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Wednesday, 26 September 1906

Senator PEARCE (Western Australia) . - I yield to no one in my belief in the principle of direct taxation ; and I sympathize very much with the remarks of Senator Stewart. I have always advocated that the Commonwealth should resort to direct, rather than1 indirect, taxation for the purpose of meeting the additional charge caused by the institution of old-age pensions. But we have to face facts and not theories. There is not a considerable body of members of the Commonwealth Parliament who are prepared to impose such direct taxation as would raise the money necessary for the payment of old-age pensions ; and, that being so, we must drop theories and come to some practical issue. Much as I should have liked to see the revenue raised by direct taxation, I find that that is impracticable. There is now a proposal for an alteration in the Constitution in order to get over the difficulty created by the Braddon section, and to enable the Commonwealth Government to have at their disposal sufficient money to carry out the scheme which is contemplated. First, I may say that I am strongly against the ear-marking of special taxation for special purposes. I do not recognise, however, that this Bill does, ear-mark any special revenue. It certainly gives the Government power to impose duties on articles which are not subject to duty on the 1st January, 1907, but the revenue so produced will be paid into the Consolidated Revenue, and section 87 of the Constitution will not apply. It is a mistake to assume, as Senator O'Keefe and others seem to assume, that in voting for this Bill we are ear-marking revenue for old-age pensions - that is not the case. If I thought it was the case, or if Senator O'Keefe's suggestion was acted upon, and that purpose was stated in the measure, I should vote against it. If we ear-mark revenue for special purposes, the particular class who happen to pay this tax, have their interests put in opposition to those of people who receive the benefit of old-age pensions. If the Government have made up their minds to pay old-age pensions, those pen sions should be paid irrespective qf any particular section of the taxpayers. It is altogether an unsound and unwise principle in finance to ear-mark special duties for special purposes.

Senator Drake - Is that not only a blind? Does it not mean that if a revenue of £1,000,000 be raised on the special articles the States will receive back revenue less by that amount?

Senator Millen - Under the Bill, the duties can be raised only when they are allocated to special purposes.

Senator PEARCE - But I take it that the money will be paid into the Consolidated Revenue.

Senator Millen - The money is for a special purpose.

Senator PEARCE - But it does not follow that it is for old-age pensions.

Senator Millen - The Bill speaks of special purposes.

Senator PEARCE - I am against that provision, and would have it struck out. For instance, the Government have foreshadowed additional expenditure on defence, but is it suggested that there shall be a special tax levied for the purpose of raising the money?

Senator Drake - Certainly, under this Bill - torpedo destroyers.

Senator PEARCE - I think not. There is nothing in the Bill to indicate that the revenue raised is for the purpose of oldage pensions. Every purpose is a special purpose - every new expenditure is a special purpose - and, therefore, the phrase means nothing in this connexion. The Royal' Commission 011 old-age pensions, of which I was a member, did not inquire into the advisability of paying such pensions, but took it for granted that the people of the Commonwealth were in favour of the principle. The inquiry was limited to the most economical methods of administration ; and I claim that as one of the results of the work of the Royal Commission, it has been found possible to effect a saving of some £8,000 per annum in the Pensions Department of New South Wales. The evidence- given as to the administration in New South Wales and Victoria, showed that in the former State there was a most wasteful method ; and the saving to which I have indicated must be laid to the credit of the Commission. Those engaged in the inquiry were face to face with the difficulty of financing the scheme, and if- honorable senators will turn to page i 1 of the report of the Royal Commission, paragraph 16, they will find this recommendation -

As "the best means to be adopted for establishing Old-age Pensions for the Commonwealth," your Commissioners recommend that the pensions be paid out of the Consolidated Revenue. Various suggestions have been made by the different witnesses who have given evidence as to the sources from which additional revenue may be derived. These suggestions include a wages stamp tax, duties on tea and kerosene, an absentee tax, a tax on unimproved land values, a Government monopoly of the tobacco industry, additional duties on intoxicants and matches, and a tax on amusements.

Your Commissioners recommend that during the operation of section 87 of the Constitution, which provides for the return by the Commonwealth to the States of at least three-fourths of the nett revenue from Customs and Excise duties, an arrangement should be made by the Commonwealth with the several States by which sufficient money should be handed over to the Commonwealth for the purpose of making good any deficiency in the Consolidated Revenue caused by the establishment of an old-age pension system.

Honorable senators will notice that we did not recommend any of the suggestions for raising revenue which were brought before us. We purposely avoided doing so, for the very cogent reason that, by the establishment of a Commonwealth old-age pension scheme, New South Wales would be relieved of expenditure to the extent of £500,000, and Victoria to the extent of a little over .£200,000. Although there are no old-age pensions schemes under tha' name in the other States, in every one of them, apart from charitable institutions and grants, systems are in operation in the nature of old-age pensions, and there was abundant evidence before the Commission to prove that the establishment of a Commonwealth system would relieve each of the States of expenditure to the extent of some thousands of pounds. In the circumstances, we thought it would be a better plan to allow the Commonwealth, to retain from the three-fourths of revenue from Customs and Excise now returned to the States a sum sufficient to pay Commonwealth old-age pensions, and the States Parliament might, by using their powers of direct taxation, or in any other method they thought fit, make up any deficiency, if any were created. I point out that if that plan were adopted, New South Wales, so far from having to meet a deficiency, would make a considerable saving.

Senator Turley - Would have an increased surplus.

Senator PEARCE - An increased surplus of over £100,000. In Victoria there would be increased expenditure required to the extent of about ,£80,000, and in the other States increased expenditure to the amount of the pension contribution, less the amount which thev are now paying for what are practically old-age pensions schemes. That proposition made by the Royal Commission came before the States Premiers and Treasurers at the Conference held in Sydney in April, 1906, and was fully discussed by them. It was a- tangible, concrete proposition, and the result of their discussion of it, which will be found at page 34 of the report of the proceedings of the Conference, was that the following motion, submitted by Mr. Kidston, was agreed to : -

That it is incumbent on the Federal Government, if it adopts an old-age pension scheme, to provide the revenue required to finance it without trenching upon the Customs revenue now returned to the States.

Therefore, the States Governments have absolutely rejected the proposal to meet the expenditure involved by allowing the Commonwealth to retain from the three-fourths of the Customs and Excise revenue now returned to the States sufficient money to provide the necessary fund, and they have said that if the Commonwealth is going to establish an old-age pensions scheme we must provide the revenue without trenching upon the three-fourths now returned to the States.

Senator Best - They said the same at Hobart.

Senator PEARCE - It is significant to note that all through th'e discussion of the matter at the Conference taxes upon tea. and kerosene were mentioned as suitable for this purpose. I should make an exception of the Premier of Tasmania, Captain Evans, who declared himself against the suggestion, not because he objected to taxation upon those articles, but because he considered that the financial condition of his State was such that the revenue which would be derived from such taxation was more urgently required in Tasmania for other State purposes than for the payment of old-age pensions.

Senator Playford - He wanted the three-fourths of that taxation.

Senator PEARCE - Yes. No other representative of any of the States took serious exception to the taxation of tea and kerosene for the purpose of providing oldage pensions. So that, whilst Senator Millen's interjection that the States Treasurers are not in favour of the proposal, may be strictly accurate according to the letter, it is not accurate according to the spirit.

Senator Millen - I think it is. They affirmed that if the Commonwealth desired to establish a scheme of old-age pensions they must provide the revenue for it with-, out trenching upon the three-fourths now returned to the States, and they refused to commit themselves to the expression of any opinion as to how the Commonwealth should raise the necessary revenue.

Senator PEARCE - But every one of them discussed the question of the taxation of tea and kerosene, and Captain Evans, of Tasmania, on the ground I have stated, was the only member of the Conference who raised any objection to that taxation. There appears to be a considerable misapprehension as to what would actually be received from the taxation of these articles. I have gone to the trouble of getting the Customs returns for 1905, and working out the imports of" those articles, in order to find out what might be realized from their taxation. I find that the imports of tea for 1905 amounted to 28,353,903 lbs. The imports of kerosene for the same year were 16,41.6,734 gallons. I have found also that a .duty of 4d. in the. lb. on tea represents an ad valorem duty nf about 60 per cent, on the declared value of the article at the Customs House. A tax of 4d. per gallon on kerosene represents an ad valorem duty of 60 per cent, on the declared value of kerosene at the Customs House. I remind honorable senators that the returns given by the Commissioner are based upon the imports for 1904. I find that a duty of 3d. per lb.

On tea on the imports for 1905 would produce a revenue of £.154,423 ; and a duty Of 3d. per gallon on kerosene a revenue of £205,209, or a total revenue of £559,632. Fourpence in the lb. on tea, which would be a dutv of 60 per cent, ad valorem, as I have explained, would realize £472.564: and 4d. per gallon on kerosene £306,945, or a. total of £779,509. A tax of $d. per lb. on tea and 5<3. per gallon on kerosene was suggested by some of the witnesses who came before the Royal Commission, and 5d. per lb. on tea would realize £590,705, whilst 5d. per gallon on kerosene would realize £408,681, or a total revenue of £999,386. I wish, in justice to my own State, to direct the attention of honorable senators to a singular position which would be created if these special duties were imposed. The Western Australian imports of tea represent onetenth of the total imports of the article, so that if the tax imposed on tea were 4d. per lb. Western Australia would contribute £47.256. Western Australia's imports of kerosene represent one-eleventh of the total imports, and that State would contribute £27,904 if a duty of 4d. per gallon were imposed on that article. This would give a total contribution from Western Australia of £75,160. Coghlan estimates that on 30th June, 1904, taking New South Wales, and New Zealand experience, the number of eligible persons who would claim oldage pensions in Western Australia was 1,677. and £23 16s. per head of this number would represent £40,000, the amount which would have to be devoted annually to the payment of old-age pensions in that State. So that the taxpayers of Western Australia would be contributing through taxation on tea' and kerosene £75,160, and receiving in the shape of old-age pensions only £40,000.

Senator Dobson - I thought the honorable senator's recommendation was £26 a vear.

Senator PEARCE - I have taken the figures given by a statistician, who gave evidence before the Royal Commission.- If the pension were £26 a year, it would mean that Western Australia would get £45,000 in pensions, and would pay in taxation for the purpose of pensions £75,160.

Senator de Largie - She would get about £1 for every £2 she paid.

Senator PEARCE - It would mean that Western Australia would contribute some £30,000 towards the payment -of old-age pensions to people in the eastern States. I do not complain about that.

Senator Dobson - What about the bookkeeping system ? Would the honorable senator contend that the bookkeeping system should not be applied to this scheme?

Senator Drake - What the honorable senator mentions would always occur in connexion with a national system, because the old people would naturally be found in greater numbers in some parts of the Commonwealth than in others.

Senator PEARCE - I recognise that possibly old people in the eastern States might be the parents of children in Western Australia, and I therefore do not think that we should ask that the bookkeeping provisions should be applied to the old-age pensions fund. I have, however, thought it only fair to my State to point out that the special taxation suggested would hit that State more heavily than her pension requirements would necessitate. According to the Budget papers circulated by the Treasurer, it is estimated that, in the comingyear, of the one-fourth of Customs and Excise revenue which may be applied to meet new expenditure, including the amount required for penny postage, there will be a surplus in the case of Western Australia of £311,228. It is true that penny postage is estimated to cost £200,000, but no practical politician will, contend that that proposal is likely to pass this session.

Senator Millen - After what has happened in another place within the last half-_ hour we need not trouble very much about it.

Senator PEARCE - I do not know what has happened within the last half-hour, but there is very little chance of the proposal being dealt with this session. This would give us a surplus of £511,228, and in Western Australia we should be able to meet the expenditure involved by an oldage pensions scheme out of our existing revenue. In view of the passing of this Bill to provide for the levying of special duties of Customs, I have taken the trouble to look through our import returns, and I find that tea and kerosene are by no means theonly articles upon which we should be justified in levying duties for the purpose of making up any deficit which might be causedby the payment of old-age pensions. I have picked out twenty or thirty items, representing over £10,000,000, but I only propose to take six items, representing nearly £3,000,000 in value. Under the head of " apparel," there are on theforce list various items, the annual imports of which amount in value to £211,324.

Senator Dobson - Is it not apparel partly made up?

Senator Millen - Is it not the raw material of those who make up apparel?

Senator PEARCE - It may represent apparelpartly made up.

Senator Drake - It appears in the third column of the schedule as an exemption.

Senator PEARCE - I took the figures from the Trade and Customs return. On looking through the Tariff, I found a large number of items under the. head of: apparel which are free. The next item is explosives, ammunition, and arms, the imports of which amount in value to


Senator Drake - How about the mining industry ?

Senator PEARCE - There is something to be said about that industry, but that objection could be urged against every tax which might be proposed.

Senator Millen - Do those figures include the imports by the Government?

Senator PEARCE - No ; the largest item is dynamite, which represents over. £300,000. I do not wish to be regarded, as advocating the imposition of a duty on these articles. I am only citing them as articleswhich, perhaps, it would be as justifiable to tax as tea and kerosene. The other items are - Bags and sacks, £841,000; books, £445,286.

Senator Drake - Surely the honorable senator does not want to levy a taxon books !

Senator PEARCE - I do not know. If a man had to make a choice, he might prefer to have his books, rather than his tea, taxed.

Senator Millen - Which man?

Senator PEARCE - I suppose that the man who was nearest to the animal would prefer to have free tea. Another item is cameo's and precious stones, the imports of which amount to £103,000. Here is a singular item, which I wondermy protectionist friends allowed to slip - perhaps it is another tribute to the power of the press - and that is printing paper and paper n.e.i., amounting to no less than £718,514.

Senator Drake - A tax on printing paper !

Senator PEARCE - There are printing mills in the Commonwealth, and the honorable senator, as a good protectionist, ought to give them a little consideration.

Senator Millen - Then we would not get the revenue.

Senator PEARCE - Perhaps not. There is a number of other items which I couldquote, but I only picked out the items over- £100,000, amounting in the total to £2,845,396. A tax of 10 per cent. on that sum would realize £284,500. On looking through' the free list, I saw a number of articles which did not seem to me to be raw material. and which could justifiably be taxed if indirect taxation for this purpose can be justified. I know that arguments could be brought against every one of the lines, but I could also bring arguments against the taxation of tea and kerosene. I could easily convince myself that those articles should not be taxed. I consider that if there is a special reason why Customs duties should be imposed to raise money for this purpose, there are items other than tea and kerosene which we might well tax, and thus keep down the tax on those articles to a reasonable limit. Let us assume that a tax on the articles I cited would realize £284,500. A Customs duty of 3d. per lb. on tea and 3d. per gallon on kerosene would realize £559,000. The surplus, after the " fourth " was returned to the States, would be £511,000.

Senator Millen - Can the honorable senator really take that into consideration, when it is a rapidly-diminishing amount?

Senator PEARCE - I think that we can.

Senator Millen - It is decreasing every year, and the Commonwealth has not yet taken over the whole of the Departments.

Senator PEARCE - My honorable friend will see that, so long as the Commonwealth returned that surplus - and it will be very much smaller this year than it was last, year - when we are dealing with a tangible proposal we have a right to consider the money which is now in our hands. Of course, if there are other services which would have to be carried out by the Commonwealth in the future, and we should not have the necessary money, other taxation would have to be imposed ; but we ought not to make the mistake which, I think Victoria made, of adopting a scheme without first making sure that the money was available.

Senator Drake - Is not the honorable senator making a (miscalculation ? That sum of £300,000 goes back to the States ; we do not retain anything.

Senator Playford - This year we shall return to the States £500,000 over and above what we are bound to return.

Senator Drake - If we 'are going to spend the £300,000. the States will get still less.

Senator PEARCE - It is the balance of our "fourth," which we are. entitled to spend.

Senator Drake - It means a draft on the States to that amount.

Senator PEARCE - Yes, but it is allowed by the Constitution. That would still leave a deficiency of £146,000. I hope that at the coming elections the electors will return to the Parliament a majority of members who will be pledged to support a progressive land tax. If it were enacted on the lines laid down by the Labour Party, then, judging by results in other places, I think it would realize £500,000 to the Commonwealth. With that sum we should have not only enough to make up the deficiency, but a fair amount to meet other charges.

Senator Best - But if the tax operated at all it would be a diminishing quantity.

Senator PEARCE - Yes, but still it would be a- good deal above the deficiency of £146,000. Senator Clemons devoted considerable time to pointing out the special troubles of Tasmania in this regard. I think he said that the State raised £250,000 by Customs and Excise duties. But the Budget papers show that for 1905-6 the indirect taxation in that State yielded £326,395. Then, in order to draw a comparison!, Senator Clemons said that Tasmania raised by direct taxation £247,000, meaning to imply that in each case the percentage was about 50 per cent. While he did not give credit for the full amount raised by indirect taxation, he took too much credit for the amount raised by direct taxation, because he included in the latter the item of licences. On page 665 of his Year Book for 1904, Mr. Coghlan, who is, I suppose, one of our best authorities on matters financial and statistics generally, includes that item in indirect taxation.

Senator Dobson - It is only a small item after all.

Senator PEARCE - It is a pretty large item in Tasmania.

Senator Dobson - Our direct taxation per head is £1 4s. 3d. What is the rate in Western Australia?

Senator PEARCE - According to Coghlan's Year Book, in 1904 the direct taxation in Tasmania was 15s. 2d. per head, while in Western Australia it was 17s. iod.

Senator Best - I understand that in that year an income tax was not charged in Tasmania?

Senator PEARCE - In that year the ability tax was not charged. In South Australia - the State which more nearly approximates to Tasmania in regard to conditions - the direct taxation in 1904 was 1 8s.1d. per head. The indirect taxation was £1 19s. 9d. in Tasmania, £5 13s. 8d. in Western Australia, and £1 19s. in South Australia, so thatwhile the indirect taxation in South Australia and Tasmania was practically equal, the latter was paying 2s. 11d. more per head in direct taxation than the former.

Senator Dobson - Has the honorable senator got the latest figures?

Senator PEARCE - No, except so far as they were given by Senator Clemons today. He included in his figures of direct taxation a sum of £56,000 from income tax, and I think £60,000 from the ability tax, which I may mention hasbeen levied since 1904. In his Year Book for 1904, Mr. Coghlan draws attention to the fact that in Tasmania the income tax is largely derivable from companies, including licences to the conductors of lotteries.

Senator Givens - Tasmania imposes a Stamp duty of 2d. on each 5s. ticket issued by Tattersall's.

Senator PEARCE - A tax of 8d. in the £1 is levied on lottery tickets.

Senator de Largie - That is why Tasmania pays so much in direct taxation.

Senator PEARCE - No. When one comes to think of the enormous sum which is invested in consultation and lottery tickets, one can easily see that a very large proportion of the new taxation which has been imposed since1904 is paid, not by the taxpayers of Tasmania, but by the taxpayers on the mainland.

Senator Findley - And Tasmania levies, I understand, a tax of1s. in the £1 on the prize money.

Senator Givens - The ability tax is deducted from the total value of a prize before the prize-winner gets it.

Senator PEARCE - Tasmania taxes the prize-winners, and also those who run the lottery.

The PRESIDENT - Does the honorable senator think that the details concerning Tattersall's ticketshave anything to do with the question before the Senate?

Senator PEARCE - Senator Clemons raised the point, and I endeavoured to show that Tasmania would be a special' sufferer if the Bill were passed.

The PRESIDENT - I would ask the honorable senator not to so into the details.

Senator PEARCE - Very well, sir. I think that the figures I have given will show that the taxpayers of Tasmania would not be so badly hit as Senator Clemons would have us believe. It has to be borne in mind that Tasmanians are not abnormal consumers of tea and kerosene like the 'taxpayers of Western Australia are. Therefore, the probability is that the revenue derived from a tax on those articles in Tasmania would be spent there, and possibly a portion of the £30,000 which the people of Western Australia would contribute would go to Tasmania to make up any deficit. Tasmania. I think, is not in any specially bad position in that regard. We are in an awkward position on this question of old-age pensions. There is the financial difficulty staring us in 'the face. I should like to make it up by direct taxation, but I am not in a position to do so.

Senator Turley - Has not the Government backbone enough to ask us to do that ?

Senator PEARCE - The Government can only do what its majority will let it do; and, unfortunately, apart from the Labour Party, the supporters of the Government are mostly against the imposition of direct taxation at thepresent time. The leader of the Opposition, Mr. Reid, has been recently going through the Commonwealth denouncing proposals for direct taxation which have been initiated by the Labour Party. Therefore, we are brought up against the position that thereis no possibility of securing, at any rate, sufficient direct taxation to pay old-age pensions. Even the moderate proposal of the Labour Party, if it were carried in its entirety, would notyield sufficient revenue for the purpose. Are we then tosay to the old people of Australia, " We have been premising you old-age pensions for five years, but we ask you to wait another three years, until we can persuade the people to consent either to a direct Federal tax on incomes or on land values." I think it would be cruel for us to take up that position. Ihave seen old people in my own State, away up on the gold-fields, who ought to have been taking, their ease in their old age. ekeing out a living by dryblowing ; and I am not going tosay to them, " We had an opportunity in the Federal Parliament to raise sufficient money to pay old-age pensions, but we rejected it because in three years time we hope to obtain the revenue by direct taxation."

Senator Walker -Why should not Western Australia have its own scheme?

Senator PEARCE - The party to which I belong in that State has been advocating this proposal.

Senator Millen - I think it may be said that whilst the Federal authorities are addressing themselves to this question, the States are not likely to do so.

Senator PEARCE - Quite so.

Senator Givens - Would it not be fair to say that we have power to raise the money by direct taxation if we had the courage to do it.

Senator PEARCE - That is a fact; and I am prepared to tell the electors that; but I cannot see any prospect of getting a majority to support what I believe in. The most I can see is the prospect of a majority that would be willing to raise £500,000. But there would still be another £500,000 wanted.

Senator Millen - Does notthe honor able senator think that there is a majority in the Senate in favour of his way of raising the money?

Senator PEARCE - I do not think that there is a majority in either House of the Federal Parliament prepared to impose direct taxation to the necessary extent. This Bill affords one solution of the problem. We have, at the same time, to remember that the Bill has to pass both Houses, and to go before the people for their consent. If the majority of the people in each State agree to this method of raising taxation, the measure will become operative.

Senator Givens - Ifthey do not, we are no further forward.

Senator PEARCE - That is so; but, at any rate, we shall have given them the opportunity to express their opinion.

Senator Dobson - If the people are to be taxed up to the hilt in this way, what is the honorable senator going to do with regard to the bush capital and the Australian Navy ?

Senator PEARCE - I do not know what the honorable senator means by the bush capital ; but, at any rate, it is not appropriate just now to expatiate on the beauties of the Federal Capital or the glories of an Australian Navy. If the majority of the people of Australia say that they want oldage pensions, and are prepared tofind the money by taxation, this Bill gives them the means. While I regret that I am forced into this position, still I recognise that I am so forced by the logic of facts. I want to give old-age pensions to the people within the next three years, and I recognise, therefore, that the only course open to me is to vote for the Bill.

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