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Wednesday, 24 October 1956

Mr KILLEN (Moreton) .- A great deal could be said about the speech of the honorable member for Port Adelaide (Mr. Thompson), but I resist the temptation. The only thing I say about his speech is that he omitted to inform the House that in the seven or eight years before 1949, when Labour was in office, no special grants of this description were made to supplement the tax reimbursements to the States. That, to my mind, is a notable omission. Of course, it may have been quite unintentional on the honorable gentleman's part, but I feel that this reference is pertinent to his observations. When related to that simple fact, some of his arguments collapse.

This is a bill to provide for payment to the States of a sum of £20,450,00. Apart from that, the legislation achieves a number of things. In the first place, it brings into clear relief the fact that this is an opportunity for this Parliament to reconsider Commonwealth-State financial relationships. 1 suppose that the great majority of taxpayers, in a sense, are perfectly well aware that they are contributing to this £20,450,000 because they assume roughly - or possibly in some cases accurately - that the Commonwealth is providing money to tho States. But they have no conception of the amount of money that has been paid to the States over the last seven years by special financial assistance and grants of this description.

My friend and colleague, the honorable member for Petrie (Mr. Hulme), last night reminded the House, as did the honorable member for Bendigo (Mr. Clarey), that in the last seven years, approximately £157,000,000 has been paid to the States by way of grants of this description. That is a most significant fact. The majority of taxpayers are aware that the Commonwealth levies taxation, but I think it would be safe to say that the great majority of them are totally unaware of the manner in which the Commonwealth spends the bulk of that money, or to be more pointed, the great majority of taxpayers are unaware of the nature of financial assistance given by the Commonwealth to the States.

Since I have been in this House, I have heard references, pointed and otherwise, to the financial relationship between the Commonwealth and the States. I have heard it suggested that it is time for an overhaul of that relationship or that it is time for the House to reconsider the relationship. May I be so bold as to say that it is high time that the system of uniform taxation was abandoned? It seems to me that if we retain uniform taxation without challenge, we tolerate a federal system being discarded and rendered useless. I realize, of course, that it is a point of view. Some honorable gentlemen opposite - indeed, I suppose most honorable gentlemen opposite - do not favour the federal system of government. The great majority of Opposition members are unificationists in one sense or another. I happen to be a federalist. I believe in the division of legislative power. I believe that responsibility should accompany power and that to divorce the two is to commit a grave error and to lead to the possibility of exposing people to great danger. If every member of this House, with one mind and with one will, set out to destroy the federal system of government, then the task could not be achieved with a greater degree of perfection than it is being achieved at the moment by the retention of uniform taxation.

In the majority of States, Labour Premiers and Ministers, during a federal election campaign, say, " Of course, the Commonwealth has maintained taxation at too high a rate ". During a State election campaign, the same gentlemen say that the Commonwealth has treated them ungenerously. So we come to what I describe as the dangerous divorce of responsibility from power. For example, the Queensland Treasurer, Mr. Walsh, when presenting his budget recently, said -

At the present time the Commonwealth is virtually the sole adjudicator upon the State's main source of revenue, the tax reimbursement and special financial assistance grants and loan finance. This dominance of the Commonwealth allows too great an influence on the domestic policies of the States.

That proves the point I am making. During a federal election campaign, the same gentleman would take the hustings and say that the Commonwealth was treating the taxpayers too harshly and that the rates of taxation were too high. It is a simple case of a person wanting the best of both worlds - wanting to secure a political advantage when it is available to him, no matter what his real principles or thoughts may be. How much longer are we to tolerate this divorce of responsibility from power?

What is possibly the most curious aspect of the problem of uniform taxation and the Commonwealth-States financial relationship is the attitude of the Labour party. For the life of me I have been unable to determine to my own satisfaction whether members of the Opposition have a common mind upon the issue of uniform taxation. Possibly honorable gentlemen opposite say, " In this House, at any rate ". But I say to them, with respect, that outside this House it is most difficult to find evidence of a common mind on the retention or otherwise of uniform taxation. Let me go back to the Premiers conference in 1953. That conference was called to consider the issue of the return of taxing powers to the States. The Premier of New South Wales, Mr. Cahill, observed -

We are practical men, and as the Commonwealth has said, it is determined to make this change-

The change being the abandonment of uniform taxation - we must set about working out the details.

The Premier of Victoria at that time, Mr. Cain, said -

I am praying for the day when our taxing powers will be restored to us.

The Premier of Queensland, Mr. Gair, said -

I agree with your-

Referring to the Prime Minister (Mr. Menzies) - statement that the levying of taxation by the States is an indispensable element of sovereign government.

The Labour Premier of Tasmania, Mr. Cosgrove, declared -

Tasmania is not in favour of the abolition of Uniform Taxation. I cannot see that such action will be of any benefit to our State, or indeed to Australia.

The Labour Premier of Western Australia. Mr. Hawke, said-

We certainly would not be prepared to accept the abolition of Uniform Taxation unless it was forced upon us.

The Labour Premier of Victoria at that time, Mr. Cain, categorically averred thai he was praying, as he put it, for the return of taxing powers. The spectacle of Mr. Cain praying for the return of taxing powers conjures all sorts of thoughts in one's mind. But one Premier categorically affirmed the desirability of returning taxing powers to the States. Mr. Cahill, the Labour Premier of New South Wales, and Mr. Gair, the Labour Premier of Queensland, tacitly approved of the return of taxing powers to the States, and two other Premiers totally opposed it. A Senate election took place a few months later, and the right honorable member for Barton (Dr. Evatt), who is Leader of the Opposition, strode the stage at Marrickville to plead the cause of the Australian Labour party. On that occasion he declared -

A " Labour " Senate majority would prevent the abolition of the system of Uniform Taxation throughout Australia in relation to taxation.

It is interesting to compare that statement with the views of Mr. Cain, the then Labour Premier of Victoria, who said in the plainest terms that he was in favour of the return of taxing powers to the States. It is interesting to consider also the opinions of the honorable member for Melbourne (Mr. Calwell), who declared in September, 1953 -

The Labour party stands for the maintenance of uniform taxation. It is a plank of our platform. That platform binds every member of the Labour party in this Parliament, every member of the party in every State parliament, and ever, other member. There is no question about where the Labour party stands in regard to uniform taxation. We stand for the maintenance of uniform taxation and for a revision of the formula under which grants are made to the States. [ have always admired the honorable member's engaging frankness, but I should like to know who was right in 1953 - he or Mr. Cain, the Labour Premier of Victoria. Once again, Mr. Acting Deputy Speaker, this House and the country sees disconcerting evidence of the great fragmentation of the Australian Labour party on matters of policy. Of course, the simple truth is that when the Labour Premiers of Victoria and Queensland declared themselves in favour of State rights they either showed abysmal ignorance of the platform of the party to which they belonged or were merely seeking party political advantage. That is a factor that must be recognized.

The honorable member for Port Adelaide said that if war had not intervened in 1939 uniform taxation may never have come into being. I suppose that is perfectly true, but it is one of the paradoxes of the position that whereas the constitutional warrant for uniform taxation was sought under the defence power, the High Court of Australia found in 1942 that the Commonwealth possessed the power to maintain or levy taxation. In other words, the States have been de facto and not de jure deprived of their taxing rights. One of the great arguments used by the devotees of uniform taxation against those of us who are opposed to it consists in asking whether we want to return to the old pre-war system of a multiplicity of taxation returns, assessment codes, and collecting authorities. That is on the surface a most impressive argument, but to my certain knowledge no one who opposes the retention of uniform taxation has ever seriously advocated embracing that form of capricious action which would destroy uniform taxation overnight and return this country to the pre-war situation of 23 tax systems. An abrupt abandonment of uniform taxation could he achieved very simply, of course. It would be necessary only to repeal the relevant legislation, principally section 221 of the Income Tax Assessment Act, and the States Grants (Tax Reimbursement) Act. As I stated a few moments ago, T would not for one moment seriously advocate the abandonment of uniform taxation and a return to the pre-war taxing evils.

To my mind three compelling questions stand on the threshold of the problem. Each is predicated by the need to do justice to the Australian taxpayers and to Australia as a nation. The first question is how to divide the income tax field so as not to place one State at a disadvantage compared with the others. Honorable members may recall, if they turn their minds back to the conference of Commonwealth and State Ministers held in 1953, the report of which they no doubt read at the time, that the Prime Minister (Mr. Menzies) observed that the abandonment of uniform taxation would present uncommon difficulties foi Queensland. He then went on to say that what would be required would be the enactment by this Parliament from time to time of legislation authorizing the payment of supplementary grants so that Queensland would not be placed at a disadvantage. In other words, the division of the taxation field would have to be accompanied by the judicious exercise of power under section 96 of the Australian Constitution and the payment to the States of subventions and grants in various forms. The second question implicit in this problem is how to adopt and maintain uniform assessment laws. The third is how to retain the single-return system with one tax-collecting authority. Two methods of achieving uniform assessment laws commend themselves to me. Uniformity could be achieved by each Parliament passing identical acts, or alternatively by each State Parliament adopting the Commonwealth assessment act following the precedent of the Air Navigation Code. That brings me to the point that even if uniform taxation were abandoned and satisfactory uniform assessment laws were adopted they would be only as durable as the good faith of succeeding parliaments. In other words, it would be possible for a government ten or fifteen years hence to repeal the uniform assessment legislation and restore uniform taxation. Therefore, I say it is absolutely necessary to entrench the uniform assessment code in the Constitution in the manner in which the Financial Agreement has been entrenched in section 105a.

At the outset T said that one of the great failings and dangers of uniform taxation consisted in the divorcing of responsibility from power and the gradual destruction of the federal system of government. I for one believe that uniform taxation just mocks the whole federal system and that it is up to this Government and this Parliament to decide once and for all whether to retain the federal system or to declare in favour of and to work towards the achievement of unification. We all can read a prophecy made more than half a century ago by Alfred Deakin, who forecast that the financial power of the Commonwealth would eventually drive the States out of existence and destroy the federal system of government. If we examine the historical records of the time when Alfred Deakin made that prophecy, we find that many people scoffed and told him that his judgment erred greatly. However, if we turn to South Australia's case against the Commonwealth on the question of uniform taxation, which was heard in 1941, we find that the High Court, and in particular the then Chief Justice, Sir John Latham, affirmed and approved the substance of Deakin's prophecy. Sir John Latham said -

If the Commonwealth Parliament, in a grants act, simply provided for the payment of moneys to States, without attaching any conditions whatever, none of the legislation could be challenged by any of the arguments submitted to the court in these cases. The amount of the grants could be determined in fact by the satisfaction of the Commonwealth with the policies, legislative or other, of the respective States, no reference being made to such matters in any Commonwealth Statute. Thus, if the Commonwealth Parliament were prepared to pass legislation, all State powers would be controlled by the Commonwealth - a result which would mean the end of the political independence of the States. Such a result cannot be prevented by any legal decision. The determination of the propriety of any such policy must rest with the Commonwealth Parliament and ultimately with the people. The remedy for alleged abuse of power or for the use of power to promote what are thought to be improper objects is to be found in the political arena and not in the courts.

In other words, this situation could arise: A Commonwealth parliament, determined to destroy the States, could say to the States, " Either you surrender your powers to us or you will get no money ". Honorable members may be tempted to describe that as financial blackmail and, no doubt, they would be right. Some other honorable gentlemen may be attracted to the idea that such a proposal is in communion with fantasy. I therefore shall read to the House a comment made by Mr. Ross Anderson, senior lecturer in law at the Queensland University, in a work entitled " Essays on the Australian Constitution"! I may add in passing that Mr. Anderson is a member of the Australian Labour party. He said -

Since the referendum procedure offers little hope of increasing direct Commonwealth powers, some greater use of Section SI may perhaps be anticipated. Attempts to enlarge Commonwealth powers by reference of matters under this provision in the past have failed largely because of equality of all seven parties. In the future-

And this is the punch-line - when the political atmosphere is favorable to the Commonwealth, the States may be induced by financial pressure to make the reference required by the Commonwealth.

So, we have a situation in which the retention of the uniform taxation system is not merely undermining our federal system of government; it stands poised as a constant threat to the whole federal system of government. The sooner it is abandoned, the sooner a sensible division of the field of taxation is determined, and the sooner there is entrenched in the Commonwealth Constitution adequate provision to prevent any extremist government in the future from using the system of uniform taxation to destroy the States by financial blackmail, then, I say, the better. For ten years or more we have seen a constant procession of examples of irresponsibility in State legislatures. It is high time that that procession was brought to a halt. It will never be brought to a halt as long as State Premiers are in a position to criticize the level of taxes imposed by the Commonwealth, while, at the same time, demanding more and more generous gifts. I appeal to the Government to give urgent and prompt consideration to the whole problem of uniform taxation. I have heard it suggested that some financial advisers and economists say that it is not possible to destroy the system of uniform taxation. In the face of such an assertion, all I can say is that I should be sorely tempted to go out and get another set of advisers.

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