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Thursday, 17 September 1942

Senator KEANE (Victoria) (Minister for Trade and Customs) . - I move- -

That the bill be now read a second time.

This bill gives effect to arrangements made by the Government with the States upon their agreement to vacate the field of entertainments tax ' and to leave it wholly to the Commonwealth. The bill provides, for the compensation payable to the States for the balance of the current year and also for the annual amounts of compensation to be paid during the period in which the act will be in operation. At a. conference of Commonwealth and State Ministers held recently in Melbourne, the government approached the States with the proposal, to vacate this field and leave it to the Commonwealth. It was suggested to the States that they should be compensated upon the basis of the average of their annual collections for the financial years 1940-41 find 1941-42. In proposing this basis of compensation the Government adopted a principle similar to that recommended by the Committee on Uniform Taxation for the purpose of compensating the State, for vacating the income-tax field. Tasmania agreed at the conference to vacate the field upon the conditions suggested by the Commonwealth. The other States asked that the Commonwealth proposals be put in writing in order that they could give further consideration to the matter. This was clone, and some of the States requested that compensation should be paid on the basis of the revenue derived by them from this source for the financial year 1941-42 instead of the average of that and the previous year as suggested by the Commonwealth. The Government gave consideration to this request and while adhering to its opinion that the basis proposed by it was reasonable it decided, in view of the relatively small amounts involved in the change of basis, to grant the request. The compensation will, therefore, be paid to the five State governments which had entered the field of entertainments tax upon the basis of the revenue derived by them from this source during the year ended 30th June, 1942. The Queensland Government had not imposed any entertainments tax in that State, and, consequently, it has not been necessary to provide for compensation to that State.

The bill provides in the first schedule for the amounts payable to the States for the balance of the current financial year provided that they cease to collect an entertainments tax under their acts as from the date on which the Commonwealth provisions come into operation. The second schedule provides the amounts to be paid each year during which the act is in operation. They are -


lt is pro-posed to introduce the Commonwealth tax on a date to be fixed by proclamation, and it is expected that the five State governments concerned will cease collecting entertainments tax from that date. Upon the assumption that the proclaimed date will be the 1st October, 1942, and that the States cease to collect the tax the compensation payable for the balance of the current financial year will aggregate £574,341, and will be payable to the States as follows: -


The amount in each case represents three-fourths of the annual amount payable. It may be thought that the Government has been over-generous in the matter of these grants. If it had compensated the States on the average of the years 1939-40 and 1940-41, being the years chosen by the Committee on Uniform Taxation as a basis for income tax compensation, the total amount payable for ;i full year would have been about £700,000. Had the basis proposed by the Government at the conference of Commonwealth and State Ministers been adopted, i.e., (he average of the financial years 1940-41 and 1941-42, the amount payable would not have exceeded £750,000. The basis adopted will result in the annual amount being approximately £766,000 and this will be paid without any reduction on account of the savings in costs of collections which will accrue to the States from vacating the field. For the current year the only adjustment, made in the annual sum is to reduce it by an average of three months'" revenue- for .1942-43, representing the proportion of the current year for which the States have collected the tax. As an offset to the foregoing it is to be borne in mind that in the first year the States may be called upon to repay to persons conducting entertainments amounts collected ir> respect, of stamp tickets purchased iii advance. They may also have to refund the tax paid on lump sum payments by members of clubs, societies, irc, applicable to entertainments which will not lake place until after the Commonwealth tax commences and the State tax ceases to operate. The bill provides that, the act shall operate for the duration of the Avar and one year thereafter.

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