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Tuesday, 29 September 1942


Mr CURTIN (Fremantle) (Prime Minister) . - I inform honorable members, without any disrespect, that their submissions were not novel to the Treasurer (Mr. Chifley) and myself. The Government has most carefully reviewed the whole matter. Once a case has been made out in principle, its application is capable of infinite extension to like categories, so that the matter becomes one of extraordinary difficulty. The Government considered that it would be an insuperable task to draw a line which would be fair and just, because of the many anomalies that would be caused. For example, the introduction of a flat rate would mean that those members of the services to whom the honorable member for Wentworth (Mr. Harrison) referred, would benefit, whilst the merchant seamen would not. Again, there are some men who are not technically in the fighting services, but whose avocations, indispensable to the war, can be most hazardous. Those men include wharf labourers at certain places which have already been bombed by the enemy. Speaking broadly the statement applies to certain civil occupations that non-enlisted men follow in locations which are not operational areas, but which, under the suggestion of the honorable member for Warringah (Mr. Spender), would expose the Government to the duty of having to define whether they should be granted exemption from tax on the basis of a flat rate. It would be a very dangerous precedent in taxing systems for a government to have the authority to grant exemptions from liability to pay tax. But the honorable member for Warringah made a distinction. He said that the Government should not have the authority to impose the tax; but the honorable member will realize that where authority is vested in the Government to relieve the taxpayer, most certainly it has the power either to enforce the tax or not to enforce it. Hitherto, this power, where it has been given, has been strictly reserved to the Commissioner of Taxation, who in this matter exercises a quasi-judicial function. Having examined all aspects of the matter, the Government came to the conclusion that a distinction should be drawn 'between the civil population as such and the enlisted forces. But, whilst that distinction should be made clear, the other basic principle in all tax systems should be preserved, namely, taxation according to capacity to pay. Therefore, the Government considered that, in relation to enlisted men, the case for a disappearing exemption was as valid as for the rest of the community. Tax systems, as such, have regard to capacity to pay rather than the functions performed by the taxpayer.


Mr Spender - There should be a flat rate of exemption in respect of all members of the armed forces, but there should be a limitation so far as the upper limits of income are concerned.


Mr CURTIN - The honorable member, who was once Treasurer of this Commonwealth, would not like to have the task of administering that principle. He would make a decision to-day and, to-morrow, when asked to apply that decision to a somewhat analagous case, would find that he had given relief to someone who ought not to have been relieved. We are standing to what we have put before the committee, not because we have not carefully examined the various submissions that have been made to-night, but because we cannot find any common formula which would preserve sound taxation principles and at the same time guard against either too extended or too restricted application of the relief. We consider that any tax which conforms to capacity to pay is less irksome to any member' of the community, whatever be his vocation, who has the capacity to pay, than is a tax which strains the capacity to pay.

The proposition of the Leader of the Opposition is that there should be a flat rate of exemption for all members of the forces, and that a man earning £2,000 a year should pay tax on a presumed income of £1,750.


Mr Fadden - That is so.


Mr CURTIN - That a man earning £1,250 a year should be presumed for income tax purposes to have an income of £1,000 a year, and that a man earning £500 a year should be taxed on a presumed income of £250 a year. That means that, regardless of the greatly increased capacity to pay of the man on £1,250 a year, his relief from taxation would be identical with that of the man receiving less than half of his income.


Mr Fadden - That does not necessarily follow.


Mr CURTIN - It follows in all cases where the income is restricted to service income.


Mr Spender - A man earning £450 a year as a member of the forces has to keep his wife and children.


Mr CURTIN - Allowances for wives and children are exempt from taxation.


Mr Spender - Yes, but compare that man with a civilian earning a similar income. Should not the soldier receive a concession over and above that enjoyed by the civilian?


Mr CURTIN - I have agreed that there should be a distinction between the great majority of the enlisted personnel and the great majority of the civilian population. We have made that clear by having for the enlisted personnel a rate of exemption different from that of the civil population, while retaining the principle, which has marked all taxation in the Commonwealth sphere since the beginning, that there shall be a disappearing exemption. In no other way can we have a graduation which does not produce anomalies. I have the utmost sympathy for the views put forward by honorable members opposite, but I direct their attention to the fact that the cases that they have put forward are not altogether identical. Varying submissions have been made. The honorable member for Warringah, for example, asks us to avoid giving a flat exemption to the services because, as he quite properly points out, some of the enlisted personnel are engaged in vocations which are practically identical with those in which they were engaged in peace-time and are not exposed, even though they wear uniforms, to the hazards of war. If we accept his formula, we are faced with what I conceive to be the impossible duty of defining an operational area in a war in which bombing attacks cannot be put cut of account. The honorable member for New England (Mr. Abbott), espousing my own view, drew attention to the fact that merchant seamen have in many respects a better case for exemption than have some of the enlisted personnel. So, having regard to the anomalies that we should be creating in accepting the principle put forward by the Leader of the Opposition, and to the departure from the accepted principles of taxation, while having the utmost sympathy with the pleas made, the Government finds no way in which it could equitably find a formula.


Mr Ryan - Does the right honorable gentleman see any objection to exempting the subsistence allowance from tax?


Mr CURTIN - The honorable member means the field allowance. The field allowance is in a different category from the allowances to wives and children, which are not subject to taxation. I am advised that the field allowance is regarded as something in the nature of an addition to salary and, therefore, taxable. That is the view of the Taxation Department, and, like any humble taxpayer, I have neither the resource nor the wit to dispute with it.


Mr Spender - Does this provision cover those who are engaged in limited part-time activities with the Defence Forces ?


Mr Chifley - Not those who are not paid.


Mr Abbott - Would the Government give consideration to placing members of the deep-sea merchant marine in the same position as is occupied by enlisted members of the defence forces in regard to taxation?


Mr CURTIN - I shall consider the honorable gentleman's suggestion, but I am not certain whether that can be done.







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