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Wednesday, 31 July 1946

Mr SPENDER (Warringah) .-' Had this debate been broadcast to-day, the people of Tumut and Wagga who had cared to listen to it would have heard the rodomontade that has just been delivered by the honorable member for Hume (Mr. Fuller). His remarks had no connexion with the resolution which the committee is considering. Nevertheless, I shall be compelled to observe the ruling of the Chair in that regard. I shall not endeavour to refer to the so-called argument of the honorable member, because I have been left completely in the air by it and can find no argument to refute. What we have to consider are the rates of taxes that are to be imposed in thisfinancial year.

The first matter to which I direct attention is the Government's pretence that the proposed .reduction of taxes,, which it claims will involve a loss to the revenue of £17,500,000, is the utmost that can- be made at the present time, and, indeed, represents a real contribution to the taxpayer. The memorandum circulated with the resolution sets out at page 2 the incomes that will have to be earned by different persons in order to bring them within the taxable scale. It is rather important that I should point to something which does not appear to have sunk home sufficiently in the minds of honorable members occupying the Government benches, namely, that the whole picture cannot be viewed by looking merely at what the direct income tax happens to be; one must also take into consideration the indirect .taxes' that have to be paid. As my time is limited, I can give only a brief outline. It is worth while to point out that indirect taxation totals over £100,000,000 per If that be divided by the total number of human beings in this continent - the old and the young; the infant in arms ; the invalid.; and those who are about to. depart from- this "vale of tears" - it will be found that the taximposed upon each of them is approximately £1S per annum. I should have thought that the Labour party, in particular, would have been the first party to direct. its attention to indirect taxes, which bear directly on the man with a low income.

Mr Sheehan - They are imposed mostly on luxuries.

Mr SPENDER - That is not correct. The honorable member shows by his interjection that he has? no knowledge of the sources from which the revenue from indirect taxes is derived. In 1943, there were 3,370,000 wage-earners in the Commonwealth of Australia, of whom 2,930,000, or 87 per cent., earned £8 a week or less, the average income of the total number being £247. a year. Deducting the amounts allowable in respect of wife, children and medical expenses, we find that the net income is approximately £147 « year, and on that the tax is about <£9. Indirect taxes are hidden, and affect the cost of everything that has to be purchased. For example, there is a 12$ per cent, sales tax - on furniture, carpets, linoleum, crockery, kitchenware, electric irons, and cutlery. Every man, even one on the smallest income, pays a substantial proportion of the .amount that he earns annually on the sum. of those items. The sales tax collections in that year- totalled £29,672,000, an average of £4 0s. lOd. a head of the population. The excise tax totalled £46,000,000, an average of £6 8s. a head. The customs tax totalled £21,000,000, an average of £2 15s. The entertainment tax totalled £6,981,000, an average of 19s. Id. a head. In order to illustrate the hearing which indirect taxes have on the poor man, I point out that he strikes on behalf of the Government one-half of every box of matches that Be uses. The Government should take steps to relieve the man on the low income of the harsh burden that is laid on him by indirect taxes. I do not claim that that can be done in rapid steps ; but I do contend that some steps to that end can be taken, particularly in the removal of sales tax from capital goods, which would enable purchasers to refurnish their homes at a much lower cost, after being denied the things they have needed during the last six years. There has been no attempt to deal with this form of taxation, which hears with particular severity on the working man.

My next point deals with the property tax. The property rates are iniquitous,' particularly on low incomes. I have in mind, not the business tycoons about whom we hear so much from honorable members opposite whenever they speak, but the people on low incomes who endeavour to save and invest, so that, when they reach the end of their working days, they may not be dependent upon any government, or the charity of any person or institution. I say deliberately, that such persons are taxed at so high a rate that many are worse off than are others who have made no provision for themselves and are drawing the old-age pension. Let ' me cite a case which is typical of many cases of which "every honorable member in this House has knowledge. It is that of a retired railway employee who has a pension of £111 a year. He also has a cottage, which he was able to purchase by saving during his working days. Because the cottage is the property of his wife, she is said to be not dependent on her husband, and he is regarded as having an income of something over £200, On which has to pay a tax of £23. - There should be a more, sympathetic approach to those who are on the lower ranges cif property income, so that some encouragement might he given' to thrift.

My next point deals with the treatment of persons who' have a mixed" income, from . personal exertion and property. In this respect, too, there should be a completely new approach in the years that lie ahead, by whoever happens to he in charge of the treasury bench. A person with an income of £50 from property and £500 from personal exertion, is taxed on both amounts at the rate applicable to a property income of £550. Every one of us knows that a person who endeavours to improve his ' position by investing in property ultimately finds that his investment' is of no value to him.

I shall next deal with the discouragement of thrift by the policy pursued by the Government in respect of trust accounts, usually in the Commonwealth Bank, established by parents on behalf of their children who have not reached- the age of 21 years. The interest payable on the savings bank account is added to the income of the father and is taxable at the personal exertion rate applicable to the total amount. I cannot imagine any result that would be more disgraceful. A parent may set aside£3 or£4 a month, or a quarter, for the establishment of a fund on which his children may rely for their education, or in sickness, or for setting themselves up in life.

Mr Anthony - Does the father operate on the fund?

Mr SPENDER - I am speaking of a genuine trust account, which really belongs not to the parent but to his children. There is no need for a provision to deal with a fake trust account because, according to income tax practice, the income is regarded as that of the parent. The matter cries to high heaven for quick redress.

I should like to have a statement from the Minister upon the matters I have raised. Although they are not of great magnitude, they are of considerable consequence to many persons.

I shall deal now with the company tax. The schedule we are considering does not make any provision for the reduction of that tax. I have heard it said that any one who advances the suggestion that the company tax ought to be reduced is, to use the customary political jargon, appearing or. holding a brief on behalf of " big business ". It would be a good thing to have regard, first to the part which companies play in the economic life of the community; secondly, to the number of shareholders in the big companies which so frequently are the object of attack; and thirdly, to the manner in which specialwar-time imposts in other countries have been treated. It is a favourite stratagem of Labour members, when criticized upon any matter - for example, coal - to state the position in other parts of the world. Well, if I may be forgiven, I propose to say something along the same lines, in order to show how company taxation has been dealt with in other parts of the world. In the United States of America, Canada and Great Britain there have been substantial reductions of war-time imposts. In Australia, we imposed a special wartime company tax which is dependent upon the amount of profit earned by a company in relation to shareholders' funds used in the company. It would be a good thing to start progressively reducing this tax - or does the Government intend to make a permanent part of our taxation system what was intended to be a purely war-time expedient?I hold no brief for any company, nor have I ever in this House held a brief for big business, any more than has any other honorable member on this side of the House.

The CHAIRMAN - The honorable member's time has expired.

Mr SPENDER - If no other honorable member wishes to speak, I shalltake my second period now. It is true, that during the war, companies earned profits largely because of the. peculiar circumstances arising out of the war. The activities of most companies were directed to war production. There was no sale organization to maintain, because order came in automatically from government departments, and overhead costs were reduced to a minimum. Consequently profits were earned, as has been shown in the statistics. Notwithstanding this there are two factorswhich should now be considered. The first is that, according to the most recent statistics, then has already been a diminution of company returns. Secondly - and only those actively engaged in business know the truth of this - very serious problems exist in connexion with the change-over from war-time to peace-time conditions problems beyond the normal, and associated with the shortage of materials and labour. When we realizethat companies are allowed only a miserable rebate for depreciation of machinery, it becomes all the more evident that some taxation relief should be afforded as soon as possible.

Companies pay a general tax of 6s. in the£1, a super-tax of1s. in the £1, 10 per cent. on undistributed profits, and the war-time company tax. I know that the theory is widely held that companies are something quite distinct from their shareholders. In a legal sense that is true, and in time of war it was justifiable to make such an artificial distinction, but now that peace has returned, such heavy taxation on companies cannot be regarded as otherthan a dual impost on those who invest their money incompanies. After all, it is their money which establishes the company; the funds which they provide make up the funds of the company; yet, before they receive any return on their investment, the Government makes this huge rake-off from the company's earnings. In 1943-44, 15,697 companies in Australia paid£54,831,000 or 27 per cent. of all direct taxation. Their assessments included £3,305,000 of supertax, £3,154,000 of war-time company tax, and £10,360,000 of undistributed profits tax. It is easily seen that taxation on this scale denies industry the means to expand, a fact that has long been recognized in other countries. For instance, in the United States of America, cuts have been made which- involve £980,000,000 in excess profits tax - which is the same as our war-time company tax - sur-tax, and capital stock tax. In Canada, the standard rate of 40 per cent. has been reduced to 30 per cent. and the excess profits tax from 20 per cent. to 15 per cent. In South Africa, excess profits tax has been reduced from 15s. to10s. in the £1, whilst in the United Kingdom excess profits tax is to he discontinued this year, and there is to be a reduction of the standard rate from 10s. to 9s. in the £1. In Australia, however, no attempt has been made to reduce company taxation. If only some relief were given in regard to the super-tax, or the war-time company tax, it would greatly help the economy of the country. There seems to me to be a great fallacy in the Government's reasoning, in that Ministers hold the view that if taxes are cut the revenue must decline. The fact is, that in times of expanding enterprise such as the present, if taxation is reduced within certain limits the total yield will almost inevitably increase, and this certainly applies to company taxation.

During a previous debate, I contested the Treasurer's claim that taxpayers would benefit by as much as £17,000,000 this year as a result of tax cuts. I have here a letter written by the Treasurer (Mr. Chifley) to the honor- able member for Darling Downs (Mr. Fadden), in which he said that it was unlikely that the 1946-47 collections of revenue would be affected by more than £15,500,000 by the tax cuts. We may be sure that that was an over estimate. Even on that basis, however, the tax cuts amount to no more than a reduction of7½ per cent. of collections from direct taxation, or 5 per cent. of the total collections for last year from all taxation, direct and indirect. Viewed in this light, it is evident that the Government has made no real attempt to afford relief to taxpayers, but has merely made a political gesture which was wrung from it by the insistent demand of public opinion.

I hope that tax rates on income from property will be reduced, in favour of the persons on small incomes. I hope that, in the case of composite incomes, the Government will abandon the iniquitous proposition that the whole of the property income must be taxed at a rate applicable to the' total income of the individual. In particular, I appeal to the Government to amend section 102 of the Income Tax Assessment Act, wthich must be read in conjunction with sections 95, 98 and 99, so as to limit taxation of genuine trust accounts and genuine trust property to income derived from them at a rate that such income itself would attract. Where parents have established genuine trust accounts for the benefit of their children they should not be penalized for their thrift and foresight.

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