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Tuesday, 24 November 1959

Mr CAIRNS (Yarra) .- I direct the attention of the committee to clause 7. The Opposition is not opposed to the principle contained in this clause, but honorable members should realize that the minimum value of these seasonal securities that will be issued is £5,000, and that the rate of tax on income from them is 2s. in the £1. The securities will be acquired only by very wealthy people with extensive assets. They will be issued in minimum lots of £5,000, and the rate of tax on them will be the very small amount of 2s. in the £1. This is the tax that normally would be paid by a person with an income of £15 or £16 a week. Now, however, it will be levied also on the very wealthy people who buy these securities.

The second point I want to make is that these seasonal securities will replace treasury-bills, which were previously held by the Commonwealth Bank, and on which the Government paid about 1 per cent. The financial institutions will receive the seasonal securities, so that fluctuations in the central bank holdings of securities can be transferred from the central bank to these financial institutions. In other words, the Commonwealth will pay 4 per cent, on the securities, which will total about £100,000,000 a year, instead of the 1 per cent, it previously paid on treasury-bills. In addition, the income of the financial institutions from the securities will be taxed at the rate of only 2s. in the £1.

It seems that, although the principle of bringing the rate of tax on these securities into line with the rate of tax on other securities must be accepted, the fact is that treasury-bills which cost the Government 1 per cent. will be replaced by special securities which will cost the Government an average of 4 per cent. This would justify a higher rate of tax than will be levied when the rebate of 2s. in the £1 on earnings from the securities is taken into account. I think that this is one point that the Treasurer (Mr. Harold Holt) should have been in the chamber to answer.

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