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Thursday, 28 May 1942

Mr GUY (Wilmot) .- I desire to add my brief quota to the debate on this very . important subject. As I realize that the Commonwealth is obliged to find approximately £1,000,000 a day for war purposes, I subscribe to the prin ciple that the full taxable capacity of Australia must be placed at the disposal of the Commonwealth. I agree that the Commonwealth must have full command of the resources of the country, and that it should not be hampered by State laws which interfere with the full exercise of its powers. As the Mills report says -

The presence in the field of six States imposing taxes on income at widely differing rates restricts the powers of the Commonwealth in raising revenue from income tax.

The varying rates and conflicting principles of taxation applied throughout the States create anomalies that operate to the detriment of Commonwealth revenue and to the confusion of taxpayers.

I agree entirely with those sentiments. War expenditure by the Commonwealth has greatly increased the taxable capacity of the States and as the result of such expenditure State revenue has also increased. Moreover, as a further result of Commonwealth expenditure, the States no longer have to provide unemployment relief, because all the unemployed have been absorbed. Surely, the Commonwealth is entitled to any benefit arising out of its own activities.

Doubts have been expressed by some honorable members regarding the constitutional validity of the Government's proposals, but very few of us in this House are qualified to discuss that issue. We must leave it to the constitutional authorities inside and outside this chamber, but it is interesting to learn that eminent King's Counsel are divided in their opinions. Some have advised that the proposed legislation is constitutional ; others say that it will be a violation of the Constitution. However, if the matter actually reaches the Privy Council, and the council declares the legislation to be unconstitutional, the result for Australia will be financial chaos until such time as a validating act can be passed. We must leave that aspect of the matter until this legislation is held to be unconstitutional. Whilst I generally support these measures, because I am in favour of the principle of uniform taxation, I have serious misgivings because of the fact that they do not provide for uniform taxation. They certainly provide for a uniform income tax, but, having regard to disbursements to be made to the States under one of the bills that we are now discussing, this plan is most inequitable in its effect on taxpayers in different States. After all, we are one people, and taxes should be levied equitably on all taxpayers, irrespective of the part of the Commonwealth in which they reside. There should be no preferential treatment as between citizens residing in different parts of the Commonwealth. To put the matter in another way, a taxpayer residing in a certain part of the Commonwealth should not be called upon to pay more taxes than a citizen on the same income residing in another part of this country. These bills do not prohibit the States from levying income tax, but they do more or less coerce the States out of that field. If they do not voluntarily enter into an agreement to suspend income taxation for the duration of the war, and until the last day of the financial year following the cessation of hostilities, they will be caught in another way, for the 'Commonwealth makes it an offence for a taxpayer to pay his State tax prior to the payment of his Commonwealth tax. When the Commonwealth tax has been paid he will have no taxable margin left, and the State will be left without a field of income taxation. In addition, no compensation will be paid. The Commonwealth takes control of all records and documents, all taxation offices and officials, and prescribes a priority payment of tax ; therefore, I am justified in saying that there is a measure of coercion in the bill.

It is proposed to collect an amount of income tax from the people of Australia approximately equivalent to that collected under a combined Commonwealth and State tax, and it is also proposed to return to those Spates which agree to the scheme an average of the amount collected in the two base years 1939-40 and 1940-41, less costs of collection. On an income tax basis, the State that I represent will fare rather well; but, when taxation generally is taken into consideration, there is little or no equity in the proposal. I desire 'uniformity, but uniformity with equality of sacrifice. In the past, some States have relied to a far greater degree than others on income tax' for revenue purposes. For instance, the land tax collections in Victoria amount to 5s. 2d. a head of the population; in Queensland, Ss. ; in South Australia, 10s. 4d.; in Western Australia, 5s. 2d.; and in Tasmania, 7s. 4d.; whilst in New South Wales no land tax is collected, excepting an amount of about £2,000 in the western district. The taxpayers in all States except New South Wales will be obliged to pay the proposed Commonwealth tax and, in addition, the State land tax. Because New South Wales and Queensland collected more than twice as much income tax as other taxes those States will have an unfair advantage over other States, which collected only about half of their revenue taxes from income tax. Therefore, I should welcome some adjustment whereby compensation would be increased by an amount sufficient to enable State governments to reduce the land tax and other taxes to the same relative levels' as in New South Wales, thereby achieving a measure of uniformity in total taxation. Whether postwar credits can he adopted to bring about this measure of justice to all taxpayers, I am not in a position to say; but I suggest that the Government should give consideration to the matter from that aspect, with a view to making this proposal more equitable.

I am inclined to think that the only way to secure uniformity with equity would be to have one taxing authority for Australia. If the Commonwealth took over all taxation, uniformity and equality of sacrifice could be achieved. Realizing that the Commonwealth must be supreme, I support the bill, but I urge the Government to endeavour to 'devise a system which would be more equitable in its incidence than the present proposal. There is need for simplification of taxation and of taxation returns. Much duplication now occurs, because there is insufficient co-ordination between Commonwealth and State taxation departments. I believe that the present scheme opens a way to the provision of a more simple and effective taxing machine than has operated in the past. According to the report of the special committee which is the basis of the bills that we have before us to-day, there will be substantial economies in man-power, money and materials. . The report states that 3Q per cent, savings will be made in staffs and in that respect £250,000 will be saved annually. Notwithstanding the inequalities of which I have spoken, I support [the proposal because it will result' in simplification of the taxation system, will produce a financial saving, and will protect persons on the lower incomes. The present exemption from Commonwealth income tax will be maintained, and many taxpayers in the lower income field will receive relief. A cursory glance at the .tables which have been distributed among honorable members shows that persons in receipt of the lower incomes 'will benefit by a reduction of tax, but I realize that the rates are subject to revision at any time. Considerable discussion has ensued on the subject of State rights. In this period of unprecedented crisis, we are concerned not with State rights, but with our very existence. When we are dealing with such momentous issues, State boundaries should not be permitted to obtrude. After all, these rights are not being vested in a foreign government. In nearly every activity of the States, the Commonwealth exercises some controlling influence. This subject should be approached, not in a parochial, but in a national spirit. State rights must be- subordinate to national interests. I agree with the statement that has been made so frequently in this chamber that the rights of the people are supreme.

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