 27 May 1942

Mr SPOONER - It applies also to my two colleagues.

Mr DUNCAN-HUGHES - That is what I have been endeavouring to prove. The opponents of this fourfold measure, which we are treating as one, may be said, for convenience, to consist of the six State Premiers. That is rather a large number of opponents in the six States, because they represent totally different points of view. Four of them are Labour Premiers of different complexions ; one is a Country party Premier who, I believe, is still maintained in office by the Labour party ; and the last - I really should have put him first - is the Liberal Premier of South Australia. "Whatever may be their party political views, all are united, for one reason or another, in their opposition to this series of measures. They represent a very strong degree of opposition which., at any rate, wipes clean out any idea that it would be strange if in this National Parliament an honorable member from any State should also oppose these particular measures.

I say a word in passing on the subject of direct taxation. I am afraid that some honorable members of this House appear never to have read the Constitution Act. Their idea of the relations that exist between the Commonwealth' and State Parliaments is that the Commonwealth Parliament has all the powers and can exercise them as it desires, and that the States have only such powers as the federal authority chooses to leave to them. That, as the majority of honorable members know, is the very reverse of the case. "When the Constitution was achieved, after very grave difficulties, only certain prescribed powers were given to the Federal authority, whilst the residuum of powers remained in the States. It is true that the Federal authority has taken to itself more and more power as the years have passed. For instance, it has come right into the field of health, which was reserved to the States, by making use of the quarantine power. But it did not make any attempt to enter the field of direct taxation until years after the Commonwealth had been in actual working. The Commonwealth camo into being in 1901. To the best of my belief, the first direct taxation levied was that imposed under the Land Tax Act 1910. The Estate Duty Act followed, under the pressure of the last war emergency, in 1914; and that, in turn, was followed by the Income Tax Act, 1915. Therefore, the three major direct forms of taxation that have been applied in Australia were put into operation from nine to fourteen years after the inauguration of federation, and two of the three were imposed as the result of the necessity to raise the revenue needed for the prosecution of the last war. Those facts show quite clearly to any body who wants to obtain a general view of the situation, that separate powers in respect of direct taxation were held by the Commonwealth and the States. The matter is summed up very briefly in the report of the Royal Commission on the Constitution, already quoted by the honorable member for Bourke (Mr. Blackburn) in, if I may say so, his not only courageous but also, I consider, very sound speech this afternoon, to which it was a pleasure to listen. I do not always find myself in agreement with the honorable member, but whether or not I agree with what he has to say I always regard it as well worth listening to and weighing. This report sets out certain limitations, under the subject " Taxation ", in Part XII. It then states -

Subject to .these limitations, the Commonwealth Parliament has a general and unfettered power of taxation- (S.51 (ii)). An regards duties of customs and excise it has exclusive power (S.90). As regards other taxation, the Commonwealth and State Parliament* have separate rather than concurrent powers; the Commonwealth may raise money by taxation for itself, and a State may raise money by taxation for itself, but the Commonwealth could . not exclude a State from a field of taxation, though it might occupy the field by taking so much that there would be nothing left for a State (see the evidence of Sir Robert Garran, p. 66)

The delimitation of powers between the Commonwealth and the States has been forgotten by many persons. A substantial number of them has no idea that there is such a division of powers. Since the Commonwealth Parliament came into existence, there has been witnessed the gradual growth of the federal power, which obviously has been prejudicial to the States with the smaller populations - I do not care to call them the smaller States, because nobody can suggest that in respect of area Western Australia is one of the smaller States. The States with the smaller populations have been gradually hurt, and more or less driven into the background. They have been impoverished by the strengthening of the federal power and, it appears to me, more specifically by the emphasis that has been laid on the industrial side of the great eastern States, and the tariffs that have encouraged that industrialism. Questions such as the grant of special moneys to the States have arisen. First, there was the grant to Tasmania, which had become so impoverished that it had to have some assistance. Then, Western Australia found itself in such a condition that it, too, had to ask for assistance ; and my own State reluctantly acknowledged itself to be in the same position. There has been a good deal of rather contemptuous reference to the fact that these States have been obliged to obtain assistance, by those States which forgot the enormous benefits that have been received by New South Wales and Victoria by reason of the operation of the tariff, and the great results that have accrued to Queensland from the sugar agreements. Even though the States with the smaller populations have received direct grants they have not, in my opinion, benefited to anything like the degree to which the other States have benefited. I have always considered that the grants to the smaller States should have been made, not as they have been, on the basis ' of necessity, but on the basis of compensation for what those States have actually lost as the result of the operation of the tariff and other federal legislation. But these losses have never been thoroughly calculated, and the easier' and cheaper course has been followed of the payment of lump sums in the hope that they would keep the States quiet for another year.

Mr Barnard - It has been reasonably successful.

Mr DUNCAN-HUGHES - It has been successful in a way, but 1 do not regard it as a satisfactory method. It would be far better if a definite arrangement were evolved on an equitable basis, which would last for a series of years. One of the reasons why the matter, has developed along such lines is that the Commonwealth did not continue to observe the provision in the Constitution, which states that there shall be an InterState Commission. Section 101 of the Constitution states positively that there shall be an interstate commission. There was such a body for a few years, but it ceased to exist because the High Court held that it had not been appointed on a life tenure, despite the positive instruction in the Constitution, which is just as emphatic as the statement that there shall be a Commonwealth parliament', consisting of two houses.

I purpose to deal more with main trends than to discuss the bills in detail. The growth of the federal power, to which I have referred, has coincided with its increasing unpopularity in many of the States, and, for that reason, the rejection of practically all the referenda put to the people. One of the astonishing features of Australian history during the last 40 years is that, as has happened so often in America, any referendum put to the people is almost certainly rejected. The only notable instance to the contrary during the whole .of federation has been the financial agreement of 1928, which was accepted by every State. The reason for that, I point out, was that not only the Commonwealth Government but also the heads of every State Government in Australia were in favour of that financial agreement. In other words, it can be said that in Australia you will not ordinarily carry a referendum unless yon have agreement with the States. You will not carry it in the teeth of the opposition of six States, or even of four, because the Constitution demands that, in order that it may be carried, there must be a majority of the electors voting in a majority of the States in favour of it. Practically every referendum has been rejected. That is no doubt the reason why the approach to this difficult problem, if it be so difficult, has taken the present form. As has been pointed out by a number of speakers, normally the form followed should be that prescribed by the Constitution, namely, that in case of a deadlock there shall be a referendum of the people to decide the matter and alter the Constitution. That has not been done; the reason being, I suggest that at any time it is abnormally difficult to carry a referendum in a majority of the States. I go further, and say that, at the present time, there is practically no chance of a referendum sponsored by the present Commonwealth Government being carried. If this issue were put to the people even during the present crisis - of which the man in the street is fully aware - it would be most definitely rejected. And why? In the first place, because these bills are not regarded by the general public as essential to the winning of the war, and therefore the people would not regard themselves as obliged to vote " Yes " in any referendum associated with them. Moreover, it would be held by many people - and in this I would concur with them - that the tills represent definite move towards unification X can speak for the people of South Australia, and I know that they have no desire for unification. Again, it -would be believed by a great many people that the bills are probably unconstitutional. A referendum was held a few years ago, and I urged the people to vote " No ". The first reason I gave in the Senate- was that I did not think that there was the slightest chance of the proposal being carried, so that there was no justification for the waste of time and money involved in holding a referendum on an issue that was predetermined. South Australia rejected it by a fourtoone vote, so that my judgment was vindicated. I do not say that there would be a 'four-to-one negative vote on the present issue, but I am certain that it would be defeated. There is this other point to be considered, also. I am sorry, as a federal member of Parliament, to have to say it, but the people of my State very much prefer their State Government and their State Parliament to the Commonwealth Government and the Commonwealth Parliament. That has been so for years, and the feeling is becoming stronger. Any federal member of Parliament who believes the contrary is deluding himself. The State member is the mail who gives the people their roads and bridges, and the other things that they want. It may be that the federal member, who distributes largess in the shape of pensions, may also 'come in for some gratitude, but the fact remains that the State member has first place in the people's hearts.

The people do not believe, and cannot be convinced, that the Government's proposals arc necessary for the defence of the country. So far as the people of South Australia are concerned, they would never believe that such men as their Premier, Mr. Pla'yford, and his chief supporter, Mr. Rudall, both of them returned soldiers, and greatly respected throughout the State, would be opposed to any measure which was really necessary for the successful prosecution of the war. No South Australian, whatever his politics, could possibly believe that. Both those men saw service overseas in the last war. As a matter of fact, Mr. Playford was picked up for dead on the battlefield, but fortunately he survived. No one will convince the people of South Australia that these arc essential war' measures when two men so highly respected say that they are not necessary.

Mr Barnard - Will the honorable member say why they did not put forward alternative proposals?

Mr DUNCAN-HUGHES - I was not at the Premiers Conference at which the matter was discussed. I was not invited; I do not even know whether mem'bers of Parliament are permitted to go along and listen to such discussions, but I gather that the Government's proposals came in for a good deal of criticism. It would have been enlightening if the Treasurer had told us what the respective Premiers said regarding the proposals, and why they rejected them. It would be interesting to know why Mr. Forgan Smith, for whom T have considerable respect, is opposed to the scheme. He is a Scotchman by birth, and, therefore, I presume that he does not want us to lose the war, yet he does not consider this scheme essential to the winning of the war. Another reason why the people of South Australia do not look upon these bills as necessary defence measures is that they have observed the manner in which this Parliament has distributed largess during the last two years in the form of child endowment, increased invalid and old-age pensions, and widows' pensions. They say to themselves that, though these things may be excellent in .themselves, they are not essential to the winning of the war. They are absorbing money which could be devoted to the winning of the war. This money, they say, is .-being distributed among a particular class, and that is a political action. Then, when the Government finds itself running short of money, it proposes to raise more .by depriving the States of the power which they have always enjoyed to provide social services from the proceeds of taxes. The State governments object strongly to the proposal that, whether they like it -'or not, the Commonwealth shall have power to take away from them their public officials, their offices, their books and their papers. They have no objection, as has been demonstrated in the past, to lending and making these facilities available to the Commonwealth Government' for the better prosecution of the war, but they maintain that they were themselves taxing authorities long before there was any Commonwealth Government. They maintain that they have their, own office staffs and their own documents, and they are not going to hand them over to any other authority for absolute ownership and retention by that authority. They know that what they surrender will never be returned. The Government of South Australia lias never hesitated during this waT to co-operate with the Commonwealth in every way possible. Some of its ablest officers, such as Mr. "Wain wright and Mr. Hunkin, have been lent to the Commonwealth for war work. The Minister for Home Security (Mr. Lazzarini), who has had a good deal to do of late with State governments will endorse my statement that they have always been willing to co-operate with the Commonwealth in . every way possible.

As I am not a King's Counsel myself, I propose to read the gist of an opinion prepared by one who is a King's Counsel on the validity of the Government's proposed legislation. Mr. Ligertwood, K.C., perhaps the leading member of the South Australian Bar on constitutional matters, has given an opinion, of which a synopsis was published in last Saturday's issue of the Advertiser. In it he states that, in his opinion, the Government's scheme is unconstitutional, and could be challenged on the following six grounds : -

(a)   That it violates section 51 (11) of the Constitution in that it discriminates between those States which are willing to vacate the income tax field and those which are not.

(6)   That the making of grants to the States by way of reimbursement of income tax is not a bona fide exercise of the powers of the Commonwealth Parliament under section 96. but is part of a scheme designed to destroy tinpowers' of States to levy income tax.

(c)   That the scheme is a law of revenue and violates section !)!) of the Constitution is that it gives a preference to those States willing to come into the scheme over the States not so willing.

(i)   That the scheme is directed towards the destruction of the activities of the States and violates the fundamental prinicple of the limited sovereignty of the States intended to be secured by the Constitution. («) That the scheme cannot be justified under the defence power because that power is given to the Commonwealth subject to the Constitution, whereas the scheme is subversive of the fundamental principle of State sovereignty implied in the Constitution. (/) I might add a subsidiary ground that the Taxation Act may be invalid because it is designed to raise taxes for both Federal and State purposes, whereas the Constitution only authorizes the Commonwealth Parliament to raise taxes for Federal purposes.

I understand that this opinion was given some what hastily, ' and if he, on short notice, was able to find six reasons why the scheme was unconstitutional, he would probably be able to find one or two more if he had time f or a more leisurely survey of the field.

Regarding the Government's proposal to compensate the States for vacating the income tax field, I maintain that it would be more equitable to treat the amount of £34,000,000 as a pool, and ' to divide it among the States .on a per capita basis. There could be no suggestion then that there was any discrimination between the States, and the proposal has the further advantage that the States which have been living on an extravagant seale would have to reduce their expenditure, while those which have been frugal would be exalted. An integral part of the policy of the present. Government is understood to be .that the rich shall be abased, and the poor shall be exalted. In this proposal, however, we find an extraordinary change of policy, because the rich States are to he exalted and the poor are to be abased. Constant repetition has almost persuaded me that only the United Australia party worked on those lines.

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