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Friday, 24 August 1923

Mr WEST (East Sydney) .- The Government has made a huge blunder in making this agreement. The first Conference of Commonwealth and State Minister's which dealt with this matter was attended, on behalf of the Commonwealth Government, by the right honorable member for Balaclava (Mr. Watt), who was then Commonwealth Treasurer. He put a practical scheme before the Conference. I believe that he i3 a good Australian. I cannot say the same for the Commonwealth representatives at the conference which earlier in this year considered the matter. Those honorable gentlemen seemed to agree to whatever the State representatives put before them. They are what are known in the Labour party as "State righters." The proposal made by the right honorable member for Balaclava was that the capitation grant to the States should be gradually reduced until it was wiped out. Honorable members know that under the Braddon clause in the Constitution the States lost a considerable amount of the Customs and Excise duty. It was provided in. that clause that the arrangement made should he reviewed in ten years. At the end of ten years it was reviewed by the Labour Government, which arranged with the States that the Commonwealth Government should retain the whole of the Customs and Excise duties, and should pay to the States a capitation grant of 25s. for a further period of ten years, when the matter was to be again reviewed. At the end of the second period of tcn years our present Speaker, the right honorable member for Balaclava (Mr. Watt), was Treasurer of the Commonwealth, and in addressing the Conference of Commonwealth and State Ministers which met to consider the financial situation, he propounded his scheme for a gradual reduction of the grant. He stated that" that was necessary because of the heavy war expenditure incurred by the Commonwealth Government. He pointed out that under his suggestion the States would, in the year 1921-22, receive £684,000 less capitation grant than in the preceding year, and the figures for the following years, up to 1925-26, were as follow: - 1921-22, £1,407,000; 1922-23, £2,170,000; 1923-24, £2,977,000; 1924-25, £3,827,000; 1925-26, £4,726,000. He stated that the States would, during those years, be able to make provision to meet the loss incurred by the reduction in the capitation payments. He stated in the most emphatic way that the Commonwealth Government, on account of its heavy war expenditure, would be unable to continue the payment of the grant. In reply to the Honorable W. A. Holman, then Premier of New South Wales, he said that there was not the slightest hope of the Commonwealth Government surrendering any of its taxation powers. He added that the Commonwealth Government, on account of the heavy burden of debt it had to carry, would have to retain all the taxation powers that it then possessed, and the States would have to make up their mind to accept that situation. I do not know what was in the minds of the honorable gentlemen who at- tended the Conference on behalf of the Commonwealth Government this year. I believe that they had some ulterior motive in agreeing to the proposals which are now before us. We know that some of the members of the composite Ministry are in favour of the New States movement, and no doubt they hope that at the end of five years, if they are still in power - which God forbid ! - they will be able to make some provision to establish new States, and set up new Parliament Houses, and all the paraphernalia of government which may be necessary. The people of Australia are strongly in favour of reducing the cost of parliamentary government. They certainly do not want to see the creation of new States with all their parliamentary and official paraphernalia. I am satisfied that in the Commonwealth Taxation Department we have a splendid body of highly trained public servants, and that the proposed retrenchment will be a serious loss to the Government. The proposal is foredoomed to failure. Before long we shall have to begin de novo and gather together a new staff for the Department. I agree with the principle that there should be only one collecting authority, and that authority should be the Commonwealth. If members of this composite Government had had a true appreciation of their responsibilities they would have taken a strong stand in the conference, and insisted upon the collection of income taxation by the central authority. The adoption of the agreement will result in the loss to the Commonwealth of a large number of highly trained and exceedingly efficient officers. A policy of economy that does not insure efficiency is no economy at all. The Government proposal is exceedingly dangerous from this point of view. Honorable members should not be expected to pass such important legislation as this at express speed. It is impossible in the limited time at our disposal to give this measure adequate consideration. Up to the present the Treasurer has finalized an agreement with only one State. I doubt very much if Sir Henry Barwell, the Premier of South Australia, will come into line, and I am satisfied that Sir William Mcpherson, keen Scotchman that he is, will be no party to an agreement that is likely to land the Victorian Government in any difficulty. The proposal is doomed to failure. It is not founded on right principles. Honorable members have no information as to the details of the agreement. I believe that the cost of collection, instead of being reduced, will be increased, because the State Taxation Departments will have to add to their collecting staffs. Unfortunately, there is little prospect of another general election for a couple of years, so I suppose this muddle will be continued and the taxpayers will be annoyed until they have an opportunity of expressing their opinion upon this composite Government at the ballot-box. The agreement will create confusion in every direction. People will not know how much or to whom they will be called upon to pay. I do not know where I stand, but I am not going to worry about that. I shall wait till I receive a notice. It would be unwise to retrench in' the Taxation Department at this stage. In view of the muddle which is sure to be created by this proposal, it would be better to retain the services of these trained officers. They might be placed in reserve, as it were, and given some other employment until the Government know definitely what is likely to happen. I should be very much interested to hear you, Mr. Speaker, on the floor of the House, express your opinion of thi3 scheme. It is most unsatisfactory in every respect. Sir Arthur Cocks, the Treasurer of New South Wales, has been very much troubled about the effect ' of this agreement upon taxpayers in his State. Until there is uniformity in assessments and exemptions, the agreement is not at all likely to be successful. In New South Wales, for instance, the exemption is £250 and £50 for each child under the age of sixteen years, whereas under the Commonwealth the exemption at the time of the Conference, was £200 and £30 for each child. Do not honorable members see what confusion will be caused by such discrepancies ? His view is, as the result of the' agreement the New South Wales Government will be obliged to place a heavier impost on small and medium incomes, because they will not be able to deal with aggregate incomes or companies. He claims that the abandonment of the taxation of aggregate incomes will benefit the big taxpayers of the Commonwealth to the extent of £2,000,000, and that in order to make good an estimated loss to the State of about £200,000, the New South Wales Government will have to increase the taxation on the smaller incomes. He realizes that as the State Government are already in bad odour, further taxation difficulties will result in their complete obliteration at the next elections. If the taxpayers are annoyed, they will give no assistance to the Department in the collection of taxation. If the Treasurer is concerned about the success of the New State movement, I think that in submitting this Bill he has done the last thing he should have done. He should have submitted legislation to make the Federal authority the sole taxing power, and should gradually have worked towards Unification. With Unification there would be no trouble in the creation of new States. I am not opposed to the creation of new States if their- boundaries are fixed and their Constitutions are framed by this Parliament. The laws for the government of Australia should be passed by this Parliament, but there is no reason why the management of local affairs should not be left to local authorities. If the bodies given the management of local affairs are called Local Governments, that will probably please gentlemen who are anxious to be Premiers of small States. It would lessen the cost of government if the management of local affairs were placed in the hands of local authorities. I am prepared to assist the New State movement, but the whole matter must be managed by the Federal Parliament. If the subdivision of the existing States is to be left to the State Parliaments, it will not be brought about within the life-time of any member of this House. If different authorities are to have the right of taxation, we shall never have economy, and what is done will only defeat the intention of. the people that the Federal Parliament should carry on the government of Australia. It may not be quite relevant to the subject, but I should like to say that I consider there are some very dangerous provisions in the Companies Bill, lt would appear that people in a small way of business will be very foolish if they do not put their affairs into a company, as by doing so they may save themselves thousands of pounds in taxes. Another dangerous feature of the proposal to leave to the State Parliaments the imposition and collection of income tax is that they will not be likely to . impose such taxation on democratic lines, though that might be done if there were Labour Governments in all of. the States. Wo know that the Federal Parliament has endeavoured to apply democratic principles to the income tax, and has provided that individuals shall pay tax in proportion to their incomes. The members of the Premiers' Conference were men largely concerned in public companies, and they seemed to have considered only the interests of the people with whom they are associated, and to have ignored those of the industrial section. I admit that I have only .skimmed over the report of. the Conference, but it appears to me that the members of it were concerned to relieve the wealthier section of the community, and to abolish, if possible, the graduated tax upon incomes. They know that, so long as the Federal Parliament has control of the matter, there is no possibility of that principle being departed from, and they feel that if the control of. income tax is handed over to the State Parliaments, it will be possible to abolish that principle. It should be remembered that Australia is not the only country in which there is a graduated income tax. In the United States of America there is no tax imposed upon incomes under £500, but the man who enjoys an income of £10,000 or £15,000 a year is called on to part up very handsomely. It was the graduated principle of our income tax that worried the gentlemen who attended the Conference of Ministers. We know that the Federal Parliament will always be more democratic than the State Parliaments because, with the exception of Queensland, there are Upper Houses in all of the States that take great care of the interests of those who enjoy the highest incomes, and endeavour to relieve them of taxation. After all, it is the industrial section of the community that pays the greatest amount in taxation. Every one has to pay Excise and Customs duties, which are imposed on! food and commodities which all the people must have. No matter how high a man's income may be he will not consume very much more than is consumed by a man earning only £4 per week. I feel very keenly about what occurred at the Conference of Ministers, because I consider that at that Conference a very dangerous attempt was made to shift the burden of taxation from those who can best bear it to those who are least able to do so. I now personally some of the gentlemen who were members of the Conference, and I know that

Mr. West.their social connexions would prompt them to do that sort of thing. I consider this a dangerous Bill. I have no desire to -get rid of the officials of the Taxation Department. A number of people in Sydney dp not think that they should pay any tax at all, and possibly there are people in other parts of Australia who hold the same view. There are some who are unable to understand their assessments, and their difficulties have brought me into close touch with the officers of the Department in Sydney. I must say that I have found them to .be possessed of more than ordinary ability. I regard the action of the Government in submitting this measure as whimsical. No member of the Ministry can tell us what is likely to be its outcome. The Press has been, able to throw very little light on the matter, and we know only that it has led to misunderstanding and discontent. In my . view it is a dangerous thing to give the Government power to dismiss the officials of the Commonwealth Taxation Department, and this measure might very well have been allowed to stand over until the Prime Minister returned from England. I do not know what the right honorable gentleman is going to do there, but by the time he returns it is possible that every one will agree that in passing this measure we have committed a serious error, and must go back to where we were before the Conference was held.

Mr Forde - How many employees are there in the Taxation Department in Sydney ?

Mr WEST - I do not know, but my view is that none of them should be. got rid of. I consider that the Government would be wise to withdraw this Bill until the Prime Minister has returned from the Old Country. If possible, the Commonwealth officers should be transferred to the States. I believe the Federal servants are of a high calibre, and understand their business better than do the State servants. I urge the Government to put the Bill aside for reconsideration on the Prime Minister's return from England. To-day we know nothing of these proposals. If the States require assistance in the collection of income tax, they should absorb the Commonwealth officers. I cannot see how the income tax returns will be simplified. Many of the large businesses in Sydney have branches throughout the various States, and many primary producers have interests in several States, and in those cases there will be great confusion in the collection of income tax. I regret that the proposal was ever made at the Conference with the State Ministers. I hope that a Government will soon be in power with a Federal spirit, and willing to recognise' that it is the Commonwealth's right to collect income tax, and disburse it to the various States

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