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Wednesday, 17 December 1941

Mr CHIFLEY (MACQUARIE, NEW SOUTH WALES) (Treasurer) . - by leave - I move -

That the motion be amended as follows: -

(a)   by adding at the end of paragraph (1) the words ", or, in the case of a member of the Defence Force having a war tax income which includes pay and allowances earned by him as a member of that force, exceeds Two hundred pounds.";

(b)   by inserting after "person" (first occurring) in paragraph (3) the words "for any financial year";

(c)   by adding at the end of paragraph (3) the words ", or, in the case of a member of the Defence Force having a war tax income which includes pay and allowances earned by him as a member of that force, exceeds Two hundred pounds."; and

(d)   by inserting after "pay" in paragraph (4) the words "for any financial year".

The' amendment I have moved' will give effect to a decision of the Government that personnel, of the fighting; forces,, in the lower ranks,, shall not be' called upon to> contribute a. special waa." tax. Accordingly, liability for waa- tax. will not. apply to a Member of the forces whose pay does noi exceed £200..

It is also proposed that the war tax shall not be imposed on the dependants' allowances which are paid in respect- of tha wife and children and other dependants of a member of the forces. This; exemption will apply to all ranks and' will be. expressed by way of amendment, to* the Income Tax Assessment Act. The amount of pay remaining te the soldier himself after allowances, have been deducted is. so small that it would be a grave hardship to impose a- tas. upon it, whilst, to impose a tax upon the allowances would be to create a. bad psychological effect. Therefore, the Government, after considering the matter this morning^ decided that the terms, of the resolution would have to be amended so as to exclude soldiers' pay up to- £200. Certain anomalies have also been, created in respect of recent legislation, because the payment, of child endowment has, in. some instances-, created a new set- of conditions'.

Amendment agreed- to.

Mr. FADDEN(Darling. DownsLeader of the Opposition) [3.50}. - It; is just about two and a half months, ago since the party which I led was displaced, and the Labour party took over the administration. Our Government was defeated because of the budget which it introduced. That budget, was formulated and presented to the House as a. measure designed to meet the situation then existing, and in anticipation of what the nation might be confronted with in the future. The Labour party strenuously opposed our budget, not on principle, but because,, so it said, we were treating harshly and unfairly those in receipt of low incomes. We, with a full realization. of the quantum of tax available from the lower ranges of incomes, sought toobtain from them, for the- financing, of this all-in war effort, a. just contribution. The taxable field which we proposed to tap amounted to £560,000^000, or 70 per cent, of the taxable capacity of the nation. That huge amount is made up of incomes below £400 a year. The only satisfaction which the- Opposition can have in the present measure is that the action, being taken by the Government to-day totally vindicates our policy which Parliament rejected less than three months ago. .1 do not know what the honorable member for Henty (Mr. Coles:) thinks- about it, having regard to the measure now before the House, and to the fact that the country was promised that the financial position would be reviewed early in the New Year1. Now the Government has brought down a measure which treats tint low incomes more harshly than we proposed to treat them. This measure provides that the whole amount shall be raised in the form of a; direct, tax, whereas we proposed that a. part of the money raised would be in the form of a post-waa?' credit or, if you like, a. compulsory loan. The Government seeks* to obtain £24,500,000 in a foll financial year, of which £20,000^000 is to he provided by individual taxpayers, and £4,500,000 will represent a further infliction upon the already overtaxed companies. Where is- thi.? £20,000,000 to come front? This is the amount, which is to be assessed for a full year, not the amount which it is expected will be received in. this financial year. Honorable members should not be misled regarding the amount which will be available to. finance the war as the result of this. provision.. Of the £30,000,000, £11,800,000' is to be raised from incomes of less- than £400 a year. This, represents 2.7 per cent, of the taxable income of £560,000,000, made up of incomes below £400 a year.. This amount of £11,800,000 can be compared with the amount of £7,750,000 which we proposed to raise under the system of post-war credits. Under that system the taxpayer would be- given, a credit, to be redeemed, after the- war, some-tiling that would assist him during the period of post-war reconstruction. Compare that with the straight-out taxation proposal;? of the present Government. Those in receipt of the lower incomes- are being asked to- contribute only 2.7 per cent, of a total of £560,000,000, and it must not be overlooked that that total is based, upon last year's figures. It is an everexpanding total, and will increase as. war expenditure increases. Yet the Government, at i his ti mm- of national emergency, timidly asks those whose incomes make up a total of £560,000.000 to contribute only 2.7 per cent, of that amount. It must not be forgotten that those in the lower income ranges receive by far the greater part of the annual child endowment payments of £1.3,000,000. When their receipts from child endowment are taken into consideration, it is probable that they will not be required to contribute more than 1 per cent, of the total of £560,000,000. The Government is not taking a realistic view of the situation. It is even camouflaging its demands by placing a super-impost on incomes over £400 a year, the minimum contribution under this provision is 6d. in the £1 on incomes up to £300 a year, whilst on incomes over that amount the tax is ls. in the £1. This impost is in addition to the disastrously high taxation already collected on incomes of £1,000 a year and more. I hold no brief for the persons in the higher ranges of income, but I warn the Treasurer that the Government, in imposing this additional tax, will pass beyond the limit of safety. Already, salaries exceeding £1,500 per annum are so overtaxed that the Government has imposed a "ceiling" of 18s. in the £1. The Treasurer has omitted to explain whether that limit will l>e affected by the new impost. If the limit is to be raised to 19s. in the £1, the effect upon our economic life and the earning capacity of the nation will be calamitous. The Government has failed to tackle this problem fairly and honestly by taxing the lower ranges of income.

The Opposition has had very little opportunity to examine the new proposals, but it is noteworthy that whilst the lower ranges of income between £156 and £300 a year will be taxed at the rate of 6d. in the £1, a system of rebates will operate. For each dependant, a rebate of ls. a week will be allowed, which will substantially reduce the rate of 6d. in the £1. I am both surprised and disappointed that, in this emergency, the Government has failed to adopt the only honest course of imposing taxation upon an equitable and sensible basis. The Opposition does not desire unnecessarily to criticize the efforts of the Go- vernment to obtain money for the purpose of waging the war, and desires to assist the Treasurer in every possible way. But the fact remains that the previous Government adopted a realistic outlook in order to safeguard to the maximum degree our lives and our possessions. The present Government has neglected to take similar precautions.

I propose to examine the reason that the Treasurer gave last evening for introducing these taxation proposals at this juncture. Two months ago, the Government's avowed policy was based upon extreme confidence. The Government had confidence that the people would voluntarily contribute to war loans and war savings certificates, and deprive themselves of luxuries in order to divert, their spending power from civil consumption to war activities. In a few weeks, the Government has discovered to its dismay that its optimism, as the Opposition prophesied, was ill-founded. The previous Government recognized that the nation cannot possible finance an adequate war effort by handing round the hat, or a " tarpaulin muster ", and that Australians have to be compelled to contribute their just proportion to war finance. This is no time for appeals to the people voluntarily to support war loans. The peril demands immediate action, and the people look to the Government for a lead.

As only meagre information has been placed at our disposal, I have experienced some difficulty in preparing constructive criticism of the Government's taxation proposals. In fact, the Treasurer has supplied to the House no worthwhile information to enable honorable members to estimate whether his proposals are sound. The honorable gentleman declared that approval of the new tax was being sought at the present juncture for the purpose of financing exceptional war expenditure that will be incurred by the entry of Japan into the conflict. According to his estimate, between £40,000,000 and £50,000,000 will be required in addition to the provision that the Chifley budget made two months ago. No data have been supplied to honorable members to enable them to gauge whether the estimated rate of expenditure is being exceeded, whether estimates of revenue are being realized, and whether the manpower and resources of the country are being adequately exploited. Personally, I doubt whether the budget estimates are being realized; hut, for the present, I shall assume that the Government requires an additional £40,000,000 or £50,000,000. The Treasurer is rapidly approaching the danger point in finance. Definitely, the Government must now realize, since the Labour party rejected the Fadden budget, the difference between responsibility and irresponsibility. Although the Fadden budget contained a gap of £122,000,000 between revenue and expenditure, the money could have been obtained by voluntary loans without disturbing the soundness of our economic structure. [Extension of time granted. J My plan also provided for the sensible use of bank credit. The Chifley budget, which was substituted for the Fadden budget, originally required the finding of £137,000,000 by voluntary loans, but in response to representations by the Opposition regarding anomalies in the lax proposals, the gap was widened to £139,000,000. I remind honorable member 8 that the previous Government, considered that the figure of £122,000,000 approached the danger point; the present Government i3 obliged to find an additional £17,000,000.

The proposed new tax will bring to the Treasury approximately £12,000,000 during the remainder of the financial year, leaving the Government still to find £5,000,000 to make up the leeway of £17,000,000. But the proceeds from" this tax will not contribute ls. towards the extraordinary expenditure of £40,000,000 or £50,000fi00 which the Treasurer urgently requires for the accelerated war effort. In my opinion, the Government is venturing far beyond the danger point and Australia will suffer severely from the effects of inflation. That could have been avoided if the Government had measured up to its responsibility by obtaining the money by equitable taxation, and by diverting money from Clv 1 consumption to war activities. Deposits in the savings banks have grown substantially since th|e outbreak of war and retail turnovers have increased. Those are danger signs, indicating that there is too much spending power in the community and that jio definite plan has been devised for diverting purchasing power from civil consumption to war needs. The Opposition recognizes that money must be found to wage the war, but honorable members on his side of the chamber must criticize the methods which the Government has employed to obtain the requisite finance. J still believe that, a method of compulsory saving must be introduced, because the burdens which the war imposes must be more equitably distributed than they a\e at present. That implies that the loveir ranges of income must, in the circuns' inces, contribute to a greater de, 0, than they are doing now. The .den budget, if it had been adopted .Id have honestly met the situation am, 'ould have created a wise psychology 'f saving among citizens, who would have accepted their responsibility to Australia by sharing in this great national effort.

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