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Wednesday, 3 June 1942


Senator SPICER (VICTORIA) - And even if they become law, uniformity will not be achieved.


Senator McLEAY - I agree.


Senator Collings - The Senate has agreed to discuss the four measures concurrently.


Senator McLEAY - Those persons who are telling the people of Australia that these proposals will institute a uniform system of taxation are attempting to mislead the public. My first objection to these proposals is that the taxes will not be uniform. As State land tax has not been included I submit the following statement showing the yield from land tax in the several States: -

 

Those State taxes have not been included in the compensation which it is proposed to pay to the State. We can say that, for all practical purposes, there is no land tax in New South Wales. Thus, a Victorian farmer just inside the border would receive one assessment for income fax and another for State land tax, whilst the farmer just over the border in New South Wales would receive an assessment for income tax, but would not be required to pay any land tax. It cannot, therefore,

 

be said that the plan makes for uniform taxation. The Victorian Commissioner of Taxation has estimated that Victorian taxpayers will be compelled under this plan to pay an additional £4,000,000, or an average of £10 10s. for each taxpayer, over and above what he is now contributing. I draw the attention of honorable senators to clause 4 of the States Grants (Income Tax Reimbursement) Bill -

4.   In every financial year during which this act is in operation in respect of which the Treasurer is satisfied that a State has not imposed a tax upon incomes, there shall be payable by way of financial assistance to that State the amount set forth in the schedule to this act against the name of that State, less an amount equal to any arrears of tax collected by or on behalf of that State during that financial year.

That represents an attempt by the legal draftsman to circumvent the provisions of the Constitution. If Victoria does not accept the plan it will, in effect, be fined £6,500,000; but if it does accept the plan, the taxpayers will be compelled to provide £4,000,000 more than they are paying now, and Victoria will become the highest taxed State in Australia.


Senator Gibson - Instead of the lowest.


Senator McLEAY - Yes, instead of the lowest. As additional proof that this plan will not bring about uniform taxation, I quote the following table, which shows the total collections from taxes in the various States, and sets forth the proportions received from income tax and from other taxes: -

 

Taxes other than income tax include probate, succession and stamp duties, land tax, liquor licences, lotteries, entertainments tax, and motor licences. For the purpose of my argument, I propose to concentrate on the three more populous States because, apart from my general objections to the Government's proposal, those States furnish the strongest argument against it. The States of Tasmania, "Western Australia, and South Australia are in a different position from them, because the Commonwealth Grants Commission will still function, and will recommend the granting of special assistance to them from time to time. The Commonwealth Government has, in the past, treated those three States well. Honorable senators who represent Tasmania, South Australia and Western Australia appreciate the action of honorable senators from other States in having agreed to the granting of such assistance as the Commonwealth has given. I cannot remember having ever heard any honorable senator from one of the nonclaimant States objecting to the making of grants to the claimant States. When we compare the spirit of fairness which animated past governments in this respect with the proposed treatment of Victoria under this plan, I find it difficult to imagine how the special taxation committee could possibly have suggested it.


Senator McBride - It was handpicked.


Senator McLeay - Yes, as the honorable senator suggests, it was apparently hand-picked. It was a monstrous thing that, when a matter so closely affecting the vital interests of the States was at issue, it should be handed over to a committee upon which the States had no representation, and which did not even invite the opinion of the States.


Senator FoLL - The States had an opportunity to consider the plan when it was placed before the Conference of Commonwealth and State Ministers.


Senator McLEAY - The States had no voice in the preparation of the plan, and at the conference could only accept or reject it. They are now asking the Senate to protect their interests.

My second objection to the plan is that the benefits under it will not be uniform.

The more I examine the figures regarding the proposed payments by way of compensation, the more convinced I am that the compensation to New South Wales is more than generous. The following table shows the distribution of the proposed compensation payments on a population basis: -

Those figures show that the treatment to be meted out to Victoria is most unfair. New South Wales is to receive nearly two and a half times more compensation than Victoria. Therefore, it cannot be said that the benefits under this scheme are to be distributed uniformly among the States. A careful examination of the basis on which the committee arrived at the amount for New South Wales emphasizes the inequalities of the scheme. One reason why the proposed allocation to New South Wales is so high is that that State's expenditure on social services, including unemployment relief, during the two years which have been taken as a basis, was unusually high. The following table, which has been compiled by the Commonwealth Statistician, summarizes the cost per capita of the States in respect of the three main groups of social services provided by the States -


Senator Gibson - And Victoria has provided social services of as high a standard as the other States.


Senator McLEAY - I emphasize that under these proposals, which are camouflaged as uniform tax proposals, it is intended to pay to the people of New South Wales for social services an amount of £4 9s. 3d. per capita, whilst the amount to be paid to Victoria for the same services is only £3 Is. 2d. per capita. How can any one justify the payment of so high a rate to people living in New South Wales, and so low a rate in respect of the same services to people living just over the border? Education and health are the principal social services in all States; and Australians as a whole are entitled to the same standards in respect of those services. Therefore, no justification whatever exists for such a great disparity between the amounts of compensation to be paid to the States to enable them to maintain those ' services. The injustice of this disparity, particularly in respect of Victoria, is emphasized by the fact that Victorians will be obliged to pay higher taxes in order to finance r.hose services, whereas taxpayers in New South Wales will not be asked to carry any additional burden. A careful perusal of the figures which I have quoted forces one to the conclusion that it is the policy of this Government to pay a premium on extravagance. The cost of social services in New South Wales reached a record " high " during the Lang regime ; and this Government, apparently, proposes to perpetuate that state of affairs. At the same time, Victoria, which has set an example to the States of thrift and frugality in its administration, is to be penalized.

I now draw the attention of honorable senators to what I consider to be the most iniquitous feature of compensation proposed to be paid to New South Wales. As from the 1st July, 1941, New South Wales was relieved of a payment of £1,337,000 annually in respect of its child endowment scheme which was superseded by the Commonwealth scheme. However, no deduction has been made in respect of that sum in computing the amount of compensation to be paid to New South Wales under these proposals. In addition, New South Wales will also be relieved of an annual expenditure of £427,000 in respect of its widows' pensions scheme as from the 1st July next, when the Commonwealth widows' pensions scheme will be inaugurated. The amount of £427,000 has been deducted in calculating the amount of compensation to be paid to New South Wales under these proposals. Therefore, I fail to understand why the amount of £1,337,000, of which New South Wales has been relieved in respect of its State child endowment scheme, has not also been deducted. I listened to the debate on this measure in the House of Representatives. I was pleased to note that the honorable member for Parramatta (Sir Frederick Stewart), who was Minister for Social Services in the previous Government, severely criticized this omission on the part of the Government. In the committee stage, I propose to move an amendment that this amount of £1,337,000 be deducted from the amount of compensation proposed to be paid to New South Wales. After the special committee had examined various proposals for arriving at a basis of compensation, it adopted, fortunately for New South Wales, the average of State collections from taxes on incomes in the financial years 1939-40 and 1940-41. In New South Wales during that period receipts from taxation increased by £4,000,000, but collections in other States remained stationary. I have prepared an interesting summary of the basis of the calculation of compensation that will be paid to New South Wales. If honorable senators examine these figures, they will understand why the proposed compensation to New South Wales is so high and disproportionate to the reimbursements to other States -

The average for those two years is £16,004,000, from which must be deducted the cost of collection, namely, £208,000, and the adjustment due to the payment of widows' pensions by the Commonwealth, amounting to £427,000. That reduces the total to £15,369,000. The Commonwealth proposes to pay as compensation to New South Wales the sum of £15,35.6,000.

Items of expenditure from the New South Wales social services fund are as follows : -

That expenditure, which was previously met by New South Wales, will now be borne by the Commonwealth. My figures indicate that an adjustment of approximately £2,050,000 should be made on account of expenditure that is now met by the Commonwealth, whereas the Treasurer's calculations disclose that only £427,000 will be deducted. Consequently, the compensation payable to New South Wales should be reduced by £1,623,000.

My third objection to the proposals of the Government is that they will destroy the power of the States to impose income taxation.







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