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Thursday, 28 November 1935

Senator GIBSON (Victoria) .- On a previous occasion I drew attention to the fact that the special tax on property, in effect, fixes . the rate . of interest which persons have to pay on mortgage. The Prime Minister (Mr. Lyons) has spoken very strongly against the principle of this tax. Originally it was 10 per cent.; it was subsequently reduced to 6 per cent., and the Government now proposes to reduce it to 5 per cent. The total revenue derived from this special tax amounts to about £1,200,000 per annum. It would have been a commendable gesture on the part of the Government towards the industrialists, the manufacturers, and primary producers of this country, if it had wiped out this taxation altogether. I do not agree with the Leader of the Opposition (Senator Collings), because I hold the view that cheap money inevitably means greater returns to industry and enables private enterprise to give more employment. Reduction of taxation is the only means whereby cheap money can be made available. I venture to say that the Commonwealth loan now being floated at 3$ per cent, will absorb the whole of the money that would otherwise be available for loan on mortgage. A person with an income of £2,000 would have to receive 5£ per cent, from the mortgagor to get a, return equal to that yielded by the 3|- per cent, interest on Commonwealth bonds, because only one tax is levied on income from bonds, whereas on income from mortgage five taxes are payable - federal tax, special property tax, State tax, State special tax, and unemployment, relief tax.

Senator Duncan-Hughes - And also rates.

Senator GIBSON - That is so. In fact, a man with an income of £2,000 to-day would have to get per cent, interest from mortgages to be in the same position as if he invested his money in Government bonds.

Senator Collings - Then he should put it all into Government bonds.

Senator GIBSON - It is better that the money be put into industry rather than into Government bonds. I hope that the Government will wipe out this tax as soon as possible. The vital need of industry to-day is cheap money. This taxation represents a means of providing cheap money for the Government, but making it dear to everybody else.

Senator PAYNE(Tasmania) [3.24 J. - But for the extraordinary statement made by the Leader of the Opposition (Senator Collings) I would not have spoken on this measure. He characterized the bill as another effort on the part of this Government to distribute largesse to its supporters. When he makes such a statement he does not know what he is talking about. He also contended that the Commonwealth Government should follow the example of Labour governments in making a wide differentiation between the taxation of income from property and the taxation of income from personal exertion. If the honorable senator examines the schedule to this- bill he will find that in the Commonwealth, also, a wide differentiation between these two classes of taxation applies. The rates which are set out on page 4 of the bill reveal a wide differentiation, not only between the respective rates, but also between the amounts on which those rates are applied. For instance income from personal exertion must exceed £6,900 before the highest rate of tax is applicable, whereas the corresponding level of income from property is £3,700. The highest rate of taxation applies only when the income from personal exertion is almost double that of income from property. That differentiation in itself is a very heavy burden to the latter class of taxpayers. The main point to be considered in connexion with this measure, however, is that in remitting some of this tax on property the Government is not distributing largesse to its supporters, as the Leader of the Opposition says, but is simply partially removing a burden that was unjustifiably placed on these taxpayers by the Scullin Government.

Senator Brown - Why was that tax unjustified ?

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