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Wednesday, 3 June 1942

Senator McBRIDE - That is not correct.

Senator DARCEY - At least, war expenditure in Tasmania has been far less than in the mainland States. All that Tasmania has got out of the war effort so far is a huge exodus of its population to the mainland. Last year; 3,000 people left Tasmania, many of them going to South Australia. The Government of Tasmania did not hesitate to address a reasoned and reasonable case to the Commonwealth on the 28th April for a larger compensation payment. A claim for £1,050,000 was submitted, but it has been revealed since that Tasmania would receive substantial concessions. These concessions are not the result of political intrigue, but were based on the findings of an independent tribunal, namely, the Commonwealth Grants Commission. The suggestions of political intrigue were made by the Premiers of the other States, who did not wish to see a larger grant made to Tasmania. The people of Tasmania are glad that the appellate tribunal under the Commonwealth uniform tax proposals is the Commonwealth Grants Commission which, in the past, has complimented the Treasurer of Tasmania upon the full and adequate presentation of the case for that State. The opposition from Victoria is understandable, but that from Queensland is not, because that State is to receive considerably more by way of compensation. Tasmania is adversely affected in other ways ; it is a small State and its revenue is small. The special committee decided that the basis of compensation for the six States should be their average collections for the years 1939-40 and 1940-41, and, therefore, any representations that were likely to succeed on behalf of Tasmania, had to be more or less consistent with that basis. The reasons for the claim made by Tasmania for an increase of compensation from £823,000 to £1,150,000 were as follows : -

(1)   The known requirements of the budget of 1942-43.

(2)   The unusual circumstances of the assessment and collection of income tax in Tasmania in 1939-40 and 1940-41.

(3)   Certain definite adverse effects on Tasmania of the proposed scheme.

(4)   To some degree, the unequal effects of Commonwealth war expenditure in the various States.

In respect of the last mentioned factor, the effect of this differential expenditure upon the finances and economy of Tasmania is so serious that Tasmania would have been justified in requesting the addition of a further sum of at least £100,000. The income tax laws in Tasmania provide concessional allowances for taxpayers who are married and those who have depen dent children. A taxpayer who supports a wife has £40 deducted from his income before it is assessed for taxation purposes, and a similar deduction is made for each dependent child. Under the Commonwealth uniform tax proposals such concessions will be provided by totally different methods, and the question can well be asked which system suits the Treasurer best and which system suits the taxpayer best. The special committee suggested the following allowances for dependants : Spouse or female relative, £100; mother, £100; one child, £75; and children in excess of one, £30. These concessions were to be given by means of rebates of taxation. If the recommendations stopped there the situation would be simple, but they do not. First the rebate of taxes in connexion with these allowances is to be " calculated at the personal exertion rate appropriate to the taxable income " of the taxpayer concerned, and, secondly, they are not, in any case, to be greater than the following amounts: Spouse or female relative, £45; mother, £45; one child, £45; and children in excess of one, £5. These two qualifications deprive the concessions of much of their apparent generosity. The effect on taxpayers can be illustrated by a few figures as applied to a married taxpayer with one child. If such a taxpayer had an income of £200 a year, and deductions of £45 were made in respect of his wife and child, according to the Tasmanian system, he would, at the rates set out in the Commonwealth's proposals, pay nothing at all, whereas a single man would pay £7 18s. However, by the application of the rebate of tax system, as set out in the special committee's report, he would pay 18s. A single man. with an income of £250 would pay £19 4s. under the Commonwealth's proposals, and a married man with one child would pay £3 16s., so that the value in reduced taxation of his combined concessions would be £15 8s. A single man with an income of £300 would pay £31 10s., and a married man with one child would pay £13 2s., so that the value in reduced taxation of his concessions would be £188s. A single man with an income of £400 would pay £57 6s., and a married man with one child would pay £32 6s., so that the value in reduced taxation of his concessions would be £25. A single man with an income of £500 would pay £84 16s., and a married man with one child would pay £55 4s., so that the value in reduced taxation of his concessions would be £29 12s. It is obvious that that system would result in increased concessions as the incomes increased. The Premier said that he had not yet been able to ascertain which system would suit the Treasurer best, because this would involve complicated calculations covering all classes of incomes. However, he wanted to make it clear that the nominal concessions of £100 for a wife and £75 for the first child by no means reflected the real value of the concessions, which in no case could exceed £45 for a wife and the first child and £5 for each additional child.

In order to show how poor we are in Tasmania I refer honorable senators to what the Commissioner of Taxes in that State said in 1934, when he was asked what would occur if he doubled income taxes on all persons with assessable incomes of more than £1,500 a year. He said that the State's revenue would be increased by not more than £12,000. Of course, there has been a considerable general improvement since then. Nevertheless, most people would be surprised to learn that the taxation assessments for 1940-41 showed that, in the income year of 1939-40, there were only 263 persons in Tasmania with assessable incomes of over £1,500. If it were possible to bring the figures up to date, it would be found that the situation has altered very little. The total of the taxable incomes of those 263 persons was £583,682, and the tax levied upon that amount was £41,650. Thus, less than 1 per cent, of the taxpayers, whose incomes totalled a little over 6 per cent, of the total gross incomes, paid more than 20 per cent. of the total income tax levied on individuals, apart from the special tax, through which they had to contribute a further £12,172. In 1940-41, it was reported on good authority that morethan 1,000 Australian taxpayers had incomes of £130 a week, but not one of them lived closer to Tasmania than Melbourne. There was no great aggregation of wealth in Tasmania to be taxed and, conse quently, in order to meet the ordinary requirements of the community, the State Treasurer was obliged to impose a considerable burden on low incomes. Under the proposed uniform taxation scheme, the Commonwealth Treasurer will collect income tax from all over Australia and, therefore, he will be able to do what the State Treasurer is unable to do. As a matter of fact, the figures of proposed taxation set out in the committee's report show large decreases of taxation on low incomes in most States, and Tasmania in general will be required to pay about £16,000 less in 1942-43 than it is paying now in combined Commonwealth and State income taxes. It is not yet possible to analyse the 1940-41 income figures satisfactorily, but my argument may be illustrated by an analysis of the income figures for the preceding year, when there were 30,948 taxpayers in Tasmania with a total gross income of £9,429,195. Of that number, 24,624. or nearly 80 per cent., had incomes of less than £301, and more than 61 per cent. had incomes of less than £201. The gross income of four-fifths of the taxpayers amounted to £5,519,416, or more than 58 per cent. of the total gross income of all taxpayers. The average income in this group was about £224 per annum. Quite rightly this group will benefit by abatements of tax totalling £1,814,142, leaving a taxable amount of £3,705,274. The tax assessed in this group was £68,968, or almost exactly 3d. in the £1 of gross income, and less than 4½d. in the £1 of taxable income. There were no persons in Tasmania receiving incomes of £5,000 solely from personal exertion, business, or property, but five persons were in receipt of composite incomes exceeding £5,001 a year, four persons were in receipt of incomes exceeding £4,001 a year, and eighteen persons were in receipt of incomes exceeding £3,001. Including these persons, there were 682 persons in Tasmania with incomes of over £1,000 a year, and their gross incomes totalled £1,086,697.

In opposing this measure, the Leader of the Opposition (Senator McLeay) referred to the " foolish ideas " which I have been expressing in this chamber for nearly four years. He seems to be quite unaware that five of the six States have passed resolutions urging the Commonwealth to make use of the Commonwealth Bank for the issuing of interest-free money in order to finance the war. The first State to do so was South Australia, which the honorable gentleman assists to represent in this chamber. Tasmania followed and later Queensland and Western Australia did likewise. I was amazed to hear an honorable senator representing Western Australia say today that that State would receive £566,000 more revenue under the proposed uniform taxation scheme than previously, and that the Parliament of that State had passed a resolution urging the provision of interest-free money by the Commonwealth Bank. He may agree now that my ideas are not so foolish, after all. I should be glad to see the Parliament of New South Wales support the provision of interest-free money, so that all States would confirm what I have repeated in this chamber so often about financing the war effort through the Commonwealth Bank. That is the only means of saving the nation from financial ruin. Yesterday, I quoted from the London Times a passage which declared that the amounts loaned to the Government by the banks were only book entries. It is significant that that view should be expressed by such a conservative journal as the London Times.

The Leader of the Opposition devoted a good deal of attention to the taxation of income from personal exertion, which reminds me that the public debt of Australia has increased since 1914 from £4 19s. to £26 per head of the population, due principally to the fact that successive governments have declined to draw upon national credit resources to finance national projects. Of what use was it to appoint a royal commission, on our monetary and banking systems, seeing that its recommendations in regard to national credit have been ignored? Now that private banks have been prevented from buying war bonds and from making credit available in the form of overdrafts for the purchase of war bonds, it seems to me that there is nothing left to the nation except to increase the present high rates of taxation, which I regard as inadvisable and unnecessary, or to use national credit, which I regard as proper. At any rate, those are the only two avenues left from which funds may be obtained. The Government's uniform income tax plan is estimated to yield only an additional £12,000,000 a year. On the present basis of expenditure that sum will pay for only twelve days of war. In one period, not a great while before the outbreak of this war, the annual Commonwealth expenditure on defence was only £7,000,000 per annum. When war threatened to occur, the Loan Council considered a proposal for the raising of £10,000,000 for defence purposes. Mr. Dwyer-Gray was Acting Premier and Treasurer of Tasmania at that time and he attended the Loan Council which considered that proposal. When it was suggested that the money should be borrowed from the private banking companies by orthodox methods, Mr. Dwyer-Gray said that if it were obtained by that means it would be an ignoble concession to an inadequate system of finance. I entirely agree with that view. In my opinion it is just as necessary that we should defeat the present financial system as it is that we should defeat the Germans and the Japanese. It is significant that Mr. Dwyer-Gray's opinions on the proposal submitted to the Loan Council at that time were suppressed by the only daily newspaper published in Hobart, yet, in the next week, the opinions of the Leader of the State Opposition were published in a full column of that newspaper, which pointed out that what were called " the fantastic financial proposals of the Treasurer of Tasmania at the Loan Council " had been opposed by even Labour Premiers and Treasurers of other States. I regret to say that that is a fact. The Premier of Western Australia, for example, remained silent at the council meeting, in company with his Labour colleagues.

I trust that this bill will be passed. I am glad that Tasmania is to receive a higher amount of compensation than was proposed originally. So long as State rights in regard to taxation are not definitely and irreparably injured by this plan, I can see no reason why it should not be endorsed.

Sitting suspended from 18.J/J/. to 2.15 p.m.

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