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Wednesday, 31 July 1946

Mr FADDEN (Darling DownsLeader of the Australian Country party) . - The purpose of this resolution is to replenish the National WelfareFund by earmarking certain graduated portions of the wages and salaries of Australian taxpayers, and, indeed of all persons who,, because they have low incomes, are not taxpayers according to the definition contained in income tax law. Those persons were not liable to pay tax until the advent of a Commonwealth Labour Government. The National WelfareFund into which the social services contributions will be paid, is a trust account which was set up specifically within the terms of the Audit Act. When it was created in 1943, the fund was admitted to be a political expedient to soften the shock to supporters of the Labour party of the reduction of the income tax exemption from £156 to £104 a year. Honorable members will recall that the last budget which I introduced was rejected by this chamber. The Labour Government, after having examined its responsibilities, found that it had not only to adopt the conditions of my budget, but also to reduce within a few months, the exemption from income tax from £156 to £104 per annum. In order to cushion the shock to the taxpayers affected by that reduction, the Labour Government told them that their contribution was for the purpose of certain social service benefits. Indeed, the Treasurer created a trust into which he undertook, on behalf of those taxpayers affected, to pay one quarter of the annual receipts from income tax, or£30,000,000, whichever was the less. In the first year of the operation of the fund, an amount of £27,800,000 was paid into it, and £2,300,000 was disbursed from it. The balance was £25,525,000. The cash substitute of that amount was taken from the special trust fund, spent for war purposes and replaced by internal treasurybills or government IO U's. There can be no complaint about the spending of cash for the purposes of war. Nobody disagrees with that. The resources of this country, including those resources in the fund, had to be marshalled to the best advantage in the conduct of the war, but the method adopted of putting the money into the trust fund, immediately taking it out, spending it, and deluding the low income earner that the money was still in the fund to be spent on social services is an action to which attention must be drawn.

An amount of only £25,525 in cash was left in the National Welfare Fund at the end of the first year of its operation. The same technique was adopted in the financial year 1944-45. An amount of £27,500,000 in cash was put into the fund, taken out, spent and replaced with treasurybills. Consequently the paper balance, and it was purely a paper balance, with which the fund commenced the year 1945-46 was £53,000,000, which was represented entirely by the Treasury I O U's. As I have stated on previous occasions in this chamber, the fund on the' basis of cash resources is bankrupt. The actual expenditure on social services for 1945-46 was £53,100,000, or £11,600,000 less than the estimate. Cash to the amount of £6,600,000 was withdrawn from the welfare fund during the year to finance the deficiency between the income of the fund and payments on social services.

Mr Burke - What else does the right honorable gentleman expect the Treasury to do with the balance of cash held in the fund?

Mr FADDEN - The balance of cash could be held in the cash resources of thecommunity. As I shall prove, it is not being used to the extent and for the purposes for which the money was raised. Three points arise from the adoption of the procedure to which I have drawn attention. . First, the total government expenditure for the year is shown in financial statements as having been about £6,600,000 less than the actual figure. Secondly, social benefits were curtailed by some millions of pounds, obviously because the cash could not be found from the welfare fund. Thirdly, the £6,600,000 in cash was obtained most probably from disposals trust funds, transferred tothe National Welfare Fund in exchange for treasury-bills, and then spent on social services. As the cash had to be used and as it was an expanding fund, the cash should be available at short call for the purposes of' the fund.

Mr Burke -That is exactly what treasury-bills are for.

Mr FADDEN -That is not what the Government has done. While the fund was in credit to the amount of £53,000,000, the sum of only£6,600,000 could be found from it to relieve expenditure from the Consolidated Revenue Fund. Those facts cannot be denied. The whole of the expenditure on social services, with the exception of an amount of £6,600,000, was met out of the Consolidated Revenue Fund instead of from out of the National Welfare Fund, which was provided for the purpose. How was the amount of £6,600,000 obtained? It was obtained most probably from the Disposals Trust Fund, transferred to the National Welfare Fund in exchange for treasurybills, and then spent on social services. As the result of much tedious interrogation, the Treasurer (Mr. Chifley) stated in reply to a question that the amount of £6,600,000 was used as a part of the Disposals Fund of £25,000,000. It is apparent that the amount of £6,600,000 in question was transferred or appropriated from disposals, put. into the trust fund so that that amount. of cash should be available, and treasury-bills of an equivalent amount were retired. The Treasurer's dilemma isobvious. He had to finance increased social services, but he could not pay for them with treasury-bills. Consequently, he had to find cash, and the extent of his social services was conditioned by the amount of cash that he could lay his hands upon. Internal treasury-bills have remained static at£85,500,000 during the year. Consequently, it is obvious that a" trust fund cash transfer such as I have described, has in fact taken place. If not, I should like a satisfactory explanation of it. Because the cash balance in the National Welfare Fund has been spent, there is now no opportunity to make large and substantial reductions of social service contributions or personal income tax, if social services are to be increased. The fund can be replenished only out of tax or other revenue, so the unfortunate taxpayer has to pay twice for his alleged benefits. As this deficiency cannot be made good out of the IOUs now in the fund, the charge will have to fall on general revenue, or social services will have to be curtailed. That is obvious because there is not sufficient cash in the fund to meet the demands that are made upon it. In any case, it is unfair to the contributors on ' low incomes who, in fact, are providing for their social services by virtue of this contribution.

The vast amount of tax arrears is due, in some measure, to the complexity of the present tax laws compared with their previous comparative simplicity. Much additional work was caused by the allowance of rebates of tax in lieu of what were previously known as concessional, deduction's. Under the latter method, we deducted allowances for dependants, insurance premiums, &c, before arriving at the taxable income, and then applied the appropriate ra te of tax to such income. Now, the rebate system compels a person to work out the tax, and then to make a separate computation of how much of the tax shall be rebated on account of dependants, medical expenses, life assurance, &c. The limitation of the rebates to certain maxima also slows down the work. This difficulty, superimposed upon the double set of calculations, is largely attributable to a provision designed to ensure that the taxpayer "shall not get too big a rebate, such ' limitation being achieved by the provisions of section 160ad. In order that honorable members may have a ready appreciation of just how tortuous the method is, I. shall, with their consent, incorporate in Hansard two schedules. Schedule A shows the calculations under the present law, and schedule B indicates the computations that would be made if the rebate system were abolished and the social services contribution were merged with the income tax, go that there would he. only one levy, as there was up to December, 1045. The schedules are as follows: -

Schedule A.

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