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Thursday, 8 December 1927

Senator GRANT (New South Wales) . - I listened carefully to the statement of the Leader of the Senate (Senator Pearce) when moving thd second-reading of the bill. I was pleased to hear him confess that he is not a taxation expert, and that regarding the provisions of the bill he had to rely upon information supplied to him by his responsible officers. I well remember on a previous -occasion when an Income Tax Bill was under consideration the right honorable gentleman submitted a formula for the assessment of incomes that had been prepared by Mr. - now Sir George - Knibbs, the then Commonwealth Statistician. Senator Pearce did not profess to understand the formula, nor did senators, but they looked wise, and adopted it. Shortly afterwards Professor Carslaw, of the Sydney University, exposed its faults in a letter to the Sydney Morning Herald. A few days later Senator Pearce informed the Senate that the formula would not have the desired result, and he presented another, which Mr. Knibbs had assured him would be entirely satisfactory. Again honorable senators looked wise, and adopted it. It is impossible for the average person to calculate the amount of assessable income according to the formula that appears in the act. I regret very much that the method has not been simplified.

This measure is extremely intricate; but there are one or two outstanding omissions to which I intend to direct attention. Most honorable senators know that I approve of taxation being levied on the lines laid down by Henry George. Consequently I do not look with enthusiasm upon any attempt to penalize a man by means of an income tax. * Unfortunately, the Labour Government in 1915, despite opposition in the caucus-room, introduced an income tax bill containing many objectionable provisions. One was the principle of taxing a man who owned a home of his own or lived in a home belonging to his wife. I regarded that as a direct tax upon industry. I therefore attacked it vigorously whenever an opportunity presented itself, and finally, in 1023, I succeeded in having it eliminated. That is the most important thing I have accomplished during the time I have been in -this Parliament. It removed the- Federal Income Tax from the taxpayer's home. At the time I endeavoured also to secure another amendment to relieve farmers from taxation on the increase in their live-stock, but unfortunately I could not persuade a majority of honorable senators to agree with me. Ever since the act has been in operation farmers have been taxed in proportion to the increase in their live-stock. This imposition is a direct incentive to go slow. Wo have been told, and I believe there is some truth in the statement, that this ca' canny sentiment, or go-alow policy, has permeated the commercial, financial, and even the political life of the Commonwealth. Some people who, in my judgment, are not well informed, go so far as to say that it is evidenced also in the industrial sphere. There can be no doubt that the Commonwealth Parliament is setting a very bad example by continuing to penalise the industrious and useful section of the community. That is what this bill will do unless it is radically amended. From time immemorial there has been an income tax in Great Britain, and last year the collections from that source amounted to £300,000,000. We are not justified in following slavishly such a bad example.- It cannot be gainsaid that the conditions in the United Kingdom to-day are very unsatisfactory, and the remedy is not to be found in an income tax.

It is argued that . all taxes are paid by labour, and therefore it does not matter to labour how they are imposed. That is true so far as it goes ; but it does not convey the whole of the truth, and to that extent is mischievous and misleading. In addition to paying all taxes, labour has also to pay for the maintenance of an army of what, in the absence of a more descriptive term, I shall call " parasites." This measure does not propose to interfere with that undesirable position. An erroneous impression is widespread throughout the Commonwealth with respect to the incidence and the operation of the income tax. Many thousands of well-meaning, upright people honestly believe that the salaries of members 'of the Commonwealth ParKament are exempt from Federal and State income tax. They express amazement ' when they are informed that the contrary is the case. - I have, never . been able to find -out why the Parliaments of the States were given the right to tax the salaries of Federal members. 'At the proper stage I shall move a number of amendments, one of which proposes that sub-section aa of section 16 of the Principal Act shall be repealed. That section renders possiblethe taxation of increases in livestock. It is absolutely wrong to penalize the fanner in that way. In 1923 the Senate agreed to repeal the provision which permitted a man to be taxed on the value of his home. Every one must admit that the man who launches out as a pastoralist, a wheat farmer, a dairy farmer, or a mixed farmer, engages in a very strenuous occupation. Sheep farming would probably be regarded as the most attractive; then wheat farming, after that mixed farming, and finally dairying. The man who grows sheep is harassed by inclement weather, blowflies, Bathurst burr, and dingoes. He gets some excitement during the shearing season, but encounters further trouble while his wool is being transported. No civilized community should countenance the taxing of a man because he strives to the utmost extent of his powers to produce more wealth. Is he an enemy of the country? Of course he is not. On the contrary, is he not performing a very useful service? He earns his income in a legal manner. I deny that there is a moral right to rob that man of any portion of his production; yet it is done every year. The longer he works, the more trouble he takes, the greater his improvements in the breed of his sheep, and in the quality of his wool, the heavier we tax him. If that is not an example of mischievous go-slowism I am at a loss to describe it.

Let us now consider the case of the man who grows wheat. First of all, he has to go to considerable trouble to secure the necessary land. Then he has to buy machinery and oil, employ labour and ascertain where water is available. After a lot of arduous work he commences to produce wheat. We stand ofl, look at him, and say-" What is this?" In a meek voice he replies, " I am producing some wheat. ' That is evidently regarded as a serious offence, because hs is fined exactly in proportion to his production. We go further and employ capable taxation officers, who keep u. close watch upon faim to see that he is taxed to the fi lies t extent of the wealth he produces. Tha., is altogether wrong The position o{ the man who engages in mixed farming ii immeasurably worse. The sheep fa,me and the wheat farmer have some spare time, but ihe mixed farmer has an ever lasting job. Every day and every night in the year his time is fully occupied. He must be- an expert in the purchase of stock. The owner of a place called Darbalara, in the Tumut district of New South Wales, after many years of careful attention to stock breeding, bred Madame Melba XT.V., the champion cow of the Commonwealth, if not of thi; world. We look him up and in effect tell him he is doing wrong, because we fine him every year in proportion to the value of the stock he breeds There te no form of go-slowism that is comparable with that. A. man reads, labours and does his best to render an inestimable service to the community, and the community fines him every years in proportion to the value of the services hn renders. My amendment "will, to some extent, relieve such a man of what in my opinion ia a very unfair tax. Machinery agents, produce agents, even some members of Parliament, characterize the man on the lend as thi backbone of the country ignoring the fact that he is but a cog in- the big wheel of modern industry. The. underpaid, sweated, intermittently employed person in the city who assists in the manufacture of the machinery which the modern farm requires, is just as much a cog in that wheel as is the fanner. They both are essential to the production of an article. Why we should seek to punish the farmer by increasing his. .taxes in .proportion to ' the work he does is beyond my comprehension. - Let us now ' come' to the man on- the bottom rung of the primary producing ladder - the dairy farmer. The sheep farmer 'has some spare time, although not much; the wheat farmer has less; the mixed farmer, still less; but the dairy farmer has none. In all weathers - hot or cold, wet or dry - Sundays and week days; holidays and holy days; the cows must receive attention. The life of the dairy farmer is one long round of drudgery. Yet if he pays attention to -his work, improves the breed and increases the number and the value of his herds, the Commonwealth Government says that he must pay more by way of taxation. In proportion to the value of his work to the community, he is taxed. An amendment which I propose to move later will, if agreed to, grant relief to these men. Considering that during his term of office the Treasurer has consistently underestimated the customs revenue, we may confidently expect that he has done so again this year. In the circumstances, we could well extend the exemption in order to benefit the primary producers I have mentioned. I do not propose to move that the salaries paid to members of this Parliament shall be exempted from the payment of the tax, although with a little encouragement from honorable senators on the other side of the chamber, I should do so. Under the existing legislation, incomes under £300 per annum are not subject, to taxation. Many electors are of the opinion that members of this Parliament receive the benefit of that exemption; but that is not so. In committee, I propose to move an amendment to delete from section -24, sub-section 1, of the principal act the words " less one pound for every three pounds by which the income exceeds three hundred pounds." That would mean that all taxpayers would receive the full benefit of the £300 exemption. In addition to the amendment which I have foreshadowed, I propose in committee to move that clause 14 be amended by inserting a new paragraph providing for the amendment of section 23- h of the- principal act by omitting the word "fifty" and inserting in lieu thereof the word " sixty," and after the word " years " the- following words : - " and the sum of One hundred pounds in respect of the wife of the taxpayer." The effect of my amendments would be to grant to each taxpayer an exemption of £300;- an exemption of £100 in respect of his wife, and a furtherexemption of £60 for each child. This proposal has the support of the Australian Labourparty. At a conference -

The PRESIDENT (Senator the Hon. Sir John Newlands). - Thehonorable senator will not be in order in discussing in detail at this stage the amendments of which he has given notice.

Senator GRANT -If we consider the matter carefully, we can come to noother conclusion than that our policy of borrowing money abroad increases our imports from year to year. Our fiscal policy must inevitably result in increased customs duties from year to year. I do not say that income taxation should be entirely abolished, but there should be no opposition to the amendments which I have outlined. The amounts received from the taxation of incomes dining recent years have been as follows : -1923-24, £11,057,555; 1924-25, £11, 136,344; 1925-26, £10,858,046; and for 1926-27, £11,126,278. The estimate for the current financial year is £9,800,000, which will probably be exceeded. Income taxation was first imposed by the Commonwealth to meet its war expenditure.In those strenuous times the peopleof Australia were prepared to submit to taxation which they would not countenance to-day. The time is opportune to review the incidence of taxation in order that a scheme may be devised whereby the burden of taxation will fall upon those best able to bear it. The amendments which I have foreshadowed will, if agreed to, assist the primary producer, the man with a family, and remove the present unsatisfactory diminishing exemption. Amended in that way, the bill would be a great improvement on the present measure. I trust that in committee my amendments will be agreed to.

Sitting suspended from 6.15 to 8 p.m.

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