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Wednesday, 3 June 1942

Senator ASHLEY - They are in a position to pay it.

Senator McLEAY - They will not he in a position to pay it after this Government has finished with them, and the country will be poorer as; a result.

In its present form the bill will permit all taxpayers whose incomes are lower than £156 per annum: to escape direct taxation entirely Although under the existing, Commonwealth law no tax is payable on> such incomes, it is noteworthy that the three less populous States have found it necessary to tax- incomes below £156' derived by persons without dependants. It is considered that no hardship bins been: imposed on this section of the community, and in war-time no justification exists for the outright exemption proposed. The extent of the loss of revenue from this source is indicated by the following figures representing taxes payable at present on a personal exertion income of £150 derived by a person without dependants: -


This is a most inappropriate time to consider lightening the burden on any part of that section of the community which at present pays a very small proportion of the aggregate income taxation although it derives about 70 per cent, of the national income. On the lower ranges of incomes Australian taxes are considerably lighter than those imposed by the Labour Government in New Zealand or the National Government in Great Britain. Yet Australia^ destiny is just as dependent as that of those two countries on the outcome of this conflict. I suggest that the Commonwealth Government has not spread the burden as the corresponding burden has been allocated in those two countries, and I object to this decision of the special committee.

My sixth objection is based on the question of the constitutionality of I he proposals before the Senate.

Senator ASHLEY - The honorable senator had better leave that matter to the lawyers.

Senator SPICER - What about the Government's lawyers? What do they say on this matter ?

Senator McLEAY - I regard the proposals as a vicious attack on the present system of government in Australia. With my limited knowledge of law I shall not attempt ait this- stage to discuss that important aspect.

Senator Cameron - The honorable senator's opinion might be worth as much as those that he intends to quote.

Senator McLEAY - No". I shall place before the Senate views which have been expressed' by well-known constitutional authorities of this country. Honorable senators should consider calmly these different views. The first is that of Mr. G. Ligertwood, K.C., of South Australia - \a) That it violates section 51 (11) of the Constitution in that it discriminates between those States which are willing to vacate the income tax. field and those which are not.

(6)   That the making of grants to the States by way of reimbursement of income tax is not a bona fide exercise of the powers of the Commonwealth Parliament under section 9G, but is part of a scheme designed to destroy the powers of States to levy income tax.

(c)   That the scheme is a law of revenue and violates section 99 of the Constitution, in that it gives a preference to those States willing to come into the scheme over the States not so willing.

(d)   That the scheme is directed towards the destruction of the activities of the States and violates the fundamental principle of the limited sovereignty of the States intended to be secured by the Constitution.

(e)   That the scheme cannot be justified under the defence power because that power ib given to the Commonwealth subject to the Constitution, whereas the scheme is subversive of the fundamental principle of State sovereignty implied in the Constitution. (/) I might add a subsidiary ground that the taxation act may be invalid, because it is designed to raise taxes for both Federal and State purposes, whereas the Constitution only authorizes the Commonwealth Parliament to raise taxes for federal purposes.

The next opinion is that of the right honorable member for Kooyong (Mr. Menzies), an authority for whom I have the highest regard -

The real test of the validity of any law is not the wording of the law, but its substance ... Is this law which prohibits the imposition of an income tax by a State a law with respect to taxation within the meaning of the Commonwealth taxation? Now as to that, I have no hesitation whatever in saying that in my opinion it is not. And there is abundance of authority to support that view. The proposed law in this case, in my opinion, is not made for the peace, order and good government of the Commonwealth, with respect to taxation. It seeks to impose a tax for partly Commonwealth purposes and partly for State purposes. . . . This is not a Commonwealth taxation law. . . . This scheme is an endeavour to make the taxation power exclusive, although the Constitution has made it concurrent. . . . By depriving the States of an important fiscal power reserved for them, this scheme violates the federal nature of the Commonwealth Constitution. I am unable at present to believe that this law can be upheld under the taxation powers.

The question of whether what the Government is now proposing can be done under the defence power of the Commonwealth is, to my mind, immeasurably more difficult to Senator answer than the first question I asked. All I can say about it is that 1 am left in grave doubt as to whether it can be done. . . .

The honorable member for Bourke (Mr. Blackburn) said -

My main reason for opposing the legislation is that it tends to alter the substance and nature of the Commonwealth Constitution without the consent of the Australian people who created it.

Finally, I shall quote from a judgment given by His Honour Mr. Justice Starke, of the High Court of Australia, in the case Andrews v. Howell. His Honour's judgment was a dissenting one, but that does not detract from its value -

Almost every citizen is injuriously affected by the war, and the argument we have heard leads apparently to the conclusion that in time of war the Commonwealth has complete power to legislate in respect of the social and economic condition of Australia, but I cannot agree. After all, the government of Australia is a dual system based upon a separation of powers.

Senator McBride - The Government could avoid all this trouble by taking a referendum.

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