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Thursday, 28 May 1942

Mr CURTIN (Fremantle) (Prime Minister) (5:48 AM) . - The essence of this matter is that the Commonwealth has accepted as a reasonable basis for the States the average amount of tax collected by them during the two years specified; and this legislation gives to them, from the compensation fund, in each year the war shall last and twelve months thereafter, an amount of income equal to that which they would have received from the imposition of their own income taxes. The war is the cause of rising costs, and those rising costs may be reflected in quite a number of State departments. The cost-of-living allowances, while fair to the employees, have yet to be provided out of the Consolidated Revenues of the States. Therefore, that sum paid to the States may not be equal to carrying on public administration having regard to the increased charges ,to be met. We say that if that should happen, the Commonwealth Grants Commission shall be the judge whether it has happened in a way that is unavoidable; and if that be the case, we shall see that a State's re quirements over and above the amount it receives from the compensation fund are met. If we made provision for a reduction of the compensation payable to the States, it could be said that we were not providing, for the duration of the war and twelve months thereafter, the sums which they themselves could have raised by means of an income tax.

Mr Fadden - That does not necessarily follow; the States may have had a reduction of their taxable capacity.

Mr CURTIN - In that case they could have increased the severity of their taxes. But, on the other hand, with the improvement' of conditions, they could have reduced the severity of their taxes, and yet gained a larger realization. What we have sought to do is to give to them, as a covenant in this legislation, an income from the compensation fund equal to the amount that they would have got on the existing rate, and existing taxable capacity of the State, in the two years taken as a basis for this calculation. We know that, implicitly, the view of the States is that this legislation is an attack on their sovereignty. We meet that charge by saying that the purpose of this legislation is to enable the Commonwealth, owing to its increased expenditure, to take full advantage of the rising taxable capacity of the nation. Therefore, we feel that it is fair and reasonable to fix this compensation fund on a static basis, allowing for flexibility of costs. We desire to give to the States some guarantee that they shall have resources open to them which will enable them to carry on their administration.

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