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Monday, 21 March 1927

Senator SAMPSON (Tasmania) . - Ever since the proposals contained in thebill were first mooted, I have been endeavouring, by careful study and thought, to arrive at a sound conclusion and a right decision as to whether they are in the best interests of those Australian citizens who reside in the State of Tasmania, whom I have the honour to serve in the Senate, as well as the citizens of the other States of the Commonwealth. It has been no easy task for a political novice like myself. It has necessitated much careful reading and thought, and a close study of the history of the birth of this great Commonwealth of which every right-thinking Australian is justly proud. I am in my political babyhood, and I find it rather, at times, to discover the best way of approaching subjects such as this. But I am a soldier of a good many years' standing, and I have learnt to adopt a certain line of action in the working out of any problem with which I am faced. My training has taught me that the proper method is to put down on paper the pros and the cons, the factors that operate against your success and those that assist you, and I have followed that method In the present case. In a federation such as ours, the financial relations between the central government and the component states are of the utmost importance. The conferring of large powers on the central government is absolutely useless unless sufficient revenue is provided for that government to operate those powers. The determination of the financial relations between the States and the central government was the principal stumbling block in the path of the framing of the Constitution and the inauguration of the federation. Those financial relations are still the subject of considerable controversy, and a solution of the problem which they present is not yet in sight. It is a most difficult and, I consider, a very urgent problem. I cannot subscribe to the doctrine that has been put forward by certain honorable senators who oppose the bill, that there is no need for haste in this matter, that no mandate has been given to the Government to take this action, and that the Commonwealth should continue to rub along as it has been doing for a number of years. I do not for a moment admit that the per capita system is either just or equitable. The main financial feature at the inception of federation was the provision in the Constitution that the Commonwealth should have sole control over Customs and excise. The States and the Commonwealth were given equal powers in regard to all other forms of taxation. The power of the Commonwealth over Customs and excise, however, was limited and qualified during the first ten years of federation. Those qualifications and limitations, in my opinion, were of a strictly temporary character. At the outset it was obvious that the Commowealth would not attempt to give effect to the whole of the 39 articles of section 51; and, as honorable senators are aware, many of those powers are still dormant. The expenditure of the Commonwealth was limited during the first ten years to one-fourth of the net revenue derived from Customs and excise; but control over that revenue was vested absolutely in the Commonwealth after the expiration of that period. That principle was confirmed when, in 1909, the people of Australia at a referendum definitely refused to make it a constitutional obligation on the Commonwealth Government to pay to the States 25s. per head of the population. On the expiry of clause 87, commonly known as the Braddon blot, Australia adopted the per capita system for the distribution of the surplus revenue of the Commonwealth to the States, not, in my opinion, because it was the best or fairest method, but because, possibly, it was the easiest to calculate, and was the least likely to arouse hostility from the States. At that time, we must remember, the Commonwealth had undertaken direct taxation to only a very limited extent. It derived the bulk of its revenue from Customs and excise duties, and the money so derived was assumed to be collected approximately at an equal rate from each individual in the Commonwealth. In other words, it was deemed to be raised in proportion to the population of the States, and it was distributed on the same basis - that is to say, on a per capita basis. But that assumption of equal financial ability in proportion to population is a fallacy. It has no foundation in fact, because necessarily the States cannot be equal in wealth, resources, or natural advantages. Even if they are equally endowed in these respects, they may be at very different stages of development. Inequalities are also brought about through the application of Federal policy, some States getting greater benefit than others through the operation of Commonwealth laws. For instance, a protective policy may be a great advantage to a State like Victoria, and at the same time a considerable burden to a State like Western Australia. When States differ so much in climate, natural resources, area, and development, there are bound to be great divergences of wealth, and clearly a per capita system of distribution of surplus revenue to the States cannot be regarded as equitable. However, that was the system adopted in 1910, and under it Australia carried on with special temporary grants to

Western Australia and Tasmania until 1914, when, like a thunderbolt, there came upon us the war. It was necessary for us to fight for our national existence, and everything else went by the board. By the end of the second year of that desperate and bloody struggle, the Commonwealth was compelled to enter the field of direct taxation, and as the war progressed it had a steeply-graded income tax, death duties, taxes on wartime profits, and an entertainments tax. It was committed definitely to direct taxation, because there was no longer sufficient revenue from its indirect taxation. Logically, and on principle, when there was no surplus revenue from indirect taxation, the per capita payments to the States should first have ceased ; but at that terrible time of stress and strain no one had much thought for logic. We were out to win, and . possibly the easiest course politically was taken - that of imposing sufficient direct taxation to cover the extra burden on the Treasury. The end of the struggle thus saw us with both federal direct taxation and per capita payments to the States, and we are still in that position to-day.

I believe in the abolition of the per capita payments to the States, and in the substitution of some more statesman-like system of finance between the Commonwealth and the States. How the change is to be brought about, I do not know; but I hold that the present position is untenable. It may be of great importance to the more populous States to retain the per capita payments, but these payments are, in themselves, of comparatively little importance to a small and struggling State like Tasmania, which, even with its per capita grant, does not receive sufficient revenue to meets its absolute financial obligations, and must have further assistance from the central Government. The population of Tasmania, which was one-twentieth of the whole of the population of Australia at the time of federation, is now, notwithstanding an increase, only one-thirtieth of the population of the whole of the Commonwealth. Obviously the per capita system does not suit Tasmania. Senator Barwell told us that the Commonwealth is rolling in wealth, and that the Commonwealth Treasurer has to rack his brains to know what to do with all the money he is getting. I do not believe it. If it is true, I should like the Government to give those who are serving in our Citizen Forces a better deal. When, recently, I put in a requisition in the ordinary way for a rubber stamp, costing about 2s. 6d., I received in due course from head-quarters, Melbourne, word regretting that there were no funds available for the purpose. It does not seem to me, therefore, that the Commonwealth is rolling in wealth, and has very much money to throw away. As a matter of fact, a careful study of the position will disclose that it has tremendous commitments to face in the immediate and near future.

I do not know who are competent to say what it is the duty of the Senate to do, but we are told by Senator Ogden, that if it does not do its duty, and reject this bill, it will sound its own death knell, and that if the bill is passed the Commonwealth will automatically assassinate the States. I may bo somewhat dense, but I do not think I have ever heard a sillier statement than that, because it follows that if we assassinate the States we automatically kill the Commonwealth also, the people of the States and the Commonwealth being absolutely one and the same. It has been maintained that the Government has received no mandate for this legislation, but fourteen or fifteen months ago, when I was attempting to woo the affections of the electors in Tasmania, the payments to the States was a very prominent question. I do not think I addressed one meeting at which the matter was not mentioned. The cry then was that the Commonwealth should get out of direct taxation as far as possible, and if the proposals put up by the Commonwealth Treasurer, and set out in a pamphlet he issued, were not a step in that direction, I should like to know what they were. Notwithstanding what Senator Barwell and others have said, this question does not appeal to the political passions or personal feelings of the electors. It does not make the slightest difference to- me if I disburse £1 to one authority or make two payments of 10s. to two separate authorities. That is the crux of the whole matter. I do not hold any brief for the Tasmanian Government or any other government. I was not sent here by the Tasmanian Government, but by the people of that State whose interests I intend to protect so far as I am able.

During the debate I have endeavoured to follow the arguments of honorable senators opposed to the bill, who seem to think that the people of Australia are divided into two hostile camps. That is not so; but there may be two hostile camps of politicians. We have been informed that if this measure is passed the States will he financially strangled - that the Commonwealth Government is now ende3.vour.1ng to assassinate them. It has also been said that the -Government is challenging the States with a double-barelled pistol, one barrel of which is to be used te shoot them and the other to murder them. That statement is stupid. I have tried quite dispassionately to follow the arguments of those opposed to the hill; but from the figures placed before me, and from the information I have been able to obtain, I believe the measure is entirely in the interests of the States. Prom some of the arguments adduced it would appear that the Commonwealth Government has no right to introduce legislation without first consulting the State Governments; but with that I do not agree. We have a duty to perform to the people, and that is to assist in framing laws for the good government of the Commonwealth. To say that the Commonwealth desires to strangle the States is ridiculous, because to do so would be equivalent to committing suicide. I have no fears concerning the results which may follow my action in supporting the bill. I have endeavoured in my own way to come to a right decision, and the future alone will prove whether I am right or wrong.

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