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Wednesday, 3 June 1942

Senator ARTHUR (NEW SOUTH WALES) - For how long?

Senator McLEAY - For the duration of the war and twelve months thereafter. As the result of this legislation, the States will be placed in a most embarrassing position. They are answerable to the people in the same way as is the Commonwealth Government, but, in effect, their future policy will be dictated by the Commonwealth Treasurer and Treasury officials. If the Labour party manages to secure its way, it will ensure that this legislation will never be repealed. Its policy is unification, and I hope that it will not try to mislead the people into believing that these measures are not an attempt to give effect to a plank of its platform. The special committee misrepresented the position in yet another way. Although itselected the financial years 1939-40 and 1940-41 as the basis for the payment of compensation, honorable senators should remember that the receipts from income tax applied to earnings in the years 1938-39 and 1939-40. For all practical purposes, the earnings in those two years covered only ten months of the war. Misleading statements have been made about the increased earnings of the States as the result of the Commonwealth's expenditure on the conduct of the war, but they are not justified because in the first twelve mouths of the war, the effect of the increased expenditure had not been felt in the various States. Whilst the Commonwealth's proposals will peg the income of the States to their receipts for the years 1939-40 and 2 940-41, costs have risen sharply. For example, this Government recently increased the sales tax, and raised old-age and invalid pensions by 25 per cent. The income of the various States has been pegged at the figures which ruled before the outbreak, and during the first ten months, of the war, but their expenditure lias increased considerably. The Commonwealth continues blithely to increase expenses, and the States are obliged to meet them. I ask honorable senators to consider the difficulties of, say, the Treasurer of Western Australia, in preparing his budget for the next financial year.

Under these proposals, of course, he will ,be permitted to appeal to the Commonwealth Grants Commission against the amount of compensation allotted to that State; but he will be in an almost hopeless position to budget for the future, because the policy of the State will be dictated by the Commonwealth Treasurer or Treasury officials. From my experience as a Minister, I know that some Commonwealth officials fairly delight in " putting it over " the States. They adopt a " take-it-or-leave-it " attitude, because they contend that they are the controllers of Australian governmental finance.

My fifth objection to these proposals is based upon the vicious increase of tax on incomes exceeding £1,000 per annum. The proposed increases on higher incomes are out of all proportion to the increases on lower incomes. The Government knows that, politically, this discrimination is popular because it will release large numbers of people from the obligation to pay income tax. But I prophesy that before the conclusion of the war, the Government will be compelled to tax the lower incomes in order to obtain money for war purposes. If it continues to impose on high incomes rates of tax exceeding 20s. in the £1, it will dry up those sources of revenue and next year the day of reckoning will be at hand. Whilst the Government proposes to compel persons with incomes exceeding £1,000 a year to pay an additional £1,500,000, it will relieve incomes under £400 and between £400 and £1,000 per annum of the payment of £750,000 per annum respectively. The preamble to the bill, states that the purpose of the measure is to ensure the more effectual prosecution of the war. Is the Minister for Trade and. Customs aware that the Government's uniform taxation proposals will relieve 60,000 or 70,000 single persons without dependants of the obligation to pay income tax? In South Australia alone, 19,000 single persons without dependants will now not have to pay income tax and the number in "Western Australia must be even greater. However,, the decision of the Government will be politically popular, although it will not help the war effort.

Senator ASHLEY (NEW SOUTH WALES) - Those people pay indirect taxation.

Senator McLEAY - That is only a parrot cry. Does the Postmaster-General imply that persons with incomes exceeding £1,000 a year do not pay indirect taxation ?

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