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Wednesday, 3 June 1942

Senator CRAWFORD - We are not Huns.

Senator A J McLACHLAN (SOUTH AUSTRALIA) - The honorable senator will remember that legislation which the present Government party held as dear as that providing any grant to the States had to be amended, and grants made under it to certain people had to be reduced because of financial circumstances then existing. Mr.

Forgan Smith has raised the query as to what might follow in the wake of this devastating war. He asks for security for these grants. This legislation is hardly satisfactory, because in case of necessity it could readily be repealed, although I do not think that any Government would do so unless it was absolutely driven to take such action. Nevertheless, the Premier of each State, as the person responsible to the people of his State for safeguarding its rights and interests, is more than justified in asking for more than a mere legislative enactment as security for these grants to the States. There are two vital issues so far as the States are concerned: First, the States have no right to bargain away their taxing power; and, secondly, these grants are not secured by this legislation, which may he repealed by Parliament within a few months. For these reasons, I am amazed that the Commonwealth did not make efforts to deal with this problem on a permanent basis rather than resort to the device of dealing with it under the defence powers of the Commonwealth. Section 105 of the Constitution provides machinery for taking over State debts. If that were done, this transaction would be placed on a permanent basis. The safeguard to the States should be embedded in the Constitution. I can find no authority which would lead me to believe that this legislation is constitutional. The Government has decked out this legislation with the object of making it attractive to the tribunals which will have to decide whether it comes within the scope of the Commonwealth's defence powers. I fail to see the distinction between this legislation and that which has been universally recognized as an exception to our power under the National Security Act. For instance, property taken under the National Security Act must be taken in the terms of the Constitution, notwithstanding the terms of the National Security Act. Under the Constitution, certain rights of freedom of religion are preserved to the people of this country. No government could take away those rights by any act of Parliament. Those things are inherent in the Constitution, and are secured because they are embedded in the Constitution. These proSenator posals should also be embedded in the Constitution in the form of an agreement along the lines set out in section 105. In that case, we might have to take over the States' debts. Would it not be a better process to clean up the position in that way ? We speak of uniform taxation. Some honorable senators have shown that these proposals cannot be described as uniform taxation proposals at all. Certainly, we must not consider them from the point of view as to how they may affect us as individual taxpayers. In matters of this kind which so closely concern the . Constitution, we must look not to to-morrow, or the day after, but hundreds of years ahead. .1 agree with Senator Large that a great many alterations may be made in the system of control as now exercised conjointly by the States and the Commonwealth. I am not a rigid adherent to the present system; but I cannot subscribe to unification in the broad sense in which Senator Spicer does. I prefer to ally myself with the views expressed by Senator Courtice in this matter. I am a federalist to the core. I believe in the balance that has already been achieved between the Commonwealth and the States; but I can see the need for alterations in many respects. However, when the States' right to tax is attacked, we shall never secure real uniformity in any sense. By this piece of legislative juggling, the Government seeks to take revenue out of the pockets of the people of Australia as a whole on a level footing. A man with an income of £400 in one State will pay the same tax as another man with the same income in another State. Having collected the revenue in that way, the Commonwealth proposes to ladle out to those States whose taxation has been high, not something taken out of the purses of the people resident in that State, but something that has been extracted from the pockets of the people of the Commonwealth as a whole. Such a method reminds me of the trick played by a gentleman who used to frequent the shows when I was a small boy. He would offer you a purse into which he would drop four sovereigns, and, placing the purse on the palm of his hand, would offer to sell it to you for £2. Any one who bought the purse would find that it contained not four sovereigns, but four half-pennies. That is the sort of thing the Government is doing in this case. The Government proposes to collect the taxes from the taxpayers as a whole, and with the revenue thereby received to subsidize the highest taxed States. That is the class of finance that has hypnotized this Government. I can understand how a master juggler in finance, or a mind which is as keen as a razor blade on financial matters, can dazzle people who do not deal with finance to the same degree. Although, in the past, I have received much money as a legal adviser from the Commonwealth and individuals, I candidly confess that to-day I do not think of making up my own income tax return. I shall not risk it, because I do not think that I am clever enough to cope with all the modern niceties of the income tax laws, both Commonwealth and State. I have always advocated simplicity in our taxation systems. Apparently no one wants simplicity and nobody can get it. We have bred in this community through the very department that has done so much good work for the Commonwealth a class of men who have gone from the department into the business world and have become experts in securing justice for the taxpayers. If the officers of the Taxation Department had acted as revenue officers as they should, they would not have let lie in their offices files which enabled these gentlemen to go to taxpayers and offer to secure for them a rebate of their taxes provided they paid these gentlemen a certain percentage of the amount refunded. That should not be the principle guiding our taxation system. I oppose the main bill because I doubt its validity. As one honorable senator said it is camouflage legislation. I should have preferred the Government to have gone the whole hog, but it could not go that far. The Government knew that the bill was unconstitutional so it was dressed up to look constitutional by the insertion of a' provision limiting its operation to the war period and one financial year thereafter. I think that the legislation will continue in operation after that period if it is held to be constitutional. It will be difficult to extricate ourselves from the situation in which we shall probably find ourselves after the war, and I hope that before that eventuality develops the States will be made secure. It is clear from the speeches of honorable senators on this, the Opposition side of the chamber, that this uniform taxation scheme is unjust in its incidence and on that ground alone I would vote against it. It would have been fairer had the Government said to the States, "Levy your income taxes on such and such a rate and collect them ; all the yield up to a certain amount you may retain and we shall take all the revenue above that level ". That arrangement might have been difficult to put into operation but it would have contained a certain element of justice. There is no security to the States in the Government's scheme and the States have no right to sacrifice their powers to impose income tax, because there is no power in their constitutions to justify a surrender of their taxing powers. There is a provision in the Constitution for the surrender of powers by the States, but that is not what the Commonwealth Government is aiming at. It is out to purchase something from the States. It says in effect to them, " We will give you so much money during the war provided you abandon your income tax". I do not think that the States under their constitutions can abandon the collection of their income taxes. The Minister for Aircraft Production (Senator Cameron), stated in an interjection during the debate that the objective of the legislation is to secure the levelling up of taxation. That objective will not be secured by the Government's scheme, because, as has been pointed out, the whole field of taxation is not being covered. The quantum of income tax in one State varies from the quantum in another. The Government is trying to perform an impossible task and one which I think will not stand an airing in the High Court. Moreover, it is not an act of justice on the part of this Parliament to every State of the Commonwealth. If anything exemplifies the blindness of the special committee that reported to the Government to a true sense of justice it is the omission to deduct the sum of £1,300,000 from the amount of compensation to be paid to the State of New South Wales. I do not desire to attack any State. I applaud the attitude of Mr. Forgan Smith, the Premier of Queensland, who realizes the insecure position in which that State will be left after this scheme begins to operate and the inability of the State to surrender its taxing power. By a sort of hypnotism exercised by the two gentlemen from New South Wales who were members of the parliamentary committee, Mr. Scullin, the other member, was persuaded to become a party to an act of injustice to the Commonwealth, which otherwise would have retained the amount of £1,300,000 in its coffers. I do not think Mr. Scullin would have agreed to such an act of injustice if he had not been persuaded to agree with the other two members of the committee. The Government's proposition that this measure is war legislation is hollow. The measure is garbed in such a way as to give it a semblance of constitutional authority. However, it will have to stand the test in the courts.

Senator Crawford - It will be an excellent thing for the lawyers.

Senator A J McLACHLAN (SOUTH AUSTRALIA) - Next to sugar I know nothing that is sweeter to lawyers than litigation of this kind. However, we should not be thinking of lawyers or sugar-growers.

Senator Courtice - The honorable senator is not thinking much of the war.

Senator A J McLACHLAN (SOUTH AUSTRALIA) - Honorable senators of the Labour party have been thinking of the war only recently. How they thundered when I, in my ministerial capacity in this chamber, tried to do something for the defence of Australia. They wanted to know what war the then government was talking about. It is better for them that their record in relation to defence over the last ten years should remain a closed book. What did they do for the defence of Australia during the last ten years except obstruct defence measures? Honorable senators on this, the Opposition side, are thinking of the war just as much as are honorable senators on the Government side. We take the long view. I am sure this scheme will be litigated. Will that be helpful to the war effort? If it be essential that more revenue should be obtained by the Commonwealth for the prosecution of the war the States should be consulted even at this, the eleventh hour. If ever there was a measure that ought to have been referred to a select committee of this Parliament it is this bill and the three associated bills. The measure is an attempt to take away from the States the right to tax which is given to them under the Constitution. Apparently the Constitution has been ignored by the Government and its advisers. One could be excused for thinking that this is a Parliament with plenary powers. Apparently the idea got into the heads of the Government and its advisers that because Australia is at war anything can be done by legislation. I believe that this bill should have been examined by a select committee on which the Senate would have had representation. The constitutional side and the incidence of income tax could have been better dealt with by a select committee than the special committee that the Government set up and which has not inspired confidence by the compilation of the figures contained in its report.

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