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Thursday, 28 May 1942

Mr SCULLIN (Yarra) .- -I participate in this- debate in the spirit in which I approached the consideration of these questions as a member of the Committee on Unif orm Taxation to which the Government did me the honour to appoint me. I did not meet in the committee, nor did I join with the other members of the committee in making the recommendations which were submitted to the Government, with a view to furthering any party political policy, or to giving effect to the view of any one State. The question I asked of myself when considering this problem was: what is the best that may be done for Australia at a time when it is engaged in a life-and-death struggle?

I regret the reference last night to the honorable member for Robertson (Mr. Spooner). I speak of a man as I find him; and, in the course of those discussions, I found that not once did the honorable member for Robertson. intrude the view of his State, or a parly political view, above the broad interest of Australia. We worked amicably and earnestly, because we realized that we were in serious times.

We have listened this afternoon to a very learned and interesting discourse by the right honorable member for Kooyong (Mr. Menzies) on the Constitution, and the powers of this Parliament. On such subjects, the right honorable member is listened to with respect, because of his experience, which probably is greater than that of any of us, and certainly is greater than that of most of us. I agree with him that constitutional questions ought not to. be left entirely to lawyers; that laymen can at least exercise some judicial thought and apply some logical reasoning to matters that are presented to them. They can also read, not only the Constitution, but also the judgments that are delivered from time to time by the High Court, and can draw their own conclusions from those very clear statements that are made by Their Honours from, the Bench. My reading of. the decisions of. the High Court over a good many years has forced me to the opinion that the Constitution of Australia is- what the High Court has said that it is. Therefore, the right honorable gentleman was very wise in being guarded and not too dogmatic. He lias probably impressed a number of honorable members of this House with the belief that the Government is treading on dangerous ground. I listened to him carefully. I have also had the privilege of' reading very closely the opinions of a number of very eminent legal men in this country; and, with due deference to the right honorable gentleman, I must say that I am more convinced by their opinions than I was by his speech. But the matter will not rest with the advisers to the Government. They will not have the last word, nor will the right honorable gentleman.

Mr Menzies - I said so.

Mr SCULLIN - As the right honorable gentleman knows, the last word will be with the High Court. The Government is not throwing this matter into the ring, as was suggested last night by one honorable member, as one throws a cat into the air, hoping that it will land on its feet. The Government has given serious consideration to all the aspects to which the right honorable gentleman has referred.

Mr Menzies - I recognize that. I thought that I had said so. The Government obviously has given full consideration to the matter; but that does not relieve me from my obligation.

Mr SCULLIN - It can be regarded as absolutely certain that the Government has had the best advice obtainable, and has accepted it. It will proceed with its plans with confidence. That is all that I have to say about the constitutional, issue. I believe that this Parliament and country will be impressed with the need for this legislation, and that, at a time when the nation is in deadly danger, that need will impress itself upon even the High Court of Aus tralia. The bills propose to set up one taxation authority for the assessment and collection of income tax, and provide for the compensation of State governments on the. basis of previous, collections. They are to operate for the duration of the war and one year thereafter. Their purpose may be summarized thus: To impose a uniform rate of. income tax throughout Australia to meet the requirements of Commonwealth and State Governments; to equalize the burden on all citizens, based upon ability to pay; to secure: the surplus, taxable capacity for war needs ; and to simplify and cheapen taxation administration. The danger of invasion demands the maximum effort that Australia can make. A gigantic task confronts this country. With due respect to all that we have heard about the rights of different governments, I point out that there is only one Parliament which has the direct responsibility of repelling an invader ; that is the Commonwealth Parliament. The Commonwealth Government is the one Government that must handle that responsibility. All the resources of this country in men, material and money must be made available to the Commonwealth Government. The slack must be taken up wherever it is found. On the money side, taxation presents one of the greatest problems with which this Parliament has been confronted. I watched with interest and great sympathy the efforts of the right honorable the Leader of the Opposition (Mr. Fadden), as Treasurer in the Menzies Government, and later as Prime Minister and Treasurer, to solve this problem. They were worthy of a very much better result than he achieved. What strikes anybody who studies the subject of income tax is how inequitable is its application by seven governments. This is brought home to us with emphasis when Commonwealth taxation is raised to the highest level it has reached since the war began. Let me give examples at both ends of the income tax scale of income tax payable. Take a man with an income of £200 a year. In one State, he pays in Commonwealth and State taxes combined a total of £7 a year, whilst in another State he has to pay £18 a year. That is an inequitable position, "which the Government considers should be remedied in the interests of the peace, order and good government of this country. Go to the other end of the scale, to the large incomes. As the Commonwealth income tax has soared, and the income tax of the States has remained at the same level, it has been found that in certain parts of this continent incomes on the top. ranges have paid 23s. in the £1; and in some specific instances an average over the whole of the income of more than 20s. in the £1 has been paid. We cannot maintain that for very long; if regard is tobe had to equity, itcannot be maintained for one moment longer. Last November, the Commonwealth enacted a proviso that there shall be a ceiling of 18s. in the £1, with a rebate of Commonwealth tax sufficient to bring its share down to that level. It invited the State governments to act similarly, but so far only one State government has passed the necessary legislation. That is the degree of assistance which the Commonwealth has received in respect of such a simple problem. The purpose of these measures is to provide revenue for the war. The huge war expenditure that hasbeen continuing for the last two and ahalf years has created activities which have enormously increased the taxable capacity of the people of Australia. Such, increased taxable capacity, due entirely to war expenditure, should, in the opinion of the Government - and, I believe, of the Opposition - be available to this Parliament for the furtherance of the war effort. The uniform rates proposed - and despite the plea that the use of the word " uniform " is merely rhetorical, they are uniform throughout Australia - will yield the same revenue to the Commonwealth based on the 1940-41 income, "but based on the 1941-42 income, they are estimated to yield an increased return of £12,000,000 to £15,000,000. That is because of the increased buoyancy of the revenue. On what grounds of justice can any State government claim a share of the increased revenue that is due entirely to Commonwealth war expenditure? In spite of the slight decreases made in the rates of income tax in most States, the total State income tax revenue has increased. In 1938-39, it amounted to £29,800,000. whereas in 1939-40 it was £33,450,000, an increase of £3,650,000. In 1940-41, it increased to £35,450,000. Taking the progressive increases over two years, the States have collected in income tax an additional £5,650,000. The estimated return for 1941-42 is £36,750,000, an increase of £300,000 over last year. These increases, are definitely the result of war expenditure, and war expenditure should have full claim on the increased taxablt capacity of the nation. Let us now consider another source of State revenue which is not touched by this proposed legislation. I have the figures here for the State railways showing the net revenue; that is, the amount by which receipts exceed working expenses. For 1938-39, the total net revenue was £8,300,000. For 1939-40, it was £9,800,000, an increase of £1,500,000. For 1940-41, the net revenue was £11,300,000, a further increase of £1,500,000, and for the seven months of 1941-42, the net revenue had increased by another £1,000,000. In addition, the State railway departments are placing quite a lot of their profits to replacement reserves - a wise policy, no doubt, but more money is being placed to these reserves than was the practicepreviously. The railways departments of New South Wales and Victoria alonehave disposed of more than £1,000,000 in this way. The States have also been saved expenditure on unemployment relief. In Victoria and South Australia, no unemployment relief is being paid at all. Indeed, for a long time past, South Australia has been importing labour. The increases of railway revenue in Victoria and South Australia are higher than in any of the other States, because Victoria and South Australia have enjoyed a larger share of war expenditure. In proportion to its size and requirements, South Australia has benefited more than any other State in the Commonwealth fromwar expenditure. Victoria comes second, New -South Wales third, and Queensland fourth.

The right honorable member for Kooyong (Mr. Menzies) emphasized to-day that a taxpayer in Victoria would make a larger contribution to the cost of the war than would a taxpayer in New

South Wales or in Queensland. That is perfectly true, but he emphasized it in such a way as to imply that he had discovered some new iniquity. As a matter of fact, there is nothing new about it. That position obtains to-day under the present taxing laws. It obtained when the right honorable gentleman was Prime Minister. It has obtained ever since there has been a federal income tax, be. cause the process of deducting State taxation before imposing federal taxation has had the effect of increasing the amount of federal tax collected from taxpayers in States where State taxation is low, as compared with the amount collected in States where State taxation is high. Let me give some figures showing how this works out under the present taxing methods -

I admit frankly that, under the uniform tax scheme, this inequality will be exaggerated, but -not abnormally. I do not say that the present proposal is . ideally just, and I do not say that if we were considering a permanent arrangement in peace-time these anomalies should be allowed to continue, or that the proposed method of compensation to the States should be followed. But I am a realist; I take a practical view of things, and lie Government is doing the same. It is charged with the responsibility for the defence of Australia. It sees the operation of the war machine providing huge revenues for some of the States, and it makes no apology for demanding from those States a greater contribution to the cost of the war, because they have had a greater share of war expenditure. I am a Victorian, and if I had any bias it should be towards my own State, but I have always tried to take an Australian view of these matters. I have listened to a great deal of parochial argument from

Mr. Scullinmembers of Parliament of all parties who represent New South Wales constituencies against Victoria being given such a large share of war expenditure. Victoria was given war industries because facilities were readily available there, and that is true of South Australia also. The position is gradually being improved as it affects other States. In the defence of Australia we cannot have regard to State boundaries, and I object to the parochial view taken by some Victorians. They resented the parochial attitude when others declared that Victoria received the lion's share of defence work, but some of them - not many of them, I am glad to say - asserted that Victoria should pay no more than Queensland, Western Australia or Tasmania. I refuse to accept that proposition, because it is not sound. The right honorable member for Kooyong stated that the proposal of the Government was not the best method by which to accomplish its objective, and that the scheme introduced in the Fadden budget was a better one. I remind the right honorable gentleman that the scheme embodied in the Fadden budget was not the first love of the previous Government; it was the second preference. The first plan, which was submitted to the States in 1941, was almost identical with the present proposal. There was a little difference in detail, but the principle of the two schemes was the same.

Mr Fadden - No definite proposal was considered.

Mr SCULLIN - I have read the speech that the right honorable gentleman delivered to the House on the subject, and I have copies of the official documents that were sent to the States as a definite proposal.

Mr Fadden - No, as a tentative proposal. It was the basis upon which the post-war credits were to be established.

Mr SCULLIN - Neither the speech of the right honorable gentleman when he explained the reception of his scheme by the Premiers, nor the document that he submitted to them, contained one reference to post-war credits.

Mr Fadden - The proposal was never considered.

Mr SCULLIN - The post-war credits scheme was an afterthought when the original proposal was rejected. When the right honorable gentleman was Treasurer in the Menzies Government, he invited the States to vacate the field of income tax, individual and company, for the duration of the war and twelve months thereafter. As compensation, the States were to receive annually the sum of £30,000,000. That sum' was £3,500,000 less than the total that the States had derived from their income taxes. The apportionment of the £30,000,000 among the States was to be on the following basis: The payment of £3 10s. a head of the population, which would account for £24,500,000, and the division of the balance in any way acceptable to the States. In rejecting the scheme, the States contended that the plan was, in fact, an interference with their sovereign rights, which the State governments had no mandate from the electors to accept, and that, in addition, an equitable division of the compensation offered would, in practice, be impossible. Honorable members will see that those objections to the original Fadden proposal are precisely the same as those taken to the present scheme. The right honorable member for Kooyong stated that the Fadden proposal was to be accepted voluntarily by the States; but they rejected it. The Premiers, at the conference whichwas held in Melbourne recently, declared that there was no difference between the present scheme and that submitted by the then Commonwealth Treasurer in 1941. So, whether the plan was to be accepted voluntarily or imposed under, duress, the States raised the same objections to it. In passing, I should say that I was highly entertained to hear the protests of the honorable member for Barker (Mr. Archie Cameron) against force. He glories in being the arch-conscriptionist of this Parliament. When the original Fadden plan was rejected, the advisers of the Government evolved the post-war credits scheme. Although it had certain merits, it was open to a number of grave objections, which in these critical times would be most serious. One objection is that the post-war credits scheme, by retaining seven taxing authorities for income tax purposes, would not have checked the existing vexatious waste and confusion. In these times, when we require every man and every £1, this country cannot afford to keep 1,000 men uselessly employed on duplication.

Mr Holt - Even if the present proposal be adopted, there will still be seven taxing authorities.

Mr SCULLIN - There will be only one income tax authority.

Mr Holt - There are many taxes apart from income tax.

Mr SCULLIN - Does the honorable member suggest that they should be included in this scheme?

Mr Holt - To be logical, the Government should do so.

Mr SCULLIN - Speaking for myself, I have no objection to such a proposal and I invite the honorable member to support it.

Mr McEwen - In my opinion, a fairer scheme than the present one could be evolved.

Mr SCULLIN - That remark could be made about every scheme which has been propounded. The truth of the statement can be shown only by examination.

Mr Francis - No taxes have ever been popular.

Mr SCULLIN - And we shall never make taxation popular.

Mr Harrison - Anyhow, the present proposal is a step in the right direction.

Mr SCULLIN - A representative of a mutual insurance company informed me recently that the office was obliged to keep a large staff for the purpose of sending out statements and answers to seven taxing authorities. He declared that, even if the uniform tax meant that the company would pay an increased amount, he hoped that this legislation would be passed.

Earlier, I referred to the deficiencies of the original proposal that was submitted to the States in 1941 by the Commonwealth Treasurer of the day. The Commonwealth proposed to apportion £30,000,000 among the States. An amount of £24,500,000 was to be distributed on a per capita basis, and the balance on another basis, which provided that States with the lowest taxes should receive the smallest proportion of the amount. Therefore, it is clear that the scheme had not a per capita basis. Until the second distribution was made, the plan would have left New South Wales with a deficiency of £5,600,000; Victoria with a deficiency of £100,000; Queensland with a deficiency of £2,200,000; South Australia with a deficiency of £300,000; and Western Australia with a deficiency of £800,000. Tasmania would not have been affected. The then Commonwealth Treasurer proposed that Victoria, South Australia and Western Australia should, receive a disproportionately small share of the pool of £5,500,000. Obviously that scheme did not embrace a per 'Capita proposal. Yet that had the support of honorable members who are to-day howling for a per capita reimbursement. While the Leader of the Opposition (Mr. Fadden) as Treasurer in the Menzies Government, was making a valiant effort to get over this problem - and I give him full credit - the Government of Canada was grappling with the same problem. The Constitution of Canada is somewhat different from ours, but Canada has provinces which take the place of our States, and those provinces have the power to collect taxes.

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