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Thursday, 28 May 1942

Mr SCULLIN (Yarra) (11:15 AM) .The provision contained in the clause is in the bill now because all Commonwealth loans have been issued free of State income tax. Under the income tax rates bill, which will be brought on today, Commonwealth and State income taxation is to be amalgamated in one uniform system. Then the Commonwealth will collect all income tax revenue, and if we did not give a rebate to honour the obligation entered into in the prospectus of our loans, that they would be free of State income tax, we should be guilty of repudiation. A calculation has been made that the rebate will be worth on an average 2s. in the f 1 of interest received on Commonwealth Government loans and that amount is to be a rebate to the taxpayer.

Mr Calwell - Will a rebate of 2s. in the £1 cover all the cases, or will some holders of bonds receive less than that sum ?

Mr SCULLIN - Nobody could calculate the exact figure. "When the Commonwealth loans were issued, their freedom from State income tax enabled the Commonwealth to borrow at a slightly lower rate of interest than would otherwise have been obtainable. We were anticipating a small reduction of the interest rate for the next Commonwealth loan, but as it will not be free of State income tax, we hope to get it at the usual rate of interest. There is another important principle involved. The Commonwealth could not permit a

State Parliament to tax the interest paid to holders of bonds issued by the Commonwealth. Therefore, all these loans were free of State income tax. We must keep faith with past borrowers and live up to the terms of the prospectus of the loans, otherwise we should be guilty of repudiation.

Clause agreed to.

Clauses 26 to 29 agreed to.

Clause 30 (Payment of tax to have priority over all other taxes).

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