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Thursday, 28 May 1942

Mr ABBOTT (New England) (2:55 AM) . - I support the bill mainly because it is essential that the whole of the financial resources of the Commonwealth be fully mobilized, and, as far as possible, controlled and handled by the Government which is directly charged with waging the war. This afternoon we heard a brilliant speech by the right honorable member for Kooyong (Mr. Menzies) concerning the constitutionality of this measure. After listening to him, I felt worried because I thought that he had built up a watertight case to show that the bill was unconstitutional. Later, however, I listened with great interest to the speech of the honorable member for Warringah (Mr. Spender). In my opinion he shattered the opposing arguments advanced by previous speakers. I was then comforted by the feeling that when doctors differ, the patient, as a general rule, recovers. I feel sure that this legislation will be found to be constitutional". No legalism or formalism should prevent us from mobilizing the resources of the nation to the fullest possible degree. It is not so much a matter of expenditure being controlled by the Commonwealth that makes this proposal for a single income tax authority essential. Ihope that in the months ahead a good deal more of the taxation of the States willbe brought under the control of the Commonwealth. The essential feature of this proposal is that it will prevent the States from competing with the Commonwealth for man-power. Since the outbreak of war, the States have not shown any appreciable readiness to curtail their expenditure, or demands on man-power. For many months they were quite prepared to continue with their peace-time programmes. For that reason, principally, I welcome the measure. The Treasurer (Mr. Chifley) pointed out that previous attempts along these lines were summarily rejected on the plea that they represented an invasion of State rights. [ have not the slightest doubt that that is so; but I maintain that the Commonwealth Government has a far greater right to demand that State rights, and the rights of the people generally, shall be subservient to our imperative need to defend this country. State rights must go by the board, in order that the supreme right to which I have referred may be sustained. The criticism levelled against the Government for its alleged failure to provide adequate compensation for the States under this scheme appears to be very shallow indeed. The proposed compensatory payments to the States are most generous. Since the outbreak of war, as the result of increased Commonwealth expenditure, State finances have steadily improved. In addition, the States have been relieved of many of the burdens which they were obliged to carry in peace-time. For instance, they have been 'relieved of the burden of providing for the unemployed. I do not suppose that at any time in the history of this country, the revenues of State railways have been more buoyant than they are at present. Railway balancesheets up to June, 1941, reveal great prosperity. Those services are benefiting immensely from the carriage of equipment, troops and goods. In addition, unemployment relief represents an enormous saving by the States. Therefore I consider that the States have no grounds for complaint. In his secondreading speech the Treasurer said, with reference to the recent conference of Commonwealth and State Ministers that 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 a State that its financial circumstances were such as to warrant an increase, and that the Commonwealth Grants Commission would determine the extent to which the grant should be increased. That was not the formula that was recommended by the committee which was appointed by the Government to consider the uniform income taxation proposals. Paragraph IS of that committee's report provide? that a State may submit a claim to the Commonwealth that its financial cir cumstances are such as to warrant an increase of the amount of compensation for any financial year subsequent to 1942-43, but it also provides that the Commonwealth may claim that the compensation to any State for any financial year should be reduced on the ground that the Commonwealth has relieved the State of the responsibility for an existing service provided by that State. I consider that the Commonwealth Government would have been well advised to have adopted the two-way method recommended by the committee rather than the one-way method contained in the bill. It has been claimed in the course of this debate that the rate of compensation to individual States is, in many cases, unfair and that it should be on a per capita basis. I remind honorable members who argued in that way, that some States have cost a great deal more to develop than others. For instance, Victoria has been a much cheaper State to develop than Queensland or New South Wales. In New South Wales practically the main railway system runs along a narrow ridge of the Great Dividing Range and, therefore, it has been very costly to construct. Similarly, in Queensland enormous lengths of line have been required to open up remote areas. Therefore it is unfair to suggest that the States should be compensated on a per capita basis. In addition, if that method were adopted, some States might enjoy a surplus of revenue, whereas in others there would be a deficit, with the result that claims would be made to the Commonwealth Grants Commission for additional compensation, and States which had a surplus would have no use for it, because if an attempt were made to employ it in developmental works requiring man-power, the war effort would be prejudiced. The various States governments have adopted different means of obtaining their revenue. While some States depend largely upon income tax, others raise revenue by means of other forms of taxation. In New South Wales, for instance, income tax amounts to £6 Os. 3d. per capita, and other taxes, £2 16s. 5d. per capita, making a total of £8 16s. Sd. In Victoria, income tax amounts to £3 9s. 7d., other taxes £3 2s. 8d., making a total of £6 12s. 3d., whereas the corresponding figures for Tasmania are £3 8s. Id., £3 17s. 6d.. and £7 5s. 7d. In view of the varying systems of taxation, I consider that the Commonwealth Government should take steps at the earliest possible opportunity, to examine the whole field of State taxation with a view to achieving unity. In addition to the per capita payments in the various States, all these different forms of taxation vary in themselves. For instance, in Victoria the entertainment tax amounts to 7s. 8d. ; South Australia, lis. 9d.; New South Wales, 4s.; and Queensland, Is. lOd. per capita. Land tax in Victoria amounts to 5s. 2d. ; South Australia, 10s. 4d. and Queensland, 8s. per capita. I maintain that all these avenues of taxation should be controlled by the Commonwealth Government and brought into line. Victoria at present does not derive so much revenue from income tax as does New South Wales, but under one control the difference would be evened up in the other forms of taxation from which Victoria and South Australia might obtain more revenue and New South Wales less. I maintain that the national income is the only reservoir from which we can draw taxes in the Commonwealth, and that the Commonwealth should control the whole of the revenue raising powers of the States. I do not think that the Commonwealth will ever have sufficient control over the expenditure of money to ensure the best use of man-power and materials in the war effort unless it has complete authority over the revenueraising powers of the States at least for the duration of the war. I suggest that the Commonwealth should go even further than those proposals, and provide that the compensatory grant to a State which has a surplus should be reduced by the amount of that surplus, and that States should not be allowed to increase their rates or to levy new direct or indirect taxes. In 1938-39, the total revenue of all States amounted to £124,893,000. By 1939-40, the total had increased to £130,543,000, and in 1940-41, the figure was £137,896,000. I believe that the Commonwealth must place a ceiling on State revenues, and I welcome this bill as a step towards the fixation of that ceiling.

There is one other point which I should like to make, and that is in regard to lower income groups. I fully realize that the committee was charged only with the task of bringing about a uniform system of income taxation in the Commonwealth, hut it is a pity that the position of the lower income groups has not 'been tackled. According to the 1940-41 figures, the estimated national income of approximately £800,000,000 was distributed as follows : -


That means, in effect, that 70 per cent, of the actual income distribution pays 3.89 per cent, of the income taxation.

The demands upon the man-power and resources of the Commonwealth are increasing at an enormous rate, and it is estimated that an additional 318,000 men and women will be required very shortly for the armed forces and munitions establishments. In addition, the Allied Works Council has called for 30,000 workers. At present the primary industries are suffering from an acute shortage of man-power, and if production is to be kept up to the level required to meet home-consumption demands and overseas commitments, additional labour will have to be made available. Therefore, I believe that there is an urgent necessity to damp down the enormous amount of consumer purchasing power in the Commonwealth to-day. Possibly that purchasing power will be reduced to some degree by rationing, but it is doubtful whether that restriction alone will reduce the purchasing power sufficiently to prevent it acting detrimentally to the war effort. A large amount of voluntary saving is taking place in this country. Savings bank deposit figures show that during the last twelve months deposits have increased from £250,234,000 to £264,446,000, an increase of £14,212,000. The sales of war savings certificates between March, 1940, and March, 1942, amounted to £21,312,838, giving a yearly average of £10,656,419. That average, added to the increase of £14,212,000 in savings bank deposits, amounts to £24,868,419. That means that the voluntary savings of the community in those two directions amount to nearly £25,000,000 per annum. But those are voluntary savings and there must be many people within the income groups which are mainly responsible for those savings who are not saving. Another point in regard to Savings Bank deposits and war savings certificates is that the savings are not frozen ; they may be used at any time and can be released in such a way that they will be in violent competition with the war effort. In addition, they may cause a substantial rise of prices despite price-fixing legislation, and so lead to the creation of black markets. It is necessary for every one to make sacrifices and I contend that there should be a compulsory loan contribution throughout the whole range of income groups down to £150 per annum for a single man without dependants. Those loans would be repayable in the post-war period and would be of enormous benefit in the change over from a war-time economy to a peace-time one. In addition, they would give great assistance to new housing schemes which must be undertaken in this country when the war is over. It is necessary to remove slums, not only from metropolitan districts, but also from the rural districts. There are just as many slum dwellings in rural areas as there are in the cities. When these post-war credits were released, they would have an enormous effect in creating a demand for consumer goods not required at the present time. They would place money in the hands of the freest-spending part of the community, and would help to swing the country more quickly from a wartime economy to a peace-time economy. I intend to vote for these bills, although I may support amendments to some of the clauses. I shall vote for the bills because they will bring about a simpler form of income taxation, and will prevent competi tion between the Commonwealth and the States in the income tax field. I believe that the people, having once experienced the benefits of this simplified system, will not be prepared to go back to the bad old system of other days.

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