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Wednesday, 31 July 1946


Mr FADDEN - With the concurrence of honorable members, I shall take my second period now. I desire to make some additional observations on the concessional allowance systemwhich the Government has adopted in preference to the straight-out deduction method that was formerly in operation. The right honorable member for Yarra (Mr. Scullin) and I have always disagreed on this subject. No one could possibly doubt the sincerity of the right honorable gentleman, and I personally respect his opinion on taxation matters generally, but on this subject our views are irreconcilable. I have never been able to understand why the right honorable member for Yarra has accepted the concessional allowance in preference to the straight-out deduction system. The deduction method, which I advocate, is simplicity itself. It is only necessary to arrive at the amount of income, make the deductions to which a taxpayer is entitled in respect of his wife and other dependants, and of medical, dental and other allowances, and then apply the appropriate rate of tax to the remainder. The right honorable member for Yarra has always argued that it is not fair that the man on the higher income should enjoy the same concessional allowances for the maintenance of dependants as the man on the lower income; but I have never failed to remind the right honorable gentleman that with the graduated curve in tax, the rate of tax looks after that matter, and overcomes any inequities that would otherwise occur. For instance a man with an income of £200 and no dependants is taxed £12 18s., whereas a man with an income of £400 and no dependants is taxed £68 7s.; roughly, on twice the amount of income he has to pay five times the amount of tax. A man with an income of £400 and no dependants is taxed £68 7s., whereas a man with an income of £800 and no dependants is taxed £198 7s. or, with twice the amount of income he pays three times the amount of tax. To take another contrast: a man with an income of £200 and no dependants pays £12 18s., whereas a man with an income of £800 and no dependants pays £198 7s. or, with four times the amount of income he pays fifteen times the amount of tax.


Mr Conelan - But how much has he left?


Mr FADDEN - I know that is the point invariably taken by the right honorable member for Yarra; but I consider that in upholding the concessional allowance system he ignores the effect of the " graduated rate of tax. As all students of taxation know, the basic consideration is, not how much is taken away, but how much is left? The graduated system of taxation is applied more comprehensively in Australia than in any. other country, but I emphasize the indisputable fact that the concessional allowance system, as against the straight-out deduction, is not only extremely complex but also unjust.

Another argument against the system which the Government kas adopted is that taxpayers are entitled to adjustments of taxation having regard to dependants, contributions to life assurance funds, and medical expenses, and by the same method an ' employer of labour is entitled to deductions in respect of the maintenance of machinery, plant and the like. Yet in the latter case the straight-out deduction method is adopted. The human machine requires repairs just as do plant and machinery, and a system of deductions that shay be properly applied to machinery and plant should also be. applicable to the human machine. Life insurance is comparable with fire insurance of buildings and equipment. If Straight-out deductions are justified in respect of property they should also be applied to the family expenses of the taxpayer. The arguments apply with equal force in each instance, in my opinion. Quite apart from the consideration that the adoption of the concessional allowances system by the Government has caused the banking-up of heavy arrears through the failure to issue assessments, owing to the necessity to employ expert staff, I contend that the method is unjustifiable on the other grounds that I have mentioned. I urge the Government, therefore, to take prompt steps to revert to the straight-out deductions system, particularly, in view of the fact that our graduated rates- of tax ensure that persons in the higher income ranges shall pay disproportionately higher rates of tax than apply to people on the lower income ranges. '







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