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Wednesday, 19 November 1941


Senator J B HAYES (Tasmania) . - I consider it fair to compare this budget with that brought down by the Fadden Government, and in the light of such a comparison, I submit that this budget cannot be regarded as an improvement on that presented by the previous Government. In any case, there is not sufficient difference between the two budgets to warrant the defeat of the Fadden Government. The Fadden budget should have been debated on its merits, and, had that been done, I have no doubt but that it would have been passed with perhaps a few amendments. However, it was not debated on its merits, but with the object of displacing the Government. Even the honorable member who was chiefly responsible for the Fadden Government's defeat had very little fault to find with the budget. Whatever grievances he harboured had little relation to the budget. The defeat of the Fadden Government was not brought .about because of any defects which it contained. Both the Fadden Government and the Menzies Government gave splendid service to the people of Australia. They laid the foundation of a war effort in this country, which has not 'been surpassed by any other nation with a similar population. Visitors from overseas invariably remark on our splendid achievements, whether in relation to the recruiting of an army for the defence of this country - our home forces to-day are incomparably better than ever before - the despatching of an army overseas to fight the Empire's battle, the making of munitions, or the building up of a navy and an air force. In every way the Menzies and Fadden Governments did well, and they dad not deserve the treatment which they received. However, whatever differences of opinion may exist in politics, there is no difference of opinion as to the imperative necessity to make a supreme war effort, and to fight on till victory is achieved. That victory will be achieved there can be no doubt, and when that, supreme aim has been accomplished, any differences of opinion which then exist can be dealt with. However, that should not prevent us from criticizing what is now being done by the Government, provided that our criticism is of a constructive character. The object of the Fadden budget was to raise large sums of money by means of heavy taxation on large incomes, somewhat smaller impositions on lower incomes, and by means of post-war credits. However, that balance has now been altered, and the Labour Government proposes to increase unduly the taxation on high incomes. I should like to make it clear that I am not speaking on behalf of the rich taxpayers. I am concerned only with the interests of the country as a whole. Under this budget the people on the lower income ranges are to make no additional contribution by means of direct taxation. Whilst no one can object to the principle of placing the burden of taxation upon the shoulders of those best able to bear it, the increases now proposed are altogether excessive. It must be remembered that taxation can be increased to such a degree that it will detract from incentive and therefore destroy progress and initiative. The result is stagnation. Because of the income tax proposals in this budget it will not be worth while certain people continuing to make money. Taxation on large incomes is to go so high as 200d. in the £1. That imposition, coupled with State taxation, will create & state of affairs in which there will be no incentive for certain individuals to do their best in the interests of the advancement of the country. Cases have been cited where the combined taxes on high incomes are over 20s. in the £1, and the taxpayer would be better off if he earned a more moderate income. In some cases, high taxation will impose considerable hardship. Most people on large incomes pay heavy life assurance premiums, and in some instances the result of these impositions will be that taxpayers will be unable to continue to meet their assurance commitments. The adverse effect of that will be appreciated when it is remembered that a good deal of our loan money comes from life assurance companies. The deduction for income tax purposes of assurance premiums paid by people in the lower income groups should be extended to those in receipt of higher incomes. The Government would probably lose very little if that concession were extended in the direction I have suggested.

There is a tendency on the part of many people to look upon all companies as rich enterprises. Actually, the majority of them are nothing of the kind. They contain many small shareholders, and when a company is taxed, the effects of the tax are passed on to its shareholders. An exemption of 4 per cent. is not enough. Heavy company taxation means lower dividends, and many people, who receive dividends of perhaps only £5 or £10 occasionally, will suffer. When people invest money in a company there is an element of speculation in their investment, and they should be allowed a fair return on their money. I ask the Government to consider this matter thoroughly. The proposed tax will be applicable to mining companies as well as industrial companies, and I should like to speak of alluvial tin-mining companies in particular. It is possible to estimate with a great deal of accuracy the quantity of tin that is in an alluvial mine. Those who invest their money in such enterprises should be enabled to get a return of their capital during the life of the mine and also a fair return for their investment. Tin will soon become a scarce commodity. If tinned plate is manufactured in Australia after the war, as it probably will be, Australia will hardly be able to meet its own requirements of that commodity. The development of tin mines should be encouraged, but we cannot expect people to risk their money in mining propositions, in which the operating costs are high, unless they have a reasonable chance of getting their money back, and a fair return on their capital. There is a great difference between industrial companies and mining companies. The capital of textile companies remains intact and after the war those companies will no doubt be able to continue operations successfully; but many tin mines have a life of only seven or eight years.


Senator Collings - Surely the companies write off depreciation.


Senator J B HAYES - They can write off certain depreciation for machinery and the like, but they wish to be able to make provision to pay back the shareholders' capital to them during the comparatively short life of the mines, as well as a reasonable profit on account of the speculative nature of the enterprise. They are entitled to this. I shall be glad to make all necessary information regarding this matter available to the Government, or to inform it as to the source from which it may be obtained.

Little fault can be found with the principle that the highest taxes should be borne by those who are best able to bear the burden, but we should not remove all incentive to enterprise. Therefore, I consider that the Government has made a mistake in relieving to too great a degree the lower-paid sections of the community of income tax. This is an all-in war, and everybody in the community should contribute according to his means, to the cost of the war. In the Fadden budget it was not proposed to tax persons on the lower incomes very drastically, but they were to be called upon to contribute a certain sum of money for the purpose of creating postwar credits. This was merely a scheme of deferred pay, such as has been adopted in the remuneration of members of the fighting services. That seemed to me to be a sound and sensible proposal, and I regret that the present Government has not adopted it. Money is being expended throughout Australia at present at a high rate. At the Melbourne Cup race meeting £400,000 passed through the totalisator, and it would be absurd to deny that a great deal of that money could have been diverted to the war effort. In what better way could it have been used than as a loan to the Government? The bulk of the national income of Australia is earned by persons receiving less than £8 a week. The annual income of those in receipt of under £400 a year has been calculated at £560,000,000 out of the total income of £800,000,000. I believe that if the present figures were taken out the total income would amount to about £900,000,000 or £1,000,000,000, and that the greatest increase would be seen in respect of the incomes of persons in receipt of less than £400 a year. We know that the average Australian, is liberal in his expenditure, and will not save money unless compulsion is brought to bear upon him. Where one man will save money, half a dozen will spend it unwisely. The people are spending so freely nowadays that it is often very difficult, if not impossible, for one to gain entrance to some of the large shops at certain periods of the day.

The fact that the war loan has been fully subscribed is a matter for congratulation.


Senator Collings - It shows that the Labour Government has the confidence of the subscribers.


Senator J B HAYES - I do not go so far as to say that, but, since it was doubtful a week or two ago whether the amount asked for would be fully subscribed, the public is to be congratulated on the success of the loan. I point out to the Government that probably six months will elapse before the taxation authorities will be able to get in the revenue to be raised under the new proposals. Prudent individuals and wellmanaged companies will no doubt have made some provision to meet the heavy taxes anticipated by them; therefore, large sums of money are lying idle in Australia on that account. I know persons who have relatively large sums in reserve to enable them to pay their taxes, and who would have been glad to put that money into the loan that has just closed. They were afraid to do so as they had no idea of the amount of tax that they would have to pay. I suggest that some scheme should be devised whereby that money could be used in the war effort. Although details of the next loan have not yet been announced, I understand that subscriptions to it would be accepted now. Subscribers to the last loan had the option of lending their money for fifteen years at 3£ per cent, or for five years at 2£ per cent. I believe that if there had been a third option, by which they could have left their money at call, the rate of interest to be 2 per cent., those who were holding large sums in reserve with which to pay their income tax would have placed that money in the war loan. Such an arrangement would merely have been an extension of the system of issuing war savings certificates, which enable contributors to get their money back at any time. If a taxpayer had £1,000 in reserve for the payment of his taxes, and could put it temporarily into a war loan, he might in the meantime discover some other way to meet his tax commitment and the £1,000 would be left in the loan. I make this suggestion in the hope that it may be useful to the Government in floating the next loan.

Senator ARNOLD(New South Wales) £9.57]. - With only a few weeks in which to prepare the budget, and without the ministerial experience and departmental knowledge of its predecessors, the Government can be proud of the budget that the Treasurer (Mr. Chifley) has placed before the Parliament. The first item on the expenditure side relates to increased pay for members of the fighting services. The Government has said that the obligations of the community to the members of those services warranted the increased rate of pay, and I feel sure that no honorable senator will quibble at the increase. Nor should it be necessary to defend at great length the proposals for the increase of invalid and old-age pensions. Most of the pensioners have been employed in industry in this country for about 50 years, but on reaching the age of 65 years found that they had no financial assets to enable them to eke out an existence. None of us will say that the£ 3s. 6d. a week granted to them in payment for the services rendered by them to their country throughout their lives is too great a recompense. The keynote of the proposals placed before us by the 'Government is that taxes should be levied in accordance with the ability of the individual to pay them. The comment has been made that persons in the higher income groups have been singled out for harsh treatment. Let us see if this be true. A. resident of New South Wales with an income of £2,000 a year has £1,262 left after paying Federal income tax and State taxation. That is equivalent to £25 a week with which to carry on his normal activities. I agree that he may have entered into commitments on the basis of an income of £40 a week; but I submit that he can adjust his commitments much more easily than is possible to a man who has to pay £11 12s. in taxes out of an income of £300 a year.


Senator McBride - Does the honorable senator really believe that?







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