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Wednesday, 8 December 1965

Mr JONES (Newcastle) .- The main purpose of the Bill is to exempt from payroll tax the Commonwealth War Graves Commission and to extend the export incentives scheme to motor car manufacturers in respect of vehicles that are exported in a knocked down condition. We on this side of the House completely support the inclusion of the War Graves Commission in the list of those exempted from payroll tax. We also support the extension of the export incentives scheme. We will, therefore, support the Bill. However, in the Committee stage the honorable member for Melbourne Ports (Mr. Crean) will move an amendment that is designed to exempt from payroll tax all municipal bodies, local councils and similar authorities doing the work normally performed by local government bodies. We believe that these organisations at least should be exempted from the payment of this iniquitous form of taxation.

Payroll tax is an unnecessary form of taxation which places an unnecessary burden on the economy as a whole. Last year, payroll tax collections amounted to £75,038,000 and it is expected that this year the tax will yield £82 million. This in itself imposes an unnecessary burden on the general price structure and the economy as a whole. No matter how we regard payroll tax, the £75 million collected last year and the £82 million expected to be collected this year will have a very definite effect on the cost structure of Australia. Motor cars exported in a knocked down condition will now be excluded from this form of taxation, but the price of motor vehicles purchased by industry in Australia will be increased by payroll tax. Not one item that is needed by the community will remain unaffected by this tax. The costs of foodstuffs, clothing and the general cost of living will be increased because of the imposition of payroll tax. If this tax were abolished, I believe that living costs would decline by the £82 million that is expected to be collected this year. For a government that is allegedly concerned at the inflationary spiral in this country, the abolition of this tax is one method whereby inflation can be curtailed to some extent.

The Treasurer (Mr. Harold Holt) said some years ago, and has continued to say, that if payroll tax were eliminated the Treasury would have to obtain the necessary revenue from other sources. The Opposition agrees that other sources would have to be explored, even if it meant increasing income tax or even if it meant increasing company tax. Those two fields could afford to supply the necessary revenue. Indirect forms of taxation are inequitable because they do not take into consideration the ability of the person to pay. Payroll lax is an indirect form of taxation. So is sales tax which is imposed on cigarettes, petrol and many other commodities. No consideration whatsoever is given to the ability of the individual to pay. A person on the basic wage pays the same amount of customs and excise duty on tobacco and cigarettes as does a person on an income of £5,000 or £10,000 per annum. The Opposition strongly supports the elimination of all forms of indirect taxation. It believes that a direct tax should be imposed in the incomes of individuals and companies. Therefore, although the Opposition will move to provide additional exemptions from payroll tax basically it believes that the tax should be eliminated completely, and it will work in that direction.

We have to realise that originally payroll tax was introduced in 1941 as part of two pieces of legislation introduced at that time. The Commonwealth Arbitration Court, rather than increase the basic wage, recommended to the government of the day that a scheme of child endowment should be introduced. Two bills were introduced into the Parliament at the one time. One was to provide for the payment of child endowment, the other was to levy payroll tax which at that time was to meet the cost of child endowment. The tax amounted to 2i per cent, on the wages paid to employees in certain industries throughout the Commonwealth. The Treasurer, in a report in payroll tax presented to the Parliament on 17th May 1960 said -

Since then, the direct connection between payroll tax and the financing of child endowment has for budgetary reasons been terminated.

In fact, thousands of people throughout Australia have been of the opinion that payroll tax is a direct tax levied to finance child endowment, but on the Treasurer's own say-so in that report, that purpose has been terminated. Payroll tax today is another means of raising revenue for the Consolidated Revenue Fund and nothing else, It is in order, therefore, to advocate the abolition of payroll tax and to suggest that a direct form of taxation be substituted.

The organisations at present exempted from payroll tax are set out in the FortyFourth Report of the Commisssioner of Taxation. At page 81 under the heading *' Payroll Tax " the Commissioner said -

A feature of the legislation is the wide scope of the tax. Exemptions are limited to wages paid by the Governor-General or the Governor of a State, the representatives in Australia of the Governments of other countries, public hospitals and certain other hospitals, public benevolent and religious institutions and a few specified organisations such as the South Pacific Commission. Wages paid to members of the Defence Force and certain ancillary services are also exempt.

If it is possible to exempt all of those organisations, and the salaries paid to members of the Defence Forces and other ancillary services, why cannot local government authorities be exempted? Why should we not exclude all State Government instrumentalities from the payment of this tax? Commonwealth Railways is exempted. Why should State railways pay payroll tax and Commonwealth Railways be. exempted? Per favour of a question asked by Senator McClelland in another place, a reply was furnished giving the amount of payroll tax paid by State railways throughout Australia during the year 1963-64. It amounted to £3,427,864. Why? I ask honorable members opposite that question. I ask any Government supporter to give some explanation why State railways should be required to pay payroll tax when Commonwealth Railways is completely exempted from the payment of such a tax. The two instrumentalities perform identical work. There is no difference between Commonwealth Railways, the New South Wales Railways, the Victorian Railways or the South Australian Railways.

Mr Crean - They are often carrying the same goods.

Mr JONES - That is correct. In South Australia the South Australian Railways and the Commonwealth Railways operate together. In Western Australia the two systems perform the same duties, operating alongside each other. One system has to pay payroll tax and the other one is completely exempted. There is no justification for this haphazard treatment.

In order to show the burden imposed on State Governments by payroll tax I refer to page 152 of " Taxation Statistics 1963-64 " which are the latest figures available. The statistics are a supplement to the FortyFourth Report of the Commissioner of Taxation. I refer to the column headed " Public Authority Activities (n.e.i.) ". As the honorable member for Melbourne Ports told us, " n.e.i." means " not elsewhere included ". In this column we have the salaries and wages paid by payroll taxpayers for each month of the financial year 1963-64. The total amount paid during the year was £427 million, which on the basis of 21 per cent, means that these authorities paid £10.6 million in payroll tax for 1963-64. It is obviously impossible for the payment of this tax not to have had some effect on the total price structure and the cost of operating these public authorities throughout Australia. Another column on the same page is headed "Electricity, Gas, Water and Sanitary Services ". The total amount paid in wages under that heading was £140 million, which represents approximately £3.5 million paid in payroll tax. What does this £3.5 million really mean when related to the cost of electricity, gas, water and sanitary services? I am sure honorable members on the Government side have received representations and complaints from various organisations and people in their electorates complaining that they have been unable to get sewerage, or that there are inadequate supplies of electricity, water or gas. Some people want gas as well as electricity but they cannot get it because the local authority has not sufficient finance to carry out the reticulation required. I am certain that these complaints have been received in other electorates as well as mine. Continual requests are made for these amenities to be provided. If this tax were removed it would make it much easier for authorities to provide these amenities.

Figures available indicate that a sum of £14.1 million is paid in payroll tax by State Government authorities. I believe that that could be eliminated completely. I admit, as the Treasurer has said on previous occasions, that if payroll tax were abolished there would have to be a readjustment of State tax reimbursements. So what? What if there had to be a readjustment of reimbursements by the Commonwealth to the States? It would stop the stupid - and I emphasise the word "stupid" - arrangement between the States and the Commonwealth whereby we have a government taxing governments. How silly can we get? How long can we continue this stupid process of government taxing government. The bookwork must be eliminated. That is what has to be done. The administrative costs must be eliminated. The whole burden of collecting this tax is placed on the various government instrumentalities which have to pay the tax. I am certain of one thing. It is that the saving of a considerable amount of money - no one can assess the exact amount - would result from the elimination of this tax. At least a saving would be reflected in the general price structure of the country as a whole. The Minister for the Army (Dr. Forbes), who assists the Treasurer, gives that as one of his weak old reasons why the elimination of payroll tax could not be agreed to.

I want to deal with local government. The amendment that the Opposition has foreshadowed is an important one. If honorable members examine figures with regard to local government they will see that the reasons why payroll tax should be eliminated are perfectly clear. To give an example, I mention that New South Wales local governments employ 43,000 people. These local governments pay by way of payroll tax £1.3 million per annum. Throughout Australia payroll tax paid by local government amounts to £2.6 million. Let us look at another aspect of this matter. Local government has to pay payroll tax to the Commonwealth. Does the Commonwealth reciprocate and pay to local authorities rates on its properties in municipal council areas? Of course it does not. The revenue lost to local government through non-ratable property in 1960 was £722,000. In 1965 the figure will be approximately £1,100,000. The 1965 figure is an approximate one but the 1960 figure is the factual figure of the loss of rates to local government because the Federal Government refuses to pay rates with respect to its various instrumentalities such as post offices, custom houses and numerous other Commonwealth properties. We know that the Commonwealth Banking Corporation pays rates.

There is another question I want to raise. The Minister for the Army said earlier today that no rates were paid by the Commonwealth Government to water and severage authorities in South Australia. I want to say to the Minister that in Newcastle, on information given to me this afternoon, the Commonwealth Government makes an ex gratia payment which is the equivalent of water board rates on Commonwealth properties. So, some justification exists for local government insisting on, requiring and expecting the Commonwealth to make some ex gratia payment on its properties. That is a fair and a reasonable proposition. The honorable member for Grey (Mr. Mortimer) has outlined what has taken place in his electorate as far as local government is concerned. In my own electorate of Newcastle, the City Council pays £27,000 a year in payroll tax. The Council loses £25,000 per annum on non-ratable Commonwealth property in the municipality of Newcastle. In other words, the Commonwealth Government, by imposing this tax and failing to pay rates on the land it uses, is costing the ratepayers of Newcastle £52,000 a year or approximately one sixth of a penny in the pound. So I think that the elimination of payroll tax is one way in which the Government can make a contribution to local government. Some positive assistance to local government by the Australian Government is long overdue. Local government bodies do not receive enough assistance. I believe that the day is not far distant when the Commonwealth Government will . have to devise some scheme with State and municipal governments whereby a certain amount of income tax and company tax will be set aside and paid to local government possibly on the basis of so much per head of population.

Local government authorities today are being required to carry out undertakings that they were not expected to carry out in years gone by. Their undertakings are just too numerous to go into. I believe it is time that the Federal Government and the State Governments gave much more assistance to local government than what they have been doing. This can be done in a practical way in the manner in which I have suggested. If the necessity for the Newcastle City Council to pay payroll tax were eliminated, the result would be that the Council would gain £27,000 per annum. If the Commonwealth were to pay rates on its properties in Newcastle, the City Council would gain immediately £25,000 per annum. In respect of these two matters the Council would gain £52,000. This, in itself, would be of great assistance to the Council. The honorable member for Grey listed all the things that should be done for the councils in his electorate. Those councils, too, could be assisted if the requirement to pay payroll tax was eliminated and the Commonwealth paid rates on its land in those council areas.

There is no justification for the Commonwealth imposing payroll tax on local government. The New South Wales Government does not charge local authorities stamp duty; nor does it require them to pay land tax. If the New South Wales Government can see its way clear to exclude local government from the payment of those two taxes, the Commonwealth should be able to exempt local authorities from the obligation to pay payroll tax.

There is one other matter with which I would like to deal. I would like to hear some members of the Country Party say something on this point. I am sorry that the honorable member for Mallee (Mr. Turnbull) is not here, because I am certain that if he were, he would have something to say on it. He would accept my challenge. I noticed a short time ago that the Minister for the Interior (Mr. Anthony) was in the chamber. But I can see that his time has expired and he has had to retire. I want to deal with the application of payroll tax to assist in the decentralisation of industry. We hear a lot about this subject from time to time, particularly from Country Party members. I bring to the notice of honorable members that some months ago the honorable member for Bendigo (Mr. Beaton) proposed a motion in which he advocated the appointment of a joint parliamentary committee to deal with decentralisation and to endeavour to find some practical solution to the decentralisation of industry in Australia. But I notice also that on 29th April 1965, the day the motion was submitted, the Minister for the Interior was speaking when the debate was interrupted, as the time for discussion had expired. The Minister was granted leave to continue his speech when the debate was resumed. The Minister is a member of the Country Party, which is continually advocating decentralisation. He is also one of the people in that party who have done nothing about decentralisation. The Country Party has been the junior partner of this Government for the past 1 6 years. Yet we have not seen any progress whatsoever towards decentralisation. Whenever any member of the Opposition brings forward a resolution dealing with decentralisation, the Government permits a debate on it in the initial stages but we can never have a vote on it.

I refer in particular to the motion moved by the honorable member for Bendigo. Paragraph (4) (b) (ii) provides -

That this House notes with grave concern -

(4)   That more than one-third of the total population of Australia is centred in Sydney and Melbourne, and recommends to the Government as a matter of extreme urgency in the interests of balanced development and defence that -

(b)   the committee make recommendations in regard to -

(ii)   concessions in individual, company, sales or other taxation to encourage such industries;

This paragraph proposes the use of taxation to assist the decentralisation of industry. We have in Australia two zones in which taxation allowances are granted to residents. Zone A takes in the northern half of Western Australia, the Northern Territory and a slice of northern and western Queensland. Anybody residing in Zone A is entitled to claim an allowance of £270 plus half the dependant's allowance. People living in Zone B are entitled to claim £45 plus one-twelfth of the dependant's allowance. What is wrong with using this form of incentive to encourage industries to leave capital cities and thus assist in decentralisation? Could we not introduce some system under which firms would be exempted from the payment of payroll tax if they establish new industries at least, say, one hundred miles from any capital cities? We could lay down definite and positive zones so that firms establishing industries in those zones could claim exemption from the payment of the whole or portion of the payroll tax normally payable. In 1962-63 exporters enjoyed the benefit of a reduction in payroll tax to the extent of £2,685,000. If we can make this concession to encourage exports, why can we not do something similar to encourage decentralisation of industry?

I would like some members of the Country Party to rise and say why this form of taxation concession should not be used to encourage decentralisation. I would like them to tell us what their Party, which forms the junior partner in the Government, is doing to bring about decentralisation of industry. I know as well as they do that they are very much opposed to decentralisation of industry because they realise that the moment industries move into their electorates their seats in the Parliament will be in jeopardy. I have always been of the opinion that it is sheer humbug and hypocracy on their part to advocate decentralisation of industry. I ask honorable members of the Country Party to rise and tell us their views on this matter. I am very pleased to see that the honorable member for Mallee is with us.

Mr Turnbull - Why do you always pick on me?

Mr JONES - The honorable member for Mallee is the only member of the Country Party, in my experience in this Parliament, who has been prepared to rise in his place when a member on this side has made an attack on his Party. I would like to hear what he has to say as to why a payroll tax concession should not be used as a means of encouraging industries to move out of the capital cities and into the country areas where they would provide employment for country people and assist in the development of so many of our country cities that need new industries. I ask the honorable member for Mallee and his colleagues of the Country Party whether they will support the Labour Party in having the motion of the honorable member for Bendigo on decentralisation brought on for discussion. It is item No. 6 under the heading " General Business ". I ask them to tell us, secondly, whether they are prepared to support us in a move to have payroll tax concessions granted as an incentive for industry to move out of the capital cities. I also ask Government members to say why local government authorities should not be given the financial assistance that they would receive if the amendment that will be moved by the honorable member for Melbourne Ports (Mr. Crean) in the Committee stage were accepted.

I support the Bill. I believe it is a step in the right direction to assist export industries. I agree with the proposal to include the War Graves Commission as one of the exempted bodies. But I ask Government members to support the amendment that will be moved by the Opposition to include local government authorities and similar instrumentalities as bodies eligible for exemption from this iniquitous form of taxation.

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