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Wednesday, 31 July 1946

Mr BURKE (Perth) .- I wish to reply to the arguments that the Leader of the Australian Country party (Mr. Fadden) has used in favour of straightout concessional deductions as against the rebate system. I concede to the right honorable gentleman his point that the system he advocates is much more simple, but when we come to considerations of equity, the arguments are all iri favour of the concessional rebates method. Instancing the effect of the taxation curve, the right honorable gentleman said that a taxpayer with an income of £200 and no dependants would pay £12 18s. in tax, and a taxpayer with an income of £800 and no dependants would pay £198 7s. in tax. The rate and amount of tax in respect of those two taxpayers admittedly rise steeply, but I direct attention to 'the principle which the right honorable member mentioned, in passing, that the main consideration was, not how much tax a man paid, but how much income he had left after his tax was paid. In that respect the man with the income of £S00 is in a much more favorable position than the man with the income of £200, for he would have £612 18s. available after paying his tax, whereas the other taxpayer would have only £187 2s. left.

With the statutory exemption standing at £250, the pre-war figure, it means nothing to a man with an income of that amount that, under the straight-out deduction system, he may deduct £100 for a wife and £50 for each dependent child up to the age of sixteen years. As he pays no tax, the deduction is of no value. This method conferred a tremendous advantage on taxpayers in the higher income brackets ; but, as the. right honorable member for Yarra (Mr. Scullin) has been at great pains to emphasize, it meant nothing at all to workers with a comparatively low income. It cannot be denied that the right to make deductions before the rate of tax is fixed would be of considerable cash value to men with higher incomes. In short, the straight-out deduction method favours the more privileged class in the community to the detriment of the underprivileged. For several days during this period of the session, honorable gentlemen opposite have- been arguing that the Government's taxation proposals are not equitable to the family man. The proposition submitted by the Leader of the Australian Country party is inconsistent with that argument. The contention that the Government is favouring the single man without dependants as against the married man with a. family has also been answered by. other supporters of the Government, again and again, most effectively.

I shall now deal with that aspect of the matter with which the right honorable member for Darling Downs began his speech. He has advanced the same argument repeatedly when matters of a. similar nature have been, before the chamber. I have not previously joined issue with him, because I have believed that he had no real faith in his . proposition. But he has made it abundantly clear to-day that he does not understand the implications of the trust fund system. He has said that the cash provided by means of this tax is not, in effect, retained in the form of cash it could be so retained only by the time-honoured practice" of placing it under the mattress, or in a tin buried where it would not- be disturbed. If that practice were adopted, it would not have any effect in the present situation, under which the available cash is more than sufficient to purchase the goods that are procurable, because it would not be in circulation. But when a trust fund is established, obviously it must be placed somewhere for safety; and if there is no need to use it, the interest it earns augments the principal. Customarily, the proceeds of a tax which are allocated to a fund are deposited in a bank, usually in the Commonwealth Bank, and interest is earned, upon the money. The bank does not keep' it in .a strongroom or a safe, or return the identical notes when the money is withdrawn, but lends it for the various purposes for which loans are made normally; for example, housing. In a time of war, that avenue for investment is closed to the bank, and there are only two ways in which it may lend the money and earn interest upon it. The. first is by investing it in Commonwealth bonds for a fixed term, or in treasury-bills. ' The right honorable gentleman . said : " That is all right; but if you invest the money in Commonwealth bonds or treasury-bills, your fund is bankrupt ". I had not previously heard such a grotesque argument.

Mr Fadden - I said that it would be bankrupt of ready cash.

Mr BURKE - That is an absurd argument.

Mr Fadden - The honorable member may think so; but the fact remains.

Mr BURKE - The fact does not remain. The fund has a balance in the savings bank, probably of a small amount. Treasury-bills are the most liquid form of security, and an investment that is fancied by the trading banks of this country, because they earn interest and yet the investment can always be con-, verted into cash whenever required.

Mr Fadden - The Disposals Fund had to be drawn on to an amount of £6,000,000.

Mr BURKE - I shall deal with that matter in a moment. . Treasury-bills represent an investment which earns interest and have the added advantage that, within three months, they can he converted into ready cash if that he the desire; otherwise, the hills may he renewed. In both forms of investment - Commonwealth bonds and treasury-bills - interest is earned. In what way is that payable? ' Solely by means of taxation. Taxes are raised- for the purpose of paying interest to the fund ; and if that money be not required it, too, oan be invested in treasury-bills The same thing happens in connexion with the money received by the Commonwealth Disposals Commission. That money is not left in a bank, earning a low rate of interest, but is probably used to finance the activities of the Government and to retire treasury-bills.

Mr Fadden - The interest on the welfare fund is at the lowest rate - 1 per cent.

Mr BURKE - If the money in the Welfare Fund be invested, it earns the interest that prevails in respect of the investment in which it is placed. The rate of 1 per cent, is the prevailing rate payable by the British Treasury. It has been as low' as | per cent. The argument of the right honorable gentleman is exceeded in puerility only by his . interjections. The fact has been established that the contributions to any such fund are either deposited in a bank and earn the ruling rate of interest, or are invested in Commonwealth inscribed stock. If the wish be not to have a long term investment, but to have a liquid security, the form most fancied is that of treasurybills. One of the principal investments favoured by trustee companies or trustees of estates is Commonwealth inscribed stock, and in many instances that is the only security in which they are allowed to invest trust funds. So we have a trustee security, with a guaranteed rate of interest, and the bills which the right honorable gentleman described as 1 0 U's can be cashed at any dme by the Treasury when they fall due, or can be discounted prior to the date of maturity if the money be needed. The only purpose of the argument advanced by the right honorable gentleman is to mislead the committee, and deceive the country as to the nature of the Government's transactions. Certainly, it is a most unreal argument, and one that should be dissipated for the benefit of the country.

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