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Wednesday, 20 May 1936

Senator A J McLACHLAN (SOUTH AUSTRALIA) (Postmaster-General) . -These- clauses repeat in substance section 28a of the existing law. This section was inserted in the act in 1930, and was received with expressions of satisfaction by all parties in Parliament, the only criticism being that it had been too long delayed. Under the pre-existing law, it was not possible to tax foreign film-producing companies upon the income they derived through the exhibiting of their films in Australia. By the creation of subsidiary distributing companies in Australia and similar devices, their affairs were so arranged that their income was, technically, not derived from sources within Australia, and was, therefore, not liable to assessment. On the other hand, the charges to the subsidiary companies operating in Australia were so framed as to cause little or no profit to be made by them. Under the law as it then stood, the Commissioner pf Taxation could go no further than the subsidiary Australian companies in an attempt to assess and collect tax, but in this respect his powers were limited to cases where the business of the subsidiary company produced either no taxable income or less than the ordinary taxable income which might be expected to arise from that business. It was quite impossible for the Commissioner to obtain the necessary information to put into operation his powers in this respect, for he was unable to obtain from the subsidiary companies any information as to costs of production and other necessary expenses upon which he could form an opinion as to the amount of income which might be expected to arise from businesses of this nature. The attitude adopted was that this information was not available in Australia. Moreover, in the enforcement of any such assessment, the Commissioner could only levy upon any property in Australia of the subsidiary companies, and could not prevent the remittance abroad of large sums of money. Owing to the widespread demand that these foreign companies should pay tax upon the profits arising in Australia through the exhibiting of their films, this legislation was enacted. Its effect is that such a company must pay tax upon 30 per cent, of its gross Australian receipts unless it proves, by production of accounts, that this amount is excessive. This legislation has operated very successfully, and has resulted in the production of accounts which previously had been stated to be not available. The fact that, in some cases, 30 per cent, has been shown to be excessive does not detract from the value of the legislation, because it is only that legis- lation which has enabled the Commissioner to obtain the accounts necessary to ascertain what are the real profits of the companies. Moreover, the fact must be remembered that the legislation was closely followed by the depression period, during which the profits of these companies were, doubtless, considerably less than in normal times. If this legislation were now abandoned, the Commissioner would again be placed in a position where he would be limited to asserting such liability as he could, against the Australian subsidiary companies, while the foreign companies would go free in respect of the large profits derived by them through the instrumentality of the subsidiary companies. The fact that some States are not adopting a provision similar to this is not significant because, while the Commonwealth provision remains, they are able to base their assessments upon the information which the companies are compelled to produce by reason of the Commonwealth provision. This is a notional method of assessing an income. The Government says, in effect, to these companies, "We shall tax. you on profits at the rate of 30 per cent, of your gross receipts ". The onus is then on the companies themselves to produce the facts; if the facts are proved, then the Commissioner does not tax them on the 30 per cent, basis. What is wrong with that?

Senator Arkins - Can the Commissioner lower the rate of taxation?

Senator A J McLACHLAN (SOUTH AUSTRALIA) - Yes, and he does. At a time when there is so much internationalism in commerce, it would be unwise for us to show any laxity in our desire to control companies of this nature. We welcome them into this country, but we say, in effect, " When yon come here, you must comply with all of the fiscal laws of this country ".

Senator Arkins - Have they been complying with the laws?

Senator A J McLACHLAN (SOUTH AUSTRALIA) - We have seen to that.

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