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Thursday, 3 December 1936

Senator PAYNE (Tasmania) .- This is my only opportunity to ventilate again what is regarded by a section of taxpayers as a grievance because of the extraction from them of income tax for which they are not liable. Clause IS provides for the repeal of section 253 of the principal act, which provides for the collection of the special property tax. Honorable senators may recall that I have drawn attention to the anomaly that, since 1931, it has been provided by an amendment of the Income Tax Assessment Act, that companies "may" deduct at its source the special property tax from dividends paid to preference shareholders. In companies from which, the tax has been, deducted and paid direct t.o the Commissioner, there must be many preference shareholders who were not even income taxpayers. Instances have been brought under my notice of people whose income was considerably below the exemption fixed in the principal act, and who, therefore, according to law, were not income taxpayers. If their dividend amounted to £20 when the levy for the special property tax was 10 per cent., £2 was deducted by the company under the authority of the amendment of the

Income Tax Assessment Act, and consequently they received only £18, the other £2 going to the Income Tax Commissioner. This is "the last opportunity I shall have of dealing with this matter. The special property tax will go with the passing of this bill, but it is not too late to right the wrong. It can be done by the Government instructing the Income Tax Commissioner that, if he is satisfied on application made to him that the special property tax was paid by a company on behalf of a person who was not an income taxpayer, a refund should be made.

Senator Collings - The honorable senator then would make it retrospective?

Senator PAYNE - Yes. Every year refunds, going back more than one year, are made in cases where income tax has been wrongly collected or wrongly paid. No exception should be made of the poorest section of people with incomes. I do not suggest, that refunds should be made to those unentitled to them. The whole principle of the administration of the Income Tax Department is that, when the commissioner is satisfied that a person is not liable for the tax collected from him, he is entitled to a refund. In these cases the commissioner has had no direct contact with the individuals. The payments have been made by the company, acting under the law, although the principal act lays it down that in these instances, the shareholders affected are not income taxpayers. I hope the Government, during the recess, will look into the representations I have made on this subject from year to year. If it does, it will be satisfied that an injustice has been clone to many unfortunate people-

Senator E B Johnston - Is much money involved?

Senator PAYNE - I should say nor a very large sum, but a number of people, who can ill-afford to pay a tax for which they are not liable, are affected. The amount can be ascertained only when all the applications for refunds have been lodged. It is surely reasonable to suggest that, if people have had heavy taxation levied upon them when the law says they are not, liable to income tax, the money taken from them should be refunded, so long as the commissioner is satisfied that the claim is just. I trust that my final representation on this matter will have the effect of causing an investigation to be made.

Senator Sir GEORGEPEARCE (Western Australia - Minister for External Affairs) [9.50]. - in reply - The honorable senator's pertinacity in this matter is certainly deserving of all praise. He has made the representations many times, and I can assure him that "when I first heard the case put by him I was so impressed that I took the matter up at the time with the Treasurer (Mr. Casey). He told me that he would look into it and discuss it with the Commissioner of Taxation, which I believe he did. He subsequently assured me that he saw no way by ' which, without great circumlocution and difficulty, the complaint could be met. He added that there was also a possibility that, in trying to meet individual cases, the way would be opened to evasion of tax by those who should be taxpayers. There was a danger, he pointed out, of creating an incentive for a nominal distribution of shares, so as to bring the income received from them below the statutory exemption. At present the tax is levied on the whole of the income distributed by the company, with the result that no shareholder can escape, but Mr. Casey feared that, if provision were made to meet the cases indicated, collusion would occur, enabling some who ought to pay the tax to escape. Mr. Casey assured mc that he had looked into the matter with all sympathy and with a desire to remedy the grievance, if this could conveniently be done, but he was satisfied, after full investigation with the commissioner, that there was no v ay of dealing with the matter, whilst at the same time protecting the revenue.

Question resolved in the affirmative. .

Bill read a second time.

In committee:

Clauses 1 to 17 agreed to.

Clause 18 (Deduction of special property tax from preference shareholders).

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