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Friday, 10 December 1965

Mr HAROLD HOLT (HigginsTreasurer) . - I move -

That the Bill be now read a second time.

This Bill declares the rates of income tax for the current financial year other than the special rates proposed to apply to certain income of members of partnerships, trust estates and superannuation funds. It imposes on individuals an additional tax of 2\ per cent, of the tax calculated in accordance with the general rates applying for the year. It proposes that the rates of tax payable by companies shall be tb- same as for the financial year 1964-65.

I would like to give the House some explanation why it has been necessary to introduce this Bill. I want to set out the course which the Government is following in relation to this matter and the problem of which this Bill is a manifestation. Some weeks ago I introduced a Bill to declare that rates of tax for the present financial year. That Bill comprehended both the proposed special rates and the additional 2b per cent, levy. The Bill was passed by this House but the Opposition voted against it. As I recall the debate, the substantial objection of the Opposition was to the additional 21 per cent, levy on individuals.

The Bill then went to the Senate but it has not been accepted there. In fact it did not get beyond the second reading stage in that chamber. A motion for the second reading was defeated, the Opposition being joined by one Government senator to produce that defeat. This rejection by the Senate presents a series of problems unless the matter can now be dealt with satisfactorily in some other fashion. The Government is trying to meet the difficulty created and at the same time enable the Senate to give what would appear to be a more faithful expression of the majority view held on each of the matters contained in the former Bill. It seems clear enough from the record of the debates on the Bill in the Senate that it met the fate it did because it dealt with both of the matters I have referred to in the one measure. It also seems clear that if there had been separate Bills dealing with each of those matters there would have been a majority of the Senate voting in favour of both proposals. The Government has accordingly decided to follow the course of submitting two separate Bills. The Bill now before the House proposes the imposition of the 2\ per cent, additional tax on individuals. It does not seek to declare the special rates relating to partnerships, trust estates and superannuation funds. A Bill that T hope to introduce later will, however, seek to declare these special rates.

I should explain here that it would not be practicable, as I understand the position, to introduce the second Bill and carry it to a conclusion in this House before the first Bill is passed through all stages in both Houses, because the second Bill will amend the first. That is why we are following the course that I am now outlining to the House.

Before I say anything about the formal provisions of this Bill I want to mention some of the extremely grave effects that would follow if the present measure is not passed in the form proposed, or if its passage is further delayed. There would inevitably be delays in the issue of notices of assessment and there could be serious effects on revenue collections for the year. The administrative difficulties that would be encountered would certainly result in much inconvenience to taxpayers through delays in advising them of their liabilities. There would also be quite heavy additional costs in the collection of tax.

Should Parliament fail to agree to the additional tax of 2i per cent, for individuals, possibly as many as 200,000 assessments now awaiting issue will have to be re-calculated. These are assessments which involve provisional tax for 1965-66 including the proposed 2i per cent, additional tax. In relation to these assessments there could be serious delays in the collection of tax of the order of £250,000,000. As to instalment deductions from salaries and wages, a most serious situation could develop. It would presumably be necessary to adjust instalment deductions. New scales would have to be worked out. There would be extreme problems associated with the advent of decimal currency which existing scales were, after much forward planning, devised to overcome. There would be a loss of revenue for the year of many millions of pounds.

I do not question the Opposition's right, or its sincerity, when it objects to the additional tax, but I do recall that public reaction to the Budget was as favourable as any reaction to any one of the series of Budgets I have introduced, or indeed to any Budget that I can recall. It is no exaggeration to say that individual taxpayers had expected rather heavier taxation than was imposed. For the most part, knowing the purposes to be served by the additional taxation, they undertook with equanimity the relatively small additional burden that the Government asked them to shoulder. They saw the necessity for it and this was clearly explained to them. Therefor, I ask the Parliament to acknowledge the responsibilities that the Government faces in its Budget programme by giving this Bill a speedy passage.

Perhaps I should add in passing, Sir, that the decision of the Senate and its conduct in relation to the tax legislation raises, I believe, an important matter of constitutional principle and practice in the relations between the two Houses concerning financial matters. I do not propose this morning to elaborate on that or to attempt to debate the matter fully. But I believe that it is desirable that the issues raised engage the attention of this House on a future occasion.

I turn now to the formal provisions of the Bill. Apart from some minor adjustments associated with the proposed change to decimal currency the general rates of tax payable by individuals are very much the same as last year. Individuals are, however, to be called upon to pay additional tax of 2i per cent, of the tax calculated in accordance with the general rates. The adjustments to the general rates will not increase the tax payable at those rates in relation to taxable incomes up to £24,000. As to taxable incomes in excess of this amount there will be a slight increase in tax payable but it will be only £1 for each £3,000 of taxable income over £24,000. The Bill expresses all proposed rates as percentages of taxable income instead of, as in the past, as so many shillings and pence, or so many pence, per £1. This will mean that on the changeover to decimal currency the rates will represent so many cents per dollar. Another feature of the Bill is that it discards the old description of the tax on incomes in favour of a simpler description. Instead of being known as income tax and social services contribution the levy is to be known simply as income tax. Apart from the matters that I have mentioned, the measure does not vary in any significant respect from the Act declaring the rates of tax for the financial year 1964-65. I commend the Bill to the House and for the reasons that I have stated I ask for a speedy passage for it.

Leave granted for the debate to continue.

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