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Wednesday, 24 July 1946

Mr SCULLIN (YARRA, VICTORIA) - The reduction was 12^ per cent, per annum, but applied to only the second half of the financial year. That variation was effected iri September, 1945. It required two. months to prepare, print and distribute the revised schedules.' The Treasurer did an extraordinary thing. . He applied the reduction of income tax from the 1st January, instead of the 1st July, following. Now the Treasurer' proposes a further reduction. In this financial year, the over-all reduction will be 22 per cent.

Mr Holt - But Australia is still the most heavily taxed country in the world. "Mr. SCULLIN.- Undoubtedly Australia is a heavily taxed country, but, if the honorable member for Fawkner (Mr. Holt) will study the figures honestly and fairly, he will find that Australia is not the most heavily taxed country in the world. I have compared the income tax tables cited by honorable members opposite as applicable to Australia with those applicable to the United Kingdom. Honorable members opposite include in the Australian income tax figures our social service contributions, but omit from the British tables the contributions payable under the social service scheme in the United Kingdom.

If the Treasurer had not been satisfied that production would increase, would he have agreed to a reduction of income tax ? The right honorable gentleman' is a very sound Treasurer. He .borrowed £150,000,000 last year. This year, he will have to continue the policy of borrowing, but in spite of that, he has agreed to a further reduction. of income tax, believing that it will stimulate production. If the right honorable gentleman had not been convinced that the reduction would provide that stimulus, he would never have reduced taxes, whilst at the same time continuing to borrow. That is not sound finance, but it may be sound economics. I believe that it is. The Leader of the Opposition' referred to' .the increase of revenue from indirect taxation. I propose to indicate one factor which increased revenue. The service Ministers and their officers in 1945 planned to demobilize 400;000 men. The task appeared to be colossal,' but they accelerated demobilization to such a degree that the actual number of personnel discharged from the forces was 450,000. The additional 50,000 men engaging in production and returning to civil occupations substantially increased receipts from direct and indirect taxation. For the first time, most of them began to pay income tax. Their purchases in Australia with money earned in this country were reflected in increased returns from sales tax and excise on luxury lines. I am rather astonished that, those additional 50,000 men returning to production and civil occupations did not produce an even greater increase of revenue from indirect taxation. The Treasurer would be severely criticized if he had made what the Leader of the Opposition described as a " bold reduction of taxes ". Incidently, the Leader of the Opposition himself was so bold that he visualized, if he were returned to office, a reduction of 40 per cent, over a three-year period. Although t-he war ended only eleven months ago, this Government has already granted a reduction of 22 per cent. The Treasurer is a' steadfast man. He does not yield to public clamour. He agrees to reduce taxes only when he believes tha.t it will stimulate production and assist in the transition from war-time to peace-time conditions. I have known him to resist many demands for an increase of expenditure. Those people who talk most about the necessity for reducing the income tax are the most clamant in demanding increases of expenditure. Nearly every honorable member in this House has either asked for, or supported others in asking for an increase of expenditure on one thing or another for one section of the community or' another. If the Treasurer considers that the proposition is sound, he may adopt it, but he always steadfastly refuses to 'yield control of the Treasury funds. If he has not reduced income tax so substantially as honorable members desire, that does not mean that the collections from income tax are being wasted. The money still belongs to the people. The Leader of the Opposition declared that the reduction will cost the Government nothing. I submit that it did cost the Government something. If the reduction of income tax last year deprived the Government of £20,000,000 and that loss of revenue was made up by additional receipts from indirect taxes and income tax because of the demobilization of an additional 50,000 men, the Treasurer is still £20,000,000 worse off because he could have had the extra sum in lieu of more borrowing. So what is the use of saying that the Government has not lost anything? Are we never going to see an end to borrowing and piling up the interest bill ? We shall have a burden of taxation for many years at a higher rate than ever we knew it before the war. But that does not mean that we shall not contemplate further reductions of taxation. I, hope that we shall, and I am sure that the Treasurer will reduce income tax as soon as he is able to do so. But listening to the criticism outside and inside this Parliament one could be excused for thinking, that the Treasurer had not done anything.. I meet important visitors from overseas and important Australian businessmen, every one of whom has said to me, " Chifley has done a great job ". I agree with them. He has controlled, not for the sake of control, but for the sake of Australia, the banks, the stock exchange, interest rates, sales of property and prices. I do not deny the Leader of the Opposition the credit to which his Government is entitled for having laid down the foundations of price control in the first week of the war. That was a good start. But I point out that during the first four years of the war, the cost of living index figures rose by 23 per cent., whilst in the last two and a half years they rose by only 1 per cent, after the Treasurer had adopted his stabilization and subsidy .plans. Those figures are outstanding.

I turn now to another criticism which the Leader of the Opposition directed at the financial statement. He referred at considerable length to the termination of lend-lease dealings. It is true that he prefaced his remarks with a tribute to the United States of America, and I endorse every word that he uttered. We would not be here to-day if it had not been for the assistance that we received from America. As long as we live our hearts will be filled with gratitude for that aid. The Leader of the Opposition said that he would have expected that two nations which made great efforts in war-time with lend-lease and reciprocal lend-lease would have "washed out" any balance outstanding after the termination of the war. That is precisely what occurred when the 'Treasurer discussed this matter with the representatives of the United States of America. The amount of £8,000,000, which Australia will pay to America, is for the purchase at current, values of the capital equipment, including tools, that the Americans owned in Australia after. the war. The "washing out " took .place, and I consider, after having examined the figures in broad outline, that the Treasurer made a jolly good bargain.

Another feature to which I should like to draw attention is the position of om- overseas funds and debts. I speak with an inside knowledge of this subject, because I became Prime Minister at a time when our overseas debt was just a nightmare and brought Australia to the very verge of bankruptcy, so much so that drastic measures were necessary to correct the trade balance and the overseas fund position. I shall not go into details of the wild borrowing policy which was in operation before the Scullin Government assumed office, but it ruined the credit of Australia. When a country gets into that position its very soul is affected. One thing is undeniable - no country can call itself financially sound while it is in a perilous position in respect of its overseas funds- The overseas position has been most carefully watched by the present Treasurer. In outlining the present position of our London debts the right honorable gentleman told us that our total overseas indebtedness had been reduced by £72,000,000 by transfers to Australia, or by repayments. On the transferred loan the interest rate had been reduced from 5 per cent, to 3^ per cent. The success of the Treasurer in this respect has been so remarkable that honorable gentlemen opposite do not like to hear the story of it repeated. The amount of interest saved to Australia in respect of these transactions is £5,600,000 per annum. Whatever party political bias may be felt against the Treasurer, no reasonable person should deny him credit for having done a fine work in this connexion during the last five years. I would have expected a word of recognition of this great fact from any one who loved Australia.

The Leader of the Opposition stated in press comments which he made about a fortnight ago that "the tax reductions proposed by the Treasurer were not equitably spread. He said that there should nave- been all-round reductions. I agree that the percentage reductions are very much more substantial on the lower than on the higher incomes. For instance', a man in receipt of £125 a year will receive a reduction of 39 per cent., a man with £400 a year, 16 per cent.; a man with £1,000 a year, 12 per cent; and a man with £3.000 a year, 8 per cent. I agree also that as taxes were increased on an all-round basis, theoretically they prob ably should be reduced in that way, but all the honorable members will surely admit that the heavy burdens of taxation which fell on everybody during the war years were felt most keenly by men in . the low income ranges. After all, those who are receiving £1,000 a year, as we do, may have to pay a heavy tax, but they also have a -fair amount left to live on and can live comfortably, if not luxuriously. That cannot be said of men in receipt of £2 10s., £3, £4, or £5 a week, who had to pay heavy taxes ali through the war years, week in, week out. I should like to see a greater measure of relief given to such taxpayers, but I ask the Leader of the Opposition to bear in mind the amount of tax relief which will be received "by people in the various income ranges that- 1 have mentioned. A man in receipt of £125 a year will benefit by £2 2s. ; a man on £400, by £13 6s.; the man on £1,000, by £38'; and the man on £3,000 by £130. I therefore join issue with the right honorable gentleman when he' advocates an allround percentage reduction.

There has been a regular spate of criticism in the press of the Government's proposals to reduce taxation. I shall select only one statement from among the many that have been made. I select this one because it came from the financial editor of one of the leading newspapers in Australia, the Sydney Morning Herald. He wrote, " A single man fares better than a family man ". . He gave as an illustration a single man on an income of £400 who would benefit by £13 6s. a year, and a married man with a wife and two children would benefit by only £6 9s. a year, or less than half the amount of benefit enjoyed by the single man. But there is a simple explanation of that. The single man paid a tax of £81 which will now be reduced to £68, whereas the married man with a wife and two children paid a tax of £39, which will be now reduced, in round figures, to £33. Both of them, however, will receive a reduction of 16 per cent. The writer could have made what would have appeared an even stronger indictment if he had compared a single man with an income of £250, which is about the basic wage rate, and a married man with a wife and three children on the same income. With the two cuts in taxation that have been made since the end of the war, the single man would get a reduction of £10, whilst the family man with three children will get nothing. Of course, the reason is that the man with a wife, and three- chidren pays no income tax. I am aware that demands have been made by . . some organizations for complete exemption from taxation of all incomes of £300. That would means-, a loss to the revenue of £40,000,000. An amount of £34,000,000 of that £40,000,000 would have relation to income of persons without dependants, a further £5,000,000 of it would .have relation to income of married people, and only £1,000,000 of it would have relation to the incomes of the average family man to whom I have referred. I stress the important point that the average family man, that is a man with a wife and two children, with an income of £300 does not pay income tax as such ; he pays a social services contribution of £12. a year.

Mr Anthony - Is that not a "tax?

Mr SCULLIN - It is a social services contribution. Does the honorable member for Richmond (Mr. Anthony) agree that the contribution that would be required from people under the contributory insurance scheme advocated by the parties opposite would also be a tax? That fact cannot be camouflaged. It has been urged that greater tax reductions and more liberal rebates should be made in respect of the average family man with a wife and two children and an income of £300 who is exempt from income tax, and who pays the social services contribution of £12, but I consider that such an individual can be afforded greater relief by means of improved social services than by income tax reductions. [.Extent sion of time granted.]

I say emphatically that the average family man on an income of £300 who pays a social services contribution of £12 is much better off than he would be if he were granted only a straight-out tax reduction. The wife of such a man receives child endowment of £19 10s. a year for one child, and let me remind the House, in passing, that child endowment has been increased 50 per cent, since this Government has been in office, the ..amount having been raised from 5s. to 7s. 6d. a week, which involved an increase of the total expenditure from £12,000,000 to £18,000,000/ The wife would also receive increasedmaternity allowance, such payments haying been increased substantially recently. No- means test is applied- to these payments. In addition, hospital benefit of £2 2s. a week is available for the family, unit. Those benefits represent many times as much as the benefits received by singlemen. Moreover, dental and medical benefits' will be available after the referendum' in regard. to social services has been carried. These are illustrations of the benefits of the social services to the family man, and they are available with-' out a. means test. An increase has been made also in the pensions rate. The in-' formation given by the Treasurer in the financial statement, as a matter of fact,' indicates clearly that a big forward step has been taken towards the elimination of the means test.

I thank honorable members for having granted me an extension of time. I shall say no . more, although a great more could and no doubt will be said before the debate concludes. My final word is a suggestion that, in accordance with the splendid spirit . of Australia during the war: there should be no more, moaning about taxation.. When we think, of- the blitz that Britain suffered, and of the thousands of people in Britain whoare still homeless, still paying high taxation, and still rationed severely even in. respect of bread, the' staff of life, let us not moan. When we remember the devastation there is in- Europe, where, people are dying of hunger, and where little children are suffering from malnutrition, the results of which will pursue them to the end of their days, let us,, who are privileged to live in this, country,, thank God that Australia, was saved' from similar devastation and suffering.

Debate (on motion by Mr. Spender) adjourned.

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