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Thursday, 30 August 1928

The Deficit

In dealing with the revenue available for the present year, the Government has given careful consideration to the question of whether the extinction of the deficit should be immediately provided for. Were this course followed two alternatives would have been available, namely, to impose additional taxation beyond the actual requirements for the services of the year, and apply the excess revenue to wipe out the deficit, or to fund the deficit by raising a loan on Revenue Account.

When, later, I am discussing the estimated customs and excise revenue, I will refer to two previous trade depressions which, although arising from different causes, had brought the same results as the depression through which we are now passing. Our experiences on those occasions demonstrated the wonderful recuperative powers of the Commonwealth, and it is not unreasonable to anticipate that those experiences will now be repeated.

It will be realized, therefore, how unwise it would be to adopt a pessimistic attitude and bring down increased taxation for the purpose of liquidating the deficit. The imposition of a special tax of this nature would have a disturbing effect upon the business community generally, and the disturbance would be repeated when the tax was remitted after the special purpose for which it had been imposed had been accomplished. Equally unwise would it be to raise a loan of £2,628,743 to pay off the deficit, when there is a reasonable prospect of the ordinary revenues of the Commonwealth proving sufficient to carry this burden iri the near future.

The Government proposes, therefore, for the present to place the deficit in suspense, and to hypothecate future surplus revenue to liquidate the deficit before further taxation relief is provided.

Customs and Excise Revenue

The estimate of customs and excise revenue, which shows an increase of £1,853,270 over the actual collections of the previous year, may be regarded by some as unduly optimistic. In this connexion our experience of the years 1917-18 and 1921-22 is illuminating.

In the year 1917-18 the full effects of the war were being felt in the restriction of trade. Shipping was being gradually reduced and embargoes were being placed by the allied countries upon exports. The result was that the customs and excise revenue for 1917-18 was £2,400,000 less than the receipts for the previous year. In the budget for 1918-19, after imposing additional taxation, an increase of £810,000 in the revenue was expected. The actual collections, however, showed an increase of £4,198,000 over those of the previous year.

In the year 1921-22, the world passed through a period of economic disorganization associated with the work of postwar reconstruction, and owing to the accompanying trade depression in the Commonwealth, the customs and excise revenue was £4,200,000 less than the actual collection of the previous year. When the budget for 1922-23 was prepared, it was expected that the period of trade stagnation would- continue, or at least improve in only a. very slight degree. The customs and excise collections wereestimated to yield only £400,000 more than the receipts of the previous year. The actual collections, however, proved to be £5,200,000 in excess of those receipts.

After each of these depressions, there was an immediate and full recovery in the customs and excise revenue. In these experiences, and in the prospects of a bountiful harvest and an increased wool clip, justification can be found for the estimated revenue of £43,300,000, which is £252,478 less than the collections of the year 1926-27, notwithstanding that in the meantime additional duties, estimated to yield" £500,000, were imposed on motor chassis.

Sitting suspended from 6.15 to 8 p.m.

Direct Taxation

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