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Friday, 15 May 1942

Mr CHIFLEY (Macquarie) (Trea surer) . - by leave- - I move -

That the bill be now read a second time.

The Commonwealth to-day is confronted with the task of mobilizing the complete resources of the nation to withstand the most terrible ordeal to which it has ever been subjected. Its financial obligations have increased to such a degree that its expenditure on war materials and war services has assumed a magnitude far beyond anything previously imagined. During the last three years, war expenditure has totalled £515,000,000, and next year it is likely to amount to £360,000,000. The Government believes that in this emergency it must have available to it the maximum taxable capacity of the nation. The whole of the taxable field is not available to the Commonwealth while State taxes are levied upon incomes at various levels. If a single income tax be imposed to raise revenue for the requirements of both Commonwealth and States, it will be possible to levy that tax on every section of the taxable field, and apply it to the nation as a whole on the basis of equality of sacrifice and equality of citizenship.

The colossal sums which the Commonwealth has expended in the manufacture of munitions of war, and on the many services utilized for war purposes, have enlarged the field of income available for taxation. The government takes the definite view that the increased national income should be used solely for the benefit of Commonwealth revenue. The increased taxable capacity created by the Commonwealth's war expenditure has greatly increased the revenue of the States, and has absorbed the unemployed in respect of whom the States carried responsibility. The position, therefore, is that whilst the obligations of the Commonwealth have multiplied, the obligations of the States have diminished. In order to meet these conditions and this emergency, the Commonwealth has made two serious attempts in the last twelve months to find a solution to the competition between Commonwealth and State Governments in the income tax field. On both occasions its proposals have been summarily rejected on the plea that they represented an invasion of State rights.

No proper or due consideration has been given by the States to the national objective that should be reached during a time of war, nor have any acceptable alternatives been put forward for a solution of the problem.

Every honorable member who has occupied the position of Treasurer can testify that the differing rates of Commonwealth and State taxation form a maddening maze of figures which must be studied whenever the preparation of a budget calls for additional Commonwealth revenue. The position has become so serious that strong and definite action must be taken by the Commonwealth to cut this gordian knot, if any simplification of Commonwealth and State taxes is to be achieved in the interests of the war effort. During the serious crisis through which the nation is now passing every benefit which one section of the community has over another must be surrendered in the interests of total war. This measure and the accompanying bills to be introduced subsequently, are designed to achieve this purpose. Nothing short of complete control by the Commonwealth during the war will meet the huge demands that have to be faced. National rights must take precedence over all State rights. The rights of the sovereign people are paramount to the sovereign rights of States.

The Uniform Taxation Committee, appointed to consider the matter, has made unanimous -recommendations. The committee was composed of three members. The chairman was Professor R. C. Mills, who occupies the chair of Economics at the Sydney University, and as chairman of the Commonwealth Grants Commission, possesses a wide knowledge of public finance and the problems of the States. Another member was tha Right Honorable J. H. Scullin, a former Prime Minister and Treasurer, who possesses considerable political knowledge of the incidence of income tax as affecting the Commonwealth and States, owing to his many years of office and his association with taxation legislation. The third member, the Honorable E. S. Spooner, was formerly Acting Treasurer and Assistant Treasurer in the largest State of the Commonwealth, and was asso- ciated with the uniform taxation legislation as a representative of New South Wales, following upon the royal commission's report of 1932-34. This, combined with his professional knowledge as a public accountant of many years' standing, made him eminently suitable to act as a member of the Uniform Taxation Committee. No three gentlemen possessed of greater breadth of view for the task confronting the committee could have been found in the whole of Australia.

The Government, having carefully considered the committee's report, has decided to adopt the recommendations with a view to bringing about a single taxation authority for the period of the war, and one year thereafter. In order to achieve this result the States Grants (Income Tax Reimbursement) Bill 1942, and bills for the amendment of the Income Tax Act and the Income Tax Assessment Act will be introduced to accompany this bill.

The bill now before the House provides machinery for the temporary transfer to the Commonwealth of the trained staff and the accommodation and equipment used by the States for the purpose of collecting income tax. The Government is charged with the full responsibility of protecting Australia from invasion, and of producing all the munitions of war which are required. It must be able to command the full resources of the nation in revenue, manpower, and efficiency. This legislation is necessary for the purpose of collecting the revenue required with a minimum use of man-power and a maximum of efficiency. (The Government does not seek to take away from the States their power to impose taxes upon incomes, but proposes to make a payment of financial assistance to any State which agrees to suspend that power in the interests of the national defence. Another bill will provide for the payment of that financial assistance. I

It must be obvious to every honorable member that, short of the measures proposed by this Government, it is impossible to strike a satisfactory and equitable Commonwealth rate while the present varying rates of taxes in the various States remain. The proposed overriding

Commonwealth rates of taxation will, in themselves, it is estimated, give an added yield to the Commonwealth of from £12,000,000 to £15,000,000. The field of income from which this added yield will be derived consists mainly of the increased income due to Commonwealth war expenditure, the aggregation of interstate incomes, and those sources of income which are at present exempted from State taxation. It cannot be stressed too strongly that the Commonwealth need is to get the maximum yield from the income tax field. No scheme which does not give this to the Commonwealth can possibly be acceptable. With the heavy imposts of taxation required, it is more than ever necessary that contributions by taxpayers for Commonwealth and State purposes should be equalized according to their ability to pay. Even the present rate of Commonwealth tax cannot be equitably maintained as an impost additional to State income tax, because in some cases the total taxes payable amount to more than 20s. in the £1. Some relief from this position has been attempted by the provision in the Commonwealth law for a rebate of tax in any case where the combined rate of Commonwealth and State taxes exceeds 18s. in the £1. This provision is not fully effective, partly because it has not been adopted by the States, and partly because it applies only to the rate over the whole of the income, and not to the rate on the highest part of the income on which taxpayers may still pay more than 20s. in the £1. This and other difficulties can best be overcome by a single uniform taxation system administered by the Commonwealth.

This bill is to be commended for the measure of assistance that it will render to Commonwealth finance. It calls for the full support of all sections of the community because of the relief that it will afford from the complexities of taxation that commerce and industry, and the taxpaying public generally, have to face at the present time. Admittedly, some sections of the community will be required to pay more, but only those sections which can afford to pay. When the scheme is fully in operation, every taxpayer in the Commonwealth will be required to pay only one income tax instead of the many different taxes that he may be required to pay at present. On a given amount of income, the amount of tax payable will be the same in all parts of the Commonwealth. One universal code of rules will be used to assess and collect all income tax. This will make it reasonably practicable for every taxpayer to estimate the amount of tax for the payment of which he must make provision. At the present time, a taxpayer is required to pay both Commonwealth and State income taxes, and, in some States, may be required to pay as many as four State taxes on income. The provisions of the laws under which these taxes are assessed vary considerably, so that the taxpayer has a complex problem in checking his assessments or in estimating the amount of tax for which he must make provision.

It will be apparent to honorable members that the simplicity which this measure will achieve will result in the more efficient use of man-power employed by the taxation administration. It will also release a great deal of man-power now used by taxpayers by the elimination of much of the work involved in the preparation of taxation returns, in the checking of assessments, and in the conduct of taxation correspondence with the department. Certain of the income tax staffs of the States will be transferred temporarily to the service of the Commonwealth and the accommodation, furniture and equipment of the States will be used by the Commonwealth. In providing for the transfer of State officers, the bill preserves their existing and accruing rights and fixes a remuneration at least equal to their remuneration in the service of the States. Provision is made also for adequate rent or other payments to be made to the States for the use of office accommodation, furniture and equipment. Records which relate to Commonwealth income tax and which are in the possession of the States will be transferred to the possession of the Commonwealth. As those records also relate to State income tax, authorized officers of the State will be given all reasonable access to them.

The reform introduced by this bill supplies a long-felt want and I am confident that it will receive the approval of all sections of the House, and the community generally. It is designed to achieve the most efficient use of the resources of the nation at a time when all those resources are required to meet the armed might of our enemies.

Debate on motion (by Mr. Fadden) adjourned.

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