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Thursday, 10 September 1942

Mr CHIFLEY (Macquarie) (Treasurer) . - I move -

That the bill be now read a second time.

The purpose of this bill is to give effect to arrangements made by the Governmentwith the States consequent upon their agreement to vacate the field of entertainments tax for the purpose of allowing the Commonwealth to impose its own tax. The bill provides for the compensation of the States for the balance of the current year and also for the annual compensation to be paid during the period for which the act will be in operation. When the Government invited the States at the recent Premiers Conference in Melbourne to vacate the field of entertainments tax it proposed to compensate the States on the average of their annual collections for the two most recent financial years during which their taxes were in operation, namely, the financial years 1940-41 and 1941-42. This basis of compensasation was similar to that recommended to the Government in the report of the Committee on Uniform Taxation in respect of income tax, and was adopted by the Government in its measures implementing the recommendations of that committee. The Government is of the opinion that it is a reasonable and proper basis for the payment of compensation.

The States, with the exception of Tasmania, were not prepared at that conference to agree to the Commonwealth's proposals, and asked that those proposals be put in writing so that the 'State governments could give further consideration to them. That was done, and the States eventually agreed to vacate the field, but some of them made representations to the effect that the compensation payable should be upon the basis of the State revenue derived from entertainments tax for the financial year 1941-42 instead of the average for that year and the previous year. The Government gave consideration to this request and while adhering to its opinion that the basis proposed by it was reasonable, it decided, in view of the relatively small amounts involved in the change of basis, to grant the requests. Therefore, compensation will be paid to the State governments upon the basis of the revenue derived by them from their taxes on admissions to entertainments for the year ended the 30th June, 1942. The bill provides in the first schedule for the amounts payable to the States for the balance of the current financial year, provided they cease to collect taxes under their acts as from the date the Commonwealth provisions come into operation.

The second schedule provides for the payment of the annual amounts for each year during which the act shall be in operation. The amounts payable annually are as follows : -


Queensland derived no revenue from an entertainments tax, and consequently provision for compensation to that State under the arrangements made is not necessary.

It is proposed, as I have previously remarked, to introduce the Commonwealth tax on a date to be fixed by proclamation, and it is expected that the five State governments concerned will cease collecting their entertainments taxes as from that date. Upon the assumption that this will be so, and that the proclaimed date will be the 1st October, 1942, compensation for the balance of the current financial year amounts to £574,341, and will be paid to the several States as follows: -


The amount is, in each ease, three-fourths of the total amount payable in a full year. The Government may be charged with over -generosity in the matter of these grants. If it had compensated the States on the average of the years 1939- 40 and 1940-41 - the years chosen by the Uniform Tax Committee as a basis for income tax compensation- the total amount of compensation for a full year would have been about £700,000. If it had compensated the States on the average collections during the years 1940- 41 and 1941-42, the, total amount of compensation would not have exceeded £750,000. Instead, it proposes to compensate the States on the basis of the relatively high revenue year 1941-42, without any reduction on account of the savings in costs which the States will obtain from the lifting of their taxes. For the current , year, there has been no attempt to reduce the annual amount by more than the revenue of an average three months of, the 1942 year. But as an offset to the foregoing, it has to be borne in mind that, in the first year, the States may be called upon to repay taxpayers amounts collected in respect of stamped tickets purchased in advance. They may also' have to refund tax paid on lump-sum payments by members of clubs, societies, &c, on entertainments which will not eventuate until after the Commonwealth tax commences to operate and which will then become liable to Commonwealth tax. The bill provides that the act will operate for the duration of the war and one year thereafter.

Debate (on motion by Mr. Fadden) adjourned.

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