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Wednesday, 12 November 1941

The PRESIDENT - Order! Honorable senators must discontinue interjecting. The honorable senator is entitled to state his case. Other honorable senators will have a similar opportunity.

Senator SPICER - If what I am saying is nonsense, I am glad that it has the imprimatur of the present Treasurer, who in his budget speech made it perfectly clear that we had to have a switch over from civil production to war production.

Senator Cameron - That does not necessarily mean reduced production.

Senator SPICER - The Treasurer went on to say that the issue of bank credit could not solve that problem. That is the situation as I see it. Unless we get a transfer of income from the community to the Government in order to finance waT production there will be a considerable increase of the prices of commodities.

Senator Cameron - What about putting non-essential industries into full production ?

Senator SPICER - When there is a decreasing supply of goods and an increasing supply of money, prices of commodities will be the means by which that diversion from civil production to war purposes will ,be reflected in the community. It is because I believe that an increase of the price of commodities which are -available to the civilian population is the most unfair, as well as the most unscientific, method of financing the war effort, that I am opposed to this method of finance.

Another aspect of this problem is of some importance. In Labour circles it seems to be assumed that companies are always fair game. After all, it must be remembered that companies do not exercise votes. Whenever increased taxation Ls necessary it is becoming the practice to increase the taxes on companies, but governments which do that overlook the fact - and governments of all political parties have been guilty of this in some degree - that companies do not exist in reality. There is no such thing as a company that can be felt, that can be hurt or taxed. In other words, the taxes which companies pay are paid by their shareholders. When an increase of company tax is imposed by a government the principle of payment of tax in accordance with ability to pay is again departed from. If a flat rate of tax of 3s. in the £1 be imposed on a company that rate of tax is carried by every shareholder in it, whether rich or poor. The widow-

Senator Brown - Oh! The widow!

Senator SPICER - Widows, as well as basic wage-earners, are included among the shareholders of companies. As proof of the inequality of the imposition of such a tax, the widow whose income from dividends represents, say, £100 a year, pays exactly the same rate of company tax and bears the same rate of burden as a man who has invested £10,000 in a company.

Senator Cameron - How many widows are shareholders in companies? It is pretty safe to say that most widows are in receipt of pensions.

Senator SPICER - The equitable way to deal with income derived from companies is to tax it in the hands of the shareholders.

Senator Courtice - Why did not the government which the honorable senator supported do that?

Senator SPICER - It did, up to a point.

Senator Courtice - We have merely gone a little further.

Senator SPICER - The heavier these burdens on companies become the more directly they affect the shareholders.

Whilst it may be possible for most people to bear a tax of 2s. in the £1, the burden placed upon them is infinitely greater when the tax rises to 4s. in the £1. As I have said, this is an inequitable method of taxing. Some taxing of companies is necessary, I agree, even if it be only to deal with undistributed profits; but in respect of the profits of companies which are properly distributed the burdens to be imposed on shareholders should be in accordance with their incomes, and the rate applied to their earnings from dividends should be the appropriate income tax rate. I take exception not only to the proposed increase of the tax to 3s. but also to the proposal of the Government to impose a vicious tax on company profits.

Senator Cameron - Who makes the profits ?

Senator SPICER - The shareholders.

Senator Cameron - They do the work.

Senator SPICER - They do not do all the work; but by their efforts they provide the means whereby plant and machinery are erected, entirely new undertakings are started, and thousands of people are kept in profitable employment.

Senator Cameron - In profitable employment! The workers-

The PRESIDENT - Every honorable senator is entitled to be heard without interruption. I again ask the honorable senator to discontinue interjecting.

Senator Cameron - I accede to your request, Mr. President, but at the same time I remind you that when we were in opposition we were interrupted so frequently that we could not express our opinions clearly.

Senator SPICER - The Government proposes to tax the earnings of companies in excess of 4 per cent. I suggest that that is a very low percentage of profit at which to commence to impose such a tax. The Government's proposal takes no account whatever of the varying risks associated with certain enterprises, and it accepts as a basis for the imposition of a special profits tax a rate of profit which is not very much higher than is at present obtained on gilt-edged securities. Again, the Government imposes this tax without regard to the ability of the companies to pay it. It does not, and will not, pay sufficient regard to the fact that one company may be carrying on an undertaking which involves considerable risks, and therefore should properly earn a higher rate of profit, whilst another may be engaged in an enterprise in which there is little risk. I suggest that that is further evidence of the failure of this Government to adhere to the perfectly sound principle that should guide us in our taxation proposals, namely, ability to pay.

I wish to commend, as I think I should, the activities of the previous Government in its control of prices. I have already referred to the fact that I believe the achievements of the last two Governments in that regard to have been little short of remarkable. A great deal of their success in that direction was undoubtedly due to the efficiency of the Prices Commissioner, Professor Copland.

Senator Amour - Professor Copland is getting a lot of praise to-day.

Senator SPICER - If the honorable senator is uncertain as to the qualifications of Professor Copland to undertake the task allotted to him I suggest that he should read the unanimous report of the Joint Committee on Profits, to which three of his colleagues have subscribed their names, in which the members of the committee thought it proper to commend the work of Professor Copland. Having regard to the record o'f public service rendered by that gentleman, I have been a little disturbed in the last few days to hear that it is proposed to alter the regulations under which he operates at present. It is easy for the Government to suggest theoretical arguments as to why the powers of the Prices Commissioner should not be placed in the hands of one man, and how it may be better if some form of appeal tribunal were established. I commend to the Minister the old adage that the proof of the pudding is in the eating of it. This country has been well served by the form of control exercised by the Prices Commissioner since the commencement of the war. I believe that it would be a disservice to the consumers of this country - in fact to all of us - if his activities were interfered with at a time when the work he has to perform may be of the utmost importance indeed. It has been difficult enough to control prices in this country during these two years of war; but I believe it will be immeasurably more difficult in the future as the result of the proposals contained in this budget. It is in the financial policy such as the Government has expounded that I see the greatest danger to the price structure. Because that danger is very real to-day I should like to see in control of that extremely difficult undertaking a man who has performed such a signal service to his country during the first two years of the war.

Senator Keane - Who has said that Professor Copland will not remain in control of it?

Senator SPICER - If he may be overruled by the Minister or by some inexpert committee he will no longer be in control.

Senator Amour - Does the honorable senator think that Professor Copland needed all his ability to allow certain manufacturing interests to " pass the buck " of the increased excise on to the workers who in turn cannot pass it on to anybody else ?

Senator SPICER - I am glad that the honorable senator has raised that question. I understand that the increased excise was imposed for the very purpose of being passed on.

Senator Cameron - Who told the honorable senator that?

Senator SPICER - The Treasurer said that it was done in order to reduce consumption. In his budget speech he said -

So far as taxation goes, as a means of reducing consumption, I think that for middle and lower incomes it is better to get the reduction by means of taxes on goods and services not really essential, which can be forgone without injury to health or efficiency.

In perfectly plain language that means that these taxes are being imposed on commodities for the purpose of reducing consumption, and that involves that the Treasurer anticipated that the tax would be collected by the retailer from the consumer in the form of increased prices.

I believe that all honorable senators are concerned at this time, as I am concerned, with the war situationWe all recognize that if the need arises all sections' of this community should make their contribution to the war effort. We cannot carry on the war on the scale on which it is being carried on at present without imposing tremendous real sacrifices upon every member of the community. It would be a good thing psychologically for this country if the Government were brave enough to indicate that fact in its financial measures, and drive straight home to every member of the community that all of us must bear our burden, that those burdens must be borne now while the war is on, and that they are the necessary insurance premiums which we must pay if we are to retain our liberties as a democratic community.

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