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Tuesday, 29 November 1927

Senator GRANT (New South Wales) . - The time is opportune to place upon record a few facts that are likely to be overlooked. I invite the attention of the Senate to the very unfair manner in which taxes ure extracted from the people, and to the heavy amount of taxation that has to be borne by the poorer section of the community. I realize, of course, that my remarks will, to a great extent, fall upon deaf ears, because the present Government represents the wealthy section of the people. I propose to remind the Senate of what is regarded by all economists worthy of the name as the proper basis of taxation. Ever since the establishment of federation we have adopted a so-called protective policy, but it does not protect the primary or secondary industries of the Commonwealth. This system of raising the national revenue permits those best able to bear the burden of taxation to escape with the payment of a nominal sum. To this I attribute much of the present turmoil, unrest and unemployment throughout the Commonwealth. It should be the aim of honorable senators to devise a system of taxation that will relieve unemployment and place the burden upon the shoulders of those best able to bear it. It is universally admitted that customs taxation falls with special severity upon the poorer section of the community. No doubt this is why it has been so warmly supported throughout the ages in almost all countries. While Great Britain is ostensibly a freetrade country, actually it resembles, in some respects, the Commonwealth in that it obtains the bulk of its revenue from customs and excise duties and income taxation. Therefore, it may be regarded as a high revenue tariff country.

It has been truly said that while a government may tax a man indirectly to almost any limit, it has the greatest difficulty in extracting from him taxation in a direct form. Hence the popularity of the indirect method for the raising of revenue in all civilized countries. I repeat that, in my opinion, much of the turmoil, unrest, and unemployment throughout the world may be removed by a change in the system of taxation. In Great Britain to-day there are no fewer than 1,500,000 able-bodied men and women out of work. To support them a heavy direct tax. is levied upon all sections of the community. The total income of Great Britain for the financial year ended 31st March last, was £S05,701,233 ls. lOd. One would imagine that the well-to-do people of the Mother Country would contribute substantially towards the revenue, but we find that the bulk of the national income is received from customs and excise, and income taxation, the figures being - Customs duties, £107,515,000 ; excise duties, «- £132,978,000; income taxation, £234,717,000; super tax, £65,910,000. From customs and excise, the total receipts were £240,493,000, and yet some ill-informed people in this country endeavour to persuade their fel-low citizens that Great Britain is a freetrade country ! That, of course, is not so. Great Britain is a. high revenue tariff country.

Income taxation, another important source of Great Britain's revenue is, in my judgment, a direct incentive to a " go-slow " policy. It is a tax upon industry, and one of its effects' must be to drive capital out of a country. Excise and customs duties, income taxation, and the super tax are all a handicap upon industry, and are levied upon those least able to bear the burden. A totally different position is disclosed when we examine the taxation imposed upon the owners of land in the Mother Country. I have not been able to ascertain the total value of the lands in Great Britain, but since it is probably the most densely populated country in Europe, with about 700 people to the square mile, the lands must be extremely valuable.- The total revenue derived from land taxation in Great Britain last year was only £S80,000, the figures being, house duties, £5,000 - I question whether that item can be regarded as a land impost - land tax, £650,000; duties on land values, £225,000. The total of receipts from this source is extremely paltry in comparison with the amount received from customs and excise and income taxation. The position should be reversed. If the bulk of the revenue in Great Britain were raised from the land, there would be little or no unemployment there. On the contrary, Great Britain would enjoy a degree of prosperity to which she has been a stranger for many a long day. Under existing taxation systems, the present unsatisfactory state of affairs is inevitable. I have referred to Great Britain because, rightly or wrongly - I think wrongly very often - the Commonwealth Government follows Britain's lead in regard to its method of raising revenue. Australia is supposed to be a protectionist country, but the existing scale of duties does not exclude foreign-made goods. Actually it produces an ever- increasing source of revenue.

It is patent to the meanest intelligence that unemployment is in direct ratio to the importation of foreign goods. No matter what may be said in favour of encouraging local industry, so long as we continue the present policy of borrowing money abroad, so long may we expect the inflow of foreign-made goods into the Commonwealth. I should welcome ti -.complete cessation of borrowing abroad with a view to fulfilling all our requirements in Australia. But that is about the last thing which the present occupants of the treasury bench -will- be willing to consider. No one will deny that customs taxation offers the easiest way to compel the poorest sections of the community to pay the highest amount of taxation. I congratulate the Minister for Trade and Customs (Mr. Pratten) upon the very able way in which he manages to remove taxation from his wealthy friends, and increase the taxation paid by the poorest sections of the community. I take it that was one of the purposes for which he was elected to represent Martin. He is doing his work in a most faithful manner. He has succeeded most admirably in securing exemption from taxation for the wealthy people, and in putting as much taxation as possible on the poor. How much longer that will continue I do not know. We have in all the States an increasing army of unemployed able and willim; workers. Our policy of protection, whatever else it may do, has certainly not removed that phenomenon. Notwithstanding all that has been said about encouraging local production and - all that sort of thing the amount of revenue we derive from taxation upon foreign made goods entering Australia has been steadily increasing year after year. It is true, of course, that the increase has hot been quite regular. But the figures for the respective years are as follow: -

The estimate for the current year is £44,000,000, but from experience we may safely conclude that the amount will be considerably exceeded. How long are we to be told that this is a policy to protect our secondary industries when all the time apparently the main object is to protect certain people from taxation? When the customs and excise duties produce £4.3,000,000 in one year it must be quite apparent that it is not necessary to increase taxation in other directions. It. is therefore natural to find a strong desire on the part of some honorable members not only to increase customs taxation, but also to simultaneously decrease income taxation, and I believe, also land taxation. I shall not very much regret a reduction in the income tax, although I think it would b, far better to have a reduction in customs taxation; but I hope that the Government will seriously consider what it is doing before it reduces land values taxation, which is, of course, the best method that can be devised for raising revenue for Federal, State, or local government purposes. It has the outstanding characteristic that it falls directly on the owners of land and cannot be passed on. The owners of land must pay, and for that reason the present occupants of the treasury bench who represent the wealthy section of the community do not look upon it with a favorable eye. They pin their faith to customs excise and other indirect methods of taxation, and armed as they are with a substantial majority I suppose we may expect them to force their views on tha Parliament of this country. Once a protective or a high revenue policy is established, it is almost impossible to remove it. I realize that it is hard to increase direct taxation, especially land values taxation, but it is an easy matter for a government with a big majority to do as it likes. I. expect the present Government to collect more and more revenue at the Customs House, and less and less by means of income taxation or land, values taxation.

I shall have a. further opportunity of speaking on both these points at a later date, and I do not propose to pursue them, further at the present time ; but taxation is a question of the very first importance, and the study of ii- would amply repay all legislators. It ls some time since I placed on record what I regard and what is regarded by all political economists as the correct principle of taxation, and I desire to place them on record again so that in the discussion of these matters honorable senates, may perhaps remember them at a later date, and possibly give effect to them. They are to be found on page 406 of the memorial edition of the writings of Henry George, Progress and Poverty, Vol. II., and are as follow': -

The 'best tax by which public revenues can be raised is evidently that which will closest conform to the following conditions: -

1.   That it bear as lightly as possible upon production - so as least to check the increase of the general fund from which taxes must be paid and the community maintained.

2.   That it be easily and cheaply collected, and fall as directly as may be upon the ultimate payers - so as to take from the people as little as possible in addition to what it yields the Government.

3.   That it 1)0 certain - so as to give the least opportunity for tyranny or corruption on the part of officials, and the least temptation to law-breaking and evasion on the part of taxpayers.

4.   That it bear equally - so as to give no citizen an advantage or put any at a disadvantage, as compared with others.

Let us consider what form of taxation best accords with these conditions. Whatever it bc, that evidently will be the best mode in which public revenue can be raised.

Elaborating 'these canons of taxation, Henry George sets out beyond contradiction that a tax which complies with these requirements is a straight-out tax upon land values, without graduation or exemption. That is the method of taxation employed in local governing districts of New South Wales. -It is responsible for the wonderful progress how being made by the city of Sydney. It lias been stated that the Commonwealth land tax was imposed for the purpose of bursting up large estates and for other reasons, but in my opinion it was imposed for revenue purposes. Practically speaking it has produced the same amount of revenue every year. It is a great pity that an exemption up to £5,000 is allowed, but it would be regarded as heresy on my part to proceed on those lines and I shall not do so. We are indebted to the Brisbane Labour conference for the land tax with that exemption. I think that Senator Lynch was one of those who persisted in including the exemption in the Labour platform. Others were Mr. J. C. Watson and Mr. W. A. Holman. A considerable number of those responsible for its inclusion in our platform are not in the Labour movement to-day, but that is a matter of detail. It is the policy of the party to have that exemption in the federal land tax. Some persons say that provision was made for an exemption of £5,000 in order that the States might also have an opportunity to impose a land values tax:...but that is so much humbug, because the States have complete power to impose such taxation either above or below the exemption I have mentioned. Some have: exercised that right, although in the eastern or central divisions of New South Wales such a tax is not imposed for revenue purposes. It only applies to a few freeholds in the western division. As the New South Wales Government collected from the whole of the land-holders of New South Wales last year the nominal sum of £3,500, is it any wonder there is an increasing number of unemployed? I recently heard of a person who some years ago invested the nominal sum of £25 in the purchase of a block of land in Sydney, and later had the misfortune to be imprisoned for a number of years. When he was released the land for which he paid £25 was worth, approximately, £200,000. That is a clear indication of the fact that the owner who did not do anything to increase its value was able to reap where he had not sown. It cannot be said that land values taxation is a tax upon industry. Many persons are afraid to express an opinion upon this important subject. Such a tax directly affects so many wealthy people.

Senator Lynch - Is that why the Labour party does not adopt the system ?

Senator GRANT - The Labour party is the only party which has stood rigidly for a land values tax, and the Labour Government in Queensland has imposed more direct land values taxation than any other government in the Commonwealth. Taxation based on land values is imposed in South Australia and Western Australia, and to a lesser degree in Victoria and Tasmania. As it is the community which gives the land its value, the community ought to appr'opriate for its use the. added value. Another illustration came under my notice many years ago in which a man leased a farm from a landowner in Scotland. After he had acquired the lease, he purchased agricultural implements, and for the first time about 200 acres of good undulating country were cultivated, on which highly productive crops were grown. When the lease expired at the end of two or three years, the owner of the land compelled him to pay a substantially increased rate for a further term merely because of his industry.' As the owner of the land he legally robbed the lessee of his rights. The same thing occurred in Ireland years ago; but the position there became so acute, and the "Irish people so incensed, that the system was dispensed with. My objective can be achieved by the public realizing that ifr should appropriate the value which it gives to land, and if such a system as I suggest were generally' adopted, the unemployment which is at present disgracing practically the whole of the civilized world, would cease to exist. I shall reserve any further comments I have to make on this subject until a measure relating to land taxation now before another place is submitted to the Senate.

I wish again to direct the attention of the Senate to what I consider the peculiar action of the Pensions, the Repatriation, or the Defence Department, the facts in regard to which are these : - The son of a lady named Mrs. Christina McArthur, of 306 Nelson-street, Annandale, enlisted for service during the Great War. He was named Sinclair McArthur, his number was 8,156, and he was a corporal in the Fourth Battalion. Early in the war he made the supreme sacrifice, leaving a widowed mother. In accordance with column 2 of the first schedule of the

Australian Soldiers Repatriation Act of 1920, Mrs. McArthur was entitled to a war pension of £2 12s. 3d. per fortnight. A pension of £2 was granted to her, but from the 18th August, 1915, the military allowance ceased to be paid. In April, 1926, the case was reviewed, when it was disclosed that Mrs. McArthur was a widowed mother, and the pension was reassessed on the basis of the £2 12s. 3d. instead of £2 as from the date of the original grant. An increase in the rate to £2 12s. 3d. was effected from the 18th August, 1915, and about the 14th of May, 1926, a cheque for £172 3s. Id. was forwarded to the pensioner to cover arrears then due. Following the payment of that cheque into her banking account, which was a very small one, the Deputy Commissioner of Pensions, in view of her changed financial circumstances, promptly reduced her old-age pension, with a result that she lost £11 8s. 9d. It is altogether wrong for a department to deprive an old-age pensioner of that amount because another department failed to pay her the money when it became due. Any department worthy of the name should at once make good the amount. On her behalf and at her request, I applied for a refund, and I was informed by the Deputy Commissioner of Pensions that he had no option but to reduce her pension owing to her altered financial position. 3 may say that the £172 3s. Iddid not last very long, because it had to be used in meeting outstanding accounts. As the Deputy Commissioner of Pensions has refused to pay the £11 8s. 9d. I should like to see an amount in the Estimates to cover it. Persons banking money receive interest at the rate of about 4 per cent., and Mrs. McArthur is entitled to interest at that rate on the money withheld from her by the department.. The sum of 12s. 3d. a fortnight waswithheld from her from the 18th» August, 1915, until the 14th May, 1926,. a period of about eleven years, and I claim that she is entitled to interest on it amounting to £44 15s. 8d. That: amount, together with the £11 8s. 9d.. withheld from her, makes a total of £56 4s. 5d. due to her. I have made repeated' application for this money, hut not one of the three departments concerned has paid it. It is a disgrace that a woman who- lost her son in the early days of the war should be treated as this woman has been treated. In a few minutes Parliament sometimes agrees to the expenditure of millions of pounds; yet the whole machinery of government is used to prevent a poor widow from reciving that to which she is entitled. I intend to take whatever steps are in my power to. see that this woman obtains justice.

Senator LYNCH(Western Australia) 1.9.17]. - The appearance of the budget early in the financial year is a great convenience, because it enables honorable senators to consider the Government's, financial proposals before the money has actually been expended. There is very little use in Parliament expressing its opinion about expenditure after it has T)een incurred.

I am afraid this is all the praise I oan afford this budget. This year we are asked to agree to the expenditure of about £63,000,000. That is a large sum to be found by a comparatively small population. The amount derived from taxation to-day is about double what it was ten years ago. A. good deal has been said lately of the heavy inroads made by the Government on the incomes of the people. In this matter there is no authoritative guide to tell us where to stop. The only limit to taxation appears to be the patience and endurance of the people. It is clear that when £63,000,000 is taken from the pockets of the people and diverted' to channels controlled by the Government, that money is not used as it would be if it remained in the pockets of the taxpayers. The pound that is directed from private to public channels ceases to fructify in the same manner as before. As a productive agent in the one case it enhances in value, in the other case it loses.

Various methods have been adopted from time to time in order to -ascertain the total income of the people of Australia. The approximate amount could be obtained by totalling the incomes of individual taxpayers, or by a careful examination of the balance-sheets of public and private companies and other public bodies. This is a laborious and incomplete method. I have adopted ;a method of my own in order to estimate the income of the people of Australia. I have based my calculations on information contained in the Commonwealth Y ear-Book. That publication, while excellent in many ways, could be improved if the statistical department had greater funds at its disposal. In the Canada Y ear-Book one can find the true position of every Canadian private and governmental activity. In . our case, however, much of the information that we need is, unfortunately, withheld from us. Nevertheless, the Commonwealth YearBook is an estimable production. Prom it I have ascertained that the total private wealth of the Commonwealth is estimated at £2,166,000,000. If we assume that that income of the people of the' Commonwealth is equal to 5 per cent, annual yield, we obtain an annual income of £108,300,000. That does not include the value of municipal and governmental enterprises which do not earn anything like 5 per cent., let alone an annual sum to offset their depreciation and inevitable extinction. For that reason I strike them out from this calculation. If from that £108,300,000 we deduct the £63,000,000 required for this Government's purposes, we shall see how alarming is the position. If to this we add the £21,000,000 levied by the. States the position is still more serious. If 5 per cent, is too -low, and we double it, then the cost of government, State and Federal, equals considerably more than £1 in every £3 of the national income. As there is an end to every story and every river, so there must be an end t" this inordinate inroad on the savings of the people. We cannot, continue to extract these large sums from the people without endangering our "financial aim industrial stability. The Government should, therefore, exercise the closest scrutiny the expenditure of every pound diverted' from the pockets of .the taxpayer. I_f!it does not do so, financial disaster, deep and widespread, will overtake us.

In my opinion, the Treasurer has adopted an extraordinary system of bookkeeping. That remark from one who is not skilled in bookkeeping may be regarded 'as audacious. A person unacquainted with our system of finance would come to the. conclusion, after a. study of the figures on page 13 of the budget, that we had had a succession of deficits instead of a series of surpluses. The Treasurer in his budget speech compared the five years ended 30th June, 1927, with the period ended 30th June, 1922, which was the period immediately prior to his assumption of office. On page 13 of the budget papers reference is made in respect of the same- period to a number of surpluses . totalling £4,221,984. There are two statements, one which shows the remarkable total of £7,661,053 of deficits and the other, £4,221,984 as the total of surpluses. With these figures we are led to believe, by a study of page 13, that the 5-year period ended' June, 1927, shows a deficit of £3,440,049, whereas the true position is that there was an aggregate surplus for the period of £6,800,000. I am quite aware of the means by which this deficiency has been arrived at. The Treasurerhas brought into account the accumulated surplus of £6,408,424 on the operations of the years ending 1921-22, and mixed it and other surpluses with the sums applicable to 1922-23 andsucceeding years. A more sensible system of book-keeping to adopt would be to make the national balancesheet so simple that he who runs may read.' -We should be able to see at a glance whether or not" there has been a . surplus in any particular year or years and how it has been applied, without laboriously puzzling out mystifying explanatory notes. My contention is that, instead of there being a deficiency, there has been a net surplus during the 5-year period of £6,800,000 although the Treasurer tells us that there has been a deficit according to the inapt figures supplied. This is due to the practice of introducing the accumulated surpluses from previous years, and mixing them with the operation of other years. I urge that we should follow the example of New Zealand. On page 8 of its budget statement, the accumulated surplus and the manner in which it has been applied, are set out in the clearest fashion. It shows that a surplus of about £29,000,000 has accumulated, and on the opposite page we see at a glance exactly how it has been distributed down to the last shilling. If the Commonwealth Treasurer adopted a similar system of book-keeping, we should not befogged, as we are by reference to page 13 of the budget.

It is interesting to consider how the States have fared compared with the Commonwealth during the last five years. While the Federal Government had a surplus to the extent of nearly £7,000,000, the States experienced fifteen surpluses and fifteen deficits, their net deficit being £2,976,741. In other words, during the 5-year period when the Commonwealth was prosperous and rolling in money, the States were rolling in deficits totalling £2,976,741, so that great difficulty was experienced by them in trying to balance their ledgers. They were hampered correspondingly in the great work of national development. Figures are as follows -



I now come to the subject of the public debt, which the Treasurer dealt with first in the budget. He said -

It is surely a most gratifying feature of our finances that we were able to effect this substantial reduction last financial year in our war debt.

I point out that the reduction in the total debt, which is the thing that matters, is not nearly so great as would appear. If honorable senators will refer to pages 10 and 11, they will notice a further attempt at making the positio'n anything but clear. We find on page 10 the words, " Less debt redeemed, £8,481,579." Then,- referring to the war debt, we see these words, " This was reduced in 1926-27 by £7,640,987." Any person reading that would naturally associate the two items, and conclude that there had been a reduction of-some £16,000,000 in the total debt. But on turning to page 11, one finds this statement -

The amount made available for debt redemption in the financial year just closed was £5,989,230, being £493,321 in excess of that for 1925-26.

Then follow the details of every conceivable item contributing to this sum, and these amount only to £5,989,230, which is far short of the £8,481,579 pre viously mentioned. It means that the difference between those two sums was made up from loan moneys, and nothing else, but that is not stated.

Let us inquire into the pleasing statement of the Treasurer that it is most gratifying that we were able to effect a substantial reduction in . our war debt last year What is the position in regard to that debt? If we turn to the budget statement of 1925-26, we notice that the Treasurer then informed us that the war debt in 1922 was £333,000,000. To-day, according to this year's budget figures, it is £297,000,000, which shows a reduction of £36,000,000 in the five years. But other debts in 1922 amounted to £30,577,000. To-day, according to the budget before us, the other debts amount to £69,706,300, or an increase of £39,127,000. In other words, while we reduced the war debt by £36,000,000 in five years, we increased the ordinary debt by £39,127,000 in the same period. Instead of the position being gratifying it is the reverse, since there was an increase instead of a decrease of indebtedness.

Senator Payne - Does not that include the money borrowed for the States?

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