House of Representatives
10 November 1904

2nd Parliament · 1st Session



Mr. Speaker took the chair at 2.30 p.m., and read prayers.

page 6833

QUESTION

RAILWAY VOLUNTEER RIFLE CORPS

Mr JOHNSON:
LANG, NEW SOUTH WALES

asked the Minister of Defence, upon notice -

  1. Has the advisability or otherwise of the formation of Volunteer Rifle Corps in connexion with the railway service yet received consideration or been mooted in military circles, and if so, what is the opinion of military experts on the subject?
  2. If the matter has not yet received attention, will the Minister give the subject early consideration, in view of the advantages of such corps for purposes of railway defence?
Mr McCAY:
Minister for Defence · CORINELLA, VICTORIA · Protectionist

– The answer to the first question is “ no.” The answer to the second question is “ yes,” but it is not probable that any such corps will be formed. It will be possible for those concerned to join rifle clubs or some other corps already established.

page 6833

QUESTION

PATENT RIGHTS FOR NITROGEN FERTILIZER

Mr PHILLIPS:
WIMMERA, VICTORIA

asked the Prime Minister -

  1. If his attention has been drawn to a recent American discovery, patented by Dr. Moore, of the Laboratory of Plant Physiology of the Department of Agriculture, Washington, and dedicated to the American people, whereby bacteria are produced capable of restoring nitrogen to the soil, and providing results at a cost of one farthing per acre equal to fertilizers which now cost six shillings per acre?
  2. Will he communicate with the Department of Agriculture, Washington, with a view to obtaining patent rights for the Commonwealth of Australia, and, failing satisfactory arrangements being made, will he ask for a supply to distribute for experimental purposes?
Mr REID:
Minister for External Affairs · EAST SYDNEY, NEW SOUTH WALES · Free Trade

– I have not had an opportunity to consider this matter, but I shall give it my attention.

page 6833

QUESTION

GOVERNMENT MANUFACTURE AND SALE OF TOBACCO

In Committee (Consideration of Senate’s message) :

Senate’s message read.

Mr REID:
Minister of External Affairs · East Sydney · Free Trade

.- I would suggest to the honorable member for Kalgoorlie, who I understand has charge of this matter, that this is scarcely a good opportunity for taking up a large question like this. It is a matter involving very important considerations, and I confess that I am not prepared to deal with it. Of course it would be a great convenience to honorable members if my honorable friend would state his views on the subject. It would help us if we had an opportunity of hearing him but after that my honorable friend will probably consider the propriety of adjourning the debate. I shall be only too glad to hear his views.

Mr FRAZER:
Kalgoorlie

– I move-

That the Committee concur in the resolution submitted by the Senate.

I admit that the subject is one which will require very serious consideration. It is a matter of some moment when an alteration is suggested in the mode of control of an industry, the products of which are subject to duties which yield a revenue of about £1, 332,000 annually. I admit that the subject is embarrassed by several difficulties. In the first place, it is argued by many persons that this Parliament has not the power to manufacture and conduct the sale of tobacco. Upon this question, however, there is a considerable difference of opinion, and I regret that my knowledge of constitutional law is not greater. We have, however, two classes of powers conferred upon us by the Constitution, the first being those which are specifically set forth in that instrument, and the second, the powers which are necessarily implied from its wording. Under the first head, we have no power to deal with the manufacture and sale of tobacco; but I maintain that under the second head we have the fullest authority conferred upon us. In section 51, it is provided that -

The Parliament shall, subject to this Constitution, have power to make laws for the peace, order, and good government of the Commonwealth with respect to -

Then certain matters are enumerated. My contention that certain implied powers are conferred upon us, is supported by a number of constitutional authorities. I propose to quote from Quick and Garran’s Annotated Constitution of the Australian Commonwealth, the opinion expressed by Lord Carnarvon, when dealing with the Federal Constitution of Canada. That Constitution, although not the same as ours, is in many respects similar. Lord Carnarvon said -

The Federal Government can claim no powers not granted to it by the Constitution ; powers actually granted must be such as are given expressly or by necessary implication. The instrument is to have a reasonable construction according te the import of its terms; where a power is expressly given in general terms, it is not to be confined to particular cases, unless that construction grows out of the context or by necessary implication. The Constitution deals in general language. It does not provide for minute specifications of powers or declare the means by which those powers shall be carried into execution.

I claim that that opinion justifies the belief that in every Constitution such as ours, similar implied powers are conferred. To the words “ or by necessary implication,” I wish to draw special attention. Upon further referring to the very useful work from which I have just quoted, I find that various other decisions have been given which have a particular bearing upon the question now under discussion. The British North America Act of 1867 gave the Parliament of the Dominion of Canada power to make laws for the peace, order, and good government of Canada, in relation to matters not exclusively assigned to the provinces. I do not claim for a moment that we have such power without limitations.

Sir John Forrest:

– Our case is the reverse,

Mr FRAZER:

– Section 51 of the Constitution confers powers upon the Commonwealth Government to legislate with respect to -

The naval and military defence of the Commonwealth ‘ and of the several States, and the control of the forces to execute and maintain the laws of the Commonwealth.

In connexion with that matter, we have no specific authority to manufacture small arms and ammunition ; but that is being done at present.

Mr Groom:

– But that is incidental to the defence powers.

Mr FRAZER:

– If so, is not the authority to control the manuacture and sale of tobacco, or to deal effectively with a trust such as that which is now making tobacco within the Commonwealth, and interfering with the liberties of our citizens, incidental to the authority we have to legislate for the peace, order, and good government of the Commonwealth. I do not wish to labour my argument upon that aspect of the question, but I would direct honorable members’ attention to the provision under which the Commonwealth has power to regulate trade and commerce between the Commonwealth and other countries, and amongst the States. I shall quote from the Annotated

Constitution the definition given . in Webster’s Dictionary -oi the words “ trade and commerce.” The definition is as follows: -

Trade means the act of business of exchange and commodities by barter, or by buying and selling for money, commerce, traffic, barter. It comprehends every species of exchange or dealing, either in the produce of land, in manufactures, in bills, or in money, but it is chiefly used to denote the barter or purchasing sale of goods, merchandize, either by wholesale or retail. Commerce means the exchange or buying and selling of commodities; especially the exchange of mer.chandize on a large scale between different places or communities; extended trade or traffic.

In a case submitted to the Courts of the United States of America - that of Gloucester Ferry Coy. v. Pennsylvania - it was held that -

Commerce is both intercourse and traffic, and the regulation of commerce is the prescribing of the rules by which intercourse and traffic shall be governed.

In the case of Wilton v. Missouri it was held that it comprehends everything that is grown, produced, or manufactured. I contend that in view of that definition, and of the general powers given to us under the Constitution, our authority covers a very wide range in reference to all matters affecting trade and commerce, and that we have the power to regulate monopolies which have the effect of restricting the liberty of exchange between citizens in a State or between the citizens of two or more States, and at a later stage I will show where this is being done by the monopoly. I should like to have some information from the Minister of Trade and Customs with regard to the attitude which the Government are prepared to take in the event of a tobacco monopoly being proved to exist.

Mr McLean:

– This is not the resolution dealing with that matter.

Mr FRAZER:

– This resolution goes still further than that which stands in the name of the honorable member for Boothby. In speaking in reference to the proposal for the appointment of a Royal Commission to inquire into the tobacco monopoly, the Minister stated1 that he considered that if the Government decided to regulate the monopoly, it would meet the case. I would ask the Minister under what section df the Constitution he could exercise that power ?

Mr McLean:

– I shall explain that when I am speaking upon the motion standing in the name of the honorable member for Boothby.

Mr FRAZER:

– If the Minister possesses the power to deal with trusts it must be an implied authority, and not one specifically provided for under the Constitution, and if we have the power to regulate we have power to nationalize Under the Constitution specific power is granted to this Parliament to make legislative provision for our indigent and aged poor. In this connexion I am pleased to note that some action has already been taken. Seeing that we have that power, I claim that incidentally we must be endowed with power to raise the necessary revenue to provide for old-age pensions. Before I conclude I shall endeavour to show that the method which I propose should be adopted is that whim would involve the least suffering upon the part of those who would be called upon to contribute to that fund. The only other consideration involved in the resolution has reference to the power of the Commonwealth to acquire the necessary land and buildings, should we decide to nationalize the industry. Sub-section xxxi., of section 51 of the Constitution empowers the Commonwealth to make laws with respect to -

The acquisition of property, on just terms, from any State or person for any purpose in respect of which the Parliament has power to make laws.

I have already stated that, in my judgment, this Parliament, under the Constitution, is vested with power to make the tobacco industry a State monopoly. But, even if we do not possess that authority, I would suggest to my honorable friends opposite who entertain doubts upon the question that we should adopt this resolution, and subsequently seek to acquire it by effecting an amendment in the Constitution, an action in which I feel sure the citizens would concur. It is very difficult to secure proofs from those who are interested in the tobacco combine in Australia that they are the only persons who are able to conduct business operations with any degree of success. I have every reason to believe that, outside one huge combination, there is only one small firm in Australia which is interested in the tobacco trade. It has been stated by Senator Pearce that -

Upon the 14th March, 1903, the Age announced that, with a view to fighting the American Tobacco Company, which has extensive ramifications all over the world, and intended to compete for the control of the Australian trade, the two largest companies in Australia - Dixson’s and Cameron’s - had amalgamated. A few days afterwards it was announced that the amalgamated company, which was called the British-Australian Tobacco Manufacturing Company, had acquired the Australian business of T. C. Williams, of Richmond,

Virginia, an Americantobacco manufacturer, who had perhaps the largest sale of aromatic imported tobacco in Australia - that is, that they had acquired the sole right of distributing their tobacco. A little later the company also acquired the business of David Dunlop, who manufactured chiefly the “ Derby “ brand of tobacco, for a term of 100 years. Then it was stated in the newspapers that Kronheimer and Company, of Melbourne, distributors and importers of tobacco, and W. D. and H. O. Wills and Company, English manufacturers, had amalgamated their Australian businesses under the name of Kronheimer Limited. This firm then absorbed the business of the National Cigarette Company, and closed its factory ; and shortly afterwards was appointed the sole distributor in Australia of the goods of the American Tobacco Company which the British-Australian Tobacco Manufacturing Company had been formed to fight. About the same time Kronheimer Limited was appointed sole distributor of the States Tobacco Company, and, on retirement of Alfred Gross and Company from the Australian trade, took over that business too. Last of all, the British -Australian Tobacco Manufacturing Company, which had been formed to fight the foreign companies, appointed Kronheimer Limited sole distributor of their manufactures in Australia.

Seeing that nobody has questioned the accuracy of the foregoing statements, there seems reasonable justification for believing that we have in the Commonwealth a. wing of the greatest manufacturing and distributing tobacco monopoly in the world. I hold in my hand several clippings from the London Daily Chronicle, relating to this matter. In that journal, upon the 6th of September, 1904, the following state ments aremadein an article, which is headed, “ A Corner in Cigars,” and “Action of the Ambitious Tobacco Trust “ -

The world tobacco trust, represented by the partnership between the Imperial Company and the American Tobacco Company, continues to expand. When the trust entered the cigar field in America three years ago, it acquired a large number of factories, all of which, with one exception, were north of the Potomac and east of Chicago. Recently, nearly a dozen of these factories have been closed - various reasons have been given - the truth is, it is part of a plan to transfer the manufacture of cigars to the south, where negro labour can be obtained at a very low rate - while northern factories are closing southern ones are opening.

Under these circumstances, it must be apparent that this combine is taking action in other parts of the world, with a view to getting the manufacture of tobacco carried on only where cheap labour is obtainable. Upon the 15th of June 1904, in an article headed the “ Tobacco Trust,” “ Industrial Companies’ Rapid Growth,” “American Methods.” rhe same journal shows how the trust first fought with and then amalga-. mated with all the leading British firms, the predominant British partners being W. D. Wills and H. O. Wills, Ltd. These persons are credited with being the chief partners in the British-American combine, which, to a large extent, is controlling the markets of the United States and Great Britain. I shall presently show that they also possess a very considerable financial interest in the monopoly which exists in Australia. The article continues -

While the combination has been extending in England it has been consolidating in Australia. Some time after the American and British giants had come to terms, the tentacles in Australia had kept up the battle. They have now, however, been brought into line, and the whole trade in Australia is now practically one monopoly.

Upon the 13th of June, 1904, after giving a history of the growth of the world’s combine, the Daily Chronicle says only in States such as France and Austria, where tobacco manufacture is a national monoply, are the operations of the trust excluded. For the purpose of illustrating the relationship which exists between the British American tobacco combine, and the monopoly which controls the trade in Australia, I have taken the trouble to obtain from the Melbourne Share Register, a list of the large shareholders in the companies carrying on operations here. Their names will indicate that they are good Australian citizens, who take a big interest in the welfare of the people of this country. Upon the 13th April, 1904, I find that the following persons held the respective shares assigned to them in the States Tobacco Company : - Louis Philip Jacobs, of St. Kilda, 28,350; E. L. Sutton, of Sydney, 11,250; C. H. Reading, of Sydney, 11,250; W. G. Shaw, 10,800; and H. R. Dixon, 9,450. In the British-Australasian Tobacco Company, which was registered on the 4th August, 1903, the share list shows that George Cameron, of Petersburg, held 17,400 shares. I ask honorable members whether upon this evidence alone we have not reasonable grounds for believing that the individuals who are interested in the tobacco trade in the United States are also interested in the combine which exists in Australia ?

Mr Lonsdale:

– I .thought that competition was a great curse.

Mr FRAZER:

– The honorable member usually interjects something which is irrelevant to the issue. I find’ also that Julius Kronheimer, of Hamburg, Germany, holds 7,120 shares, and Max Kronheimer, of the same place, 1,000 shares. These persons derive profits from Australia, and spend them elsewhere. The next shareholder is Isaac Feildheim, of London. He holds 4,280 shares. Mr. Shaw, whom I have already mentioned as being largely interested in the States Tobacco Company, is the possessor of 2,847 shares. These names must suggest to honorable members that the huge monopoly which exists in Melbourne to-day is but a wing of the great British-American tobacco monopoly, whose operations and interests extend over the entire globe. Mr. Jacobs, who gave evidence before the Select Committee appointed’ by the Senate, to inquire into this matter a few days ago, stated upon oath that he is a director of several tobacco companies. He declared that the following firms had entered into an arrangement : -

The British-Australasian Tobacco Co. Limited, Melbourne and Sydney ; W. D. and H. O. Wills (Australia), Limited, Sydney ; the States Tobacco Company Proprietary Limited, Melbourne; the American Tobacco of Australasia Limited, Sydney; Cameron Bros, and Company Limited, Brisbane ; the British American Tobacco Company Limited, London, which company includes the Australian business of Williams and Dunlop.

The witness went on to read a statement, setting forth that. -

Under the arrangement alluded to, each of the manufacturing companies held a proprietary interest in every other such company. Every one of the companies concerned, however, carried on its business separately from the others. The manufacturing companies purchased an interest in the distributing house of Kronheimer Limited, and appointed this firm sole distributing agents for their products to wholesale houses, for which service they received a commission.

What I wish to convey is that all the profits find their way to the one source. Mr. Jacobs is evidently one of those who has a considerable interest in the combine. It is not a monopoly, only so far as the manufacturing trade in Australia is concerned, as the evidence of this witness proves. I think it will be admitted that when a monopoly exists in both the manufacture and’ distribution of tobacco, the consumer must fare badly. The witness added -

This fact showed that a community of interests had been established between the manufacturing firms concerned.

Seeing that they have a proprietary interest in one another, I should imagine that this statement was beyond cavil. They have a community of interest which I imagine amounts almost to amalgamation. The witness further stated that -

Community of interest had been established between the manufacturing firms concerned. But they also showed that it was quite incorrect to term the arrangement a “ trust “ or a “ monopoly.”

Is it reasonable to say that a monopoly does not exist, when one firm controls the manufacture and distribution of a particular article? Professor H. C. Adams, who will be admitted by most honorable members as qualified to speak on the subject, says that-

An industrial monopoly may be denned as a business superior to the regulative control of competition.

Mr King O’malley:

– In this case there 5s no competition at all.

Mr FRAZER:

– Quoting again from the evidence to which I have referred, the chairman asked -

Do the shareholders of the States Tobacco Company, apart from yourself and your brothers, hold the shares bond fide or in trust for the British Australasian Company?

To that the witness replied -

I do not wish to touch upon the nature of the arrangement, how we arrived at the arrangement, or the division of interests, or any other question which to my mind touches upon private arrangements.

That was undoubtedly a refusal to answer the question, which, I think, shows pretty clearly that the fight referred to in the article in the Age is merely a matter of bluff. With the exception of the small Victorian manufacturing firm of Dudgeon and Arnell, there is an absolute monopoly in the tobacco trade of Australia. Many nations which are in the van of human progress have nationalized the tobacco industry. Among them, I may mention France, Italy, Austria, Hungary, Roumania, Greece, and, latest of all, the great rising Eastern nation of Japan. In France the tobacco industry was nationalized during the seventeenth century, and it is a remarkable thing that no serious effort has yet been made to revert to the condition of affairs which existed prior to its nationalization. In 1901, the population of that country was 39,000,000 people, who had under cultivation for tobacco-leaf 44>SS6 acres, from which were produced 5S»9I4,i69 lbs. of leaf, or about 11 cwt. to the acre. In 1889, 20,000 hands were employed in the manufacture and distribution of tobacco there, while rn 1900 there were twenty national factories engaged1 in the manufacture, and the quantity sold reached1 the total of 84,867,235 lbs., the average price being 3s. iod. per lb., and the average consumption per inhabitant about 29 ozs., the State Treasury, after all expenses had been deducted, receiving the handsome net profit of £i3>215>799- The revenue received from tobacco by Great Britain during the same year was only £10,500,000, or about £3,000,000 less, although that country has a larger, and, on the whole, a wealthier, population than that of France.

Mr Lonsdale:

– Does France produce better tobacco than is manufactured in Great Britain ?

Mr FRAZER:

– I hope so. When the State takes control of an industry, the ambition of those who manage it is not to make profit at the expense of the consumer.

Mr Lonsdale:

– Frenchmen have said that their tobacco would avenge Fashod’a, if the British Army could be made to smoke it ; it is so bad.

Mr FRAZER:

– The tobacco industry has been nationalized in Austria since 1784. That country has a population of nearly 26,000,000, and Tobacco for May, 1904, states that the gross proceeds derived from the manufacture and sale of the article there in 1901 amounted to ,£9,360,000, the net profit received by the State being £6,-107,000.

Mr Lonsdale:

– What wages were paid f

Mr FRAZER:

– I have not gone extensively into that matter yet.

Mr Lonsdale:

– How many women were employed as compared with the number of men engaged in the industry?

Mr FRAZER:

– I venture to say that the percentage of women was no greater than it is in this fair country of Australia. Italy, during 1902-3, with a population of 32,961,247, produced £8,405,369 worth of tobacco, the net profit for the State being £6,419,237. Those figures show that the nationalization of the tobacco industry has not been attended with disastrous results to the countries which I have mentioned. In 1880, there were numerous tobacco factories in Australia, and 1,941,296 lbs. of leaf were grown. But to show the result of the influences at work during the past twenty-four years-

Mr Lonsdale:

– Has the combine .been in existence so long?

Mr FRAZER:

– No; but things have been drifting in the direction of a combine for many years. In 1903, the production of leaf in this country was only 802,237 lbs., a falling off of about 1,140,000 lbs. There must be some pretty strong reason to account for a decline of that magnitude in twenty-four years.

Mr Kelly:

– The growers may be producing a lighter and a better leaf.

Mr FRAZER:

– There is something in the honorable member’s interjection, because when the State of Victoria was offering a bonus on the production of tobacco leaf in this State, the inspectors reported that the efforts of the growers were directed to producing a heavy leaf, without much regard to quality. During 1903, the manufactured tobacco imported into the Commonwealth amounted to 3,028,102 lbs., valued at £350,531. Those amounts were made up in this way : Tobacco4 2,573,244 lbs., valued at ,£194,767 j cigars, 319,588 lbs., valued at £112,265; cigarettes, I35>27° lbs., valued at ^43,499- During the same year, 5,163,724 lbs. of leaf were imported, valued at £233,360. At that time there were 1,200 acres under cultivation, producing 802,237 lbs. of leaf, a great falling off when compared with the production of 1896, when there were 5,000 acres under cultivation.

Mr Kelly:

– Were bonuses paid for the production of tobacco leaf in 1896 ?

Mr FRAZER:

– I believe that the bonuses ceased about four years prior to that, being abolished in about 1892. The production of leaf in 1896 was 4,925,544 lbs., whereas in 1903 the production of Australian leaf was only 802,237 lbs.

Mr Kelly:

– Was 1896 a record, or an average year?

Mr FRAZER:

– It was better than an average year ; it was a high year ; though it is impossible to get a fair average unless a long period is taken. When we find the production of tobacco leaf falling from 5,000,000 lbs. to less than 1,000,000 lbs., we cannot but conclude that there is something wrong. The inducements offered for the production of tobacco have not been such as to encourage growers to persevere in their efforts. The tobacco combines are interested in plantations in the United States and elsewhere, which are worked by black labour, and they desire to draw their main supplies from those sources rather than from local growers.

Mr Kelly:

– Is the State monopoly designed in the interests of the growers.

Mr FRAZER:

– It is designed in the interests of all concerned, namely, the grower, the manufacturer, the distributor, and the consumer.

Mr G B EDWARDS:
SOUTH SYDNEY, NEW SOUTH WALES · FT

– Does the honorable member recognise that the demand for sheep-wash diminished when the scab in sheep was eradicated?

Mr FRAZER:

– I understood that only the waste from the factories and leaf unfit for manufacture was used for the purpose of making sheep-wash. The honorable member for Moira, speaking some time ago in regard to the suggestion made by the honorable member for Darwin, expressed an opinion highly favorable to the tobacco-growing capacities of certain parts of the Commonwealth. A good deal of tobacco is grown in the constituency represented by the honorable member, and his opinion is entirely in favour of the suitability of our soil for the production of leaf equal to any that is produced in. other parts of the world.

Mr Kelly:

– Has the honorable member ever compared the locally produced leaf with that which is imported?

Mr FRAZER:

– I have seen the two descriptions of leaf, but I frankly confess that I do not consider myself competent to judge as to their respective qualities. I am, therefore, content to accept the opinions of experts. Mr. Arnell, the only tobacco manufacturer outside of the big combine, stated before the Senate Committee upon the tobacco monopoly, that he had manufactured hundreds of tons of Australian leaf, and liked it. Mr. Arnell has been in the trade since 1853, and he should be in a position to express an authoritative opinion.

Mr Kelly:

– He does not say that the Australian leaf is better than the imported.

Mr FRAZER:

– No; he says that he likes it, and, presumably, he would prefer to manufacture it rather than use the imported leaf. I have directed the attention of honorable members to the conditions which exist in countries in which the tobacco industry is nationalized, and now I propose to refer to the state of affairs in Australia and New Zealand. According to a recent report in a Canterbury newspaper, the Hon. Richard Seddon, the Premier of New Zealand, in speaking of the American Tobacco Trust, said -

At the present time there is no tobacconist in the country who can call his soul his own.

Almost the same may be said of Australia. The monopoly- is gradually extending its influence, and all those who are engaged in the tobacco business are absolutely frightened to speak from the fear that their means of subsistence will be taken from them. The honorable and learned member for Ballarat has spoken about the machine in politics, and he has stated that machines have no souls. I am perfectly sure that a trust, such as that which now exercises control over the tobacco industry in Australia, has absolutely no soul, and the fact that our producers and distributors are to a very large extent being victimized by the trust must cause us to indulge in the most un- satisfactory reflections. A New Zealand tobacconist is quoted as having said -

We know that the evil exists, as well as feel its influence every day of our lives; and we are dominated by it to such an extent that we dare not take action. We are afraid to take steps publicly, or even to approach the Premier, in case the fact might come to the knowledge of the trust. In these circumstances we are delighted to learn that the Premier has taken the matter in hand, and we sincerely hope that he will do something to stop the operations of the trust, which extend throughout the Colony.

Mr Kelly:

– Is that an anonymous letter ?

Mr FRAZER:

– Yes, for. the reason that the tobacconist was frightened to declare himself. He goes on to say -

If we took action openly, our lives, from a business point of view, would not be worth twopence. Bound hand and foot, we can do absolutely nothing, and that is why we welcome the Premier’s remarks and hope that they will lead to something practical being done to help us.

That is the position of the tobacco trade in the young, bright, and prosperous land of New’ Zealand. So far as the position in Australia is concerned, I claim that the tobacco trust is an octopus, which is becoming a menace to the peace, order, and good government of the (Commonwealth. I shall first of all deal with the case of the producer. I know that honorable members opposite are very much concerned about the producers, who are entitled to the fullest consideration at our hands, because they have to encounter all manner of special difficulties in carrying on their operations. They are subject to all the caprices of the seasons, which may at any moment bring ruin upon them. I, therefore, think that I shall have the sympathetic ‘attention of honorable members- opposite when I urge that they should receive every encouragement. Something should be done to improve the conditions under which the growth of tobacco can be engaged in. As I have previously stated, the production of leaf fell away within a few years from 5,000,000 lbs. to 1,000,000 lbs., and the acreage under crop decreased from 5,000 to 1,200 acres. This was owing to the lack of a profitable market and reasonable prices. The tobacco manufacturers had the whole matter in their hands, and the growers were at their mercy- The planters had to accept the prices offered by the combine, or allow their crops to rot. We should take steps to insure a fair market for any leaf that may be produced, and we should release our growers from the control of the monopolistic combinations which are making large profits in the interests of capitalists living in Germany and America. We should take a patriotic as well as a business view of this question. Our first consideration should be for the welfare of the people who pay the taxes and help to build up the country. My honorable friends say’, “ We have the greatest respect for you, but when it comes to a question of nationalizing industry, we must leave you.” They profess the utmost friendship for the producers, but when it comes to a question of giving them a square deal and providing a market in which no favour will be shown, they will not permit the nationalization of the industry.

Mr Kelly:

– If the Government are going to pay a much larger price to the producers, how will they get a larger profit for the payment of old age pensions ?

Mr FRAZER:

– I have not stated what price the Government would be prepared to pay for Australian leaf, but the producers would not be under the thumb of the monopolistic combine who now pay what they like. According to the information . I have received, the combine are not giving Australian leaf a fair deal. It is asserted thai it is of inferior quality. Unfortunately I am not at liberty to disclose the name’ of my informant, on account of the awful consequences which might ensue to him, but I am led to believe that inferior Australian leaf is used only in the hand-made material, and that the better class of Australian leaf is mixed with American leaf, manufactured by machinery, the product being sold as American tobacco. I have been told that _ this action is being taken to discredit the Australian leaf. I now come to the position of the manufacturer. We have no reason to be proud of the conditions which exist in this industry. The workshops are certainly no better than they ought to be, and I believe are not so good as they would be if the State were controlling the industry. The honorable member for New England has interjected about the proportion of women who are employed in this trade elsewhere. Approximately,” 250 females and 240 males are employed in Victoria. I am assured that the females include fifty girls who, judging by their short frocks, may be taken to be under the age of fifteen years. When Mr. Jacobs was before the Select Committee of the Senate the other day, he was examined on the question of wages : -

What wages, do you pay to females under and over eighteen .years of age in Victoria? - The average paid, including young girls and old women, is 15s. 5d.

For twisting tobacco in a stuffy workshop for forty-eight hours per week the magnificent sum of 15s. 50”. is paid to female workers. And, as regards piece-work, I am assured that conditions exist which forbid a man to make more than £2 2s. per week. When he has done sufficient work to gain that sum he has to stop. It is thought that he might get too independent if he were allowed to earn more. There is also an arrangement which enables a husband to work in one portion of the factory and the wife to work in another portion, at 15s. 5d. per week.

Mr Lonsdale:

– Cannot they bring themselves under the Wages Board ?

Mr FRAZER:

– I understand not. It is another case which shows the curse of piece-work. It is generally admitted that that country is happiest in which the wife can stay at home and do the house-work, and the husband can be employed outside for reasonable hours, and at a reasonable wage. I do not think that the figures J have given can be seriously questioned, because I am assured by a senator that in the year 1902, although the exemption was fixed at [he low sum of £125. only one man engaged in the tobacco trade in Victoria paid income-tax. Of course I am referring to the working employes, not to the foremen or “Yankee bosses.” That goes to prove that the workers are engaged at a starvation rate of wages, and that we ought to take some steps to alter their conditions. Coming now ‘to the distributor, I understand from a reliable authority that unless a man gets the permission of Kronheimer and Company, in this city, it is impossible for him to start a retail business. A man is unable to get supplies unless he starts with the good grace of this double-headed combine. Is it right in this age that a man should have to go down on bended knee to the head of a monopolistic combination, and ask for permission to start in business? Again, a distributor has to subscribe to certain conditions which I shall quote from the circular issued by the combine.

Any goods supplied by us are supplied upon the express condition that the scale list of prices, as well as the terms and conditions contained herein, are strictly adhered to, both as regards goods on hand and further supplies, and the acceptance of these supplies will be considered an agreement on the part of the purchaser to rigidly observe and enforce this condition.

So that a retailer is not permitted1 to sell a certain brand at any price. he pleases, but he has to sell at the price dictated by the combine.

Mr Kelly:

– Is that done to protect the consumer ?

Mr FRAZER:

– I should think that it is done to protect the man who is getting rid of the goods. His concern is not in the consumer, but in getting as many dollars as possible, and in the institution of conditions which will prevent competing firms from having a chance to sell their goods. The combine also impose the following condition : -

Goods supplied in this State must not be exported to other States.

Does not that interfere with our power under the Constitution to regulate trade and commerce amongst the States. Apparently that power is being usurped by this monopolistic combine, and it is time that we interfered. The position of the capitalists is quite clear. They say, “ If we like, we can raise the price. If you do not sell the goods at our price, you shall get no more supplies, and you must starve.” Again, take the mode in which the combine conduct their business. They have dismissed their travellers. Mr. Arnell stated in his evidence the other day, that his firm have received numerous applications from travellers, who had been dismissed or put off by the combine during the last few months. The. monopoly has no need to send round any men to canvass for business, because when a retailer sells out he is not allowed to give an order to the other firm. He must send to the combine for fresh supplies, and, therefore, they have no need to keep travellers. The same remark applies to advertising. The combine have taken every possible step to economize the management of their huge business. Of course it is done with a view to get as much profit as possible from the customer. If we take the consumer, we find that his position is also an unsatisfactory one. I understand, from a notification which has been circulated, that after a certain date the combine will issue goods of a certain shape, size, and weight. It is to have supreme control even over the shape of the tobacco which a man may smoke. If he visits one shop in search of a certain quality of tobacco, and cannot obtain it there, he will find, upon applying at the next establishment, that it is also under the thumb of the same combine. Thus it will be seen that unless the monopolists choose to manufacture the particular class of tobacco which the consumer requires, the latter cannot obtain it, because the combine controls not only the manufacture of the tobacco, but also its distribution. I understand that Mr. Kronheimer has affirmed that the price of tobacco has not been raised as the result of the combination. Technically speaking, that is correct, but I am led to believe its cost was enhanced just prior to the amalgamation of the companies being effected. I would further point out that, although the price of tobacco has not been raised, the size of the plugs which are supplied to the distributors has been reduced. It is declared that that course has been adopted for the purpose of assisting the distributors. I can scarcely conceive how, unless a consumer is given so many plugs to represent a certain weight, and they do not do so, any such statement can be justified. A few years ago it was impossible to obtain more than twelve plugs of tobacco to the pound. Now, however, I understand that it is possible to obtain fifteen plugs. What can we gather from that circumstance? I recognise that it is unreasonable to expect this Committee to agree to my proposal without first entering into a full consideration of its effects from a financial stand-point. In this connexion, I regret that I am compelled to deal with my .subject after a wearisome allnight sitting. Although I have prepared quite an array of figures relating to the financial aspect of this question, I shall epitomize the results of my research as far as possible. I find from research that the annual profit upon imported tobacco, cigars, and cigarettes within the Commonwealth would be £572,029, £316,439, and £112,857 respectively. These sums aggregate £1,001,325. The profit upon locally produced tobacco added to the foregoing amount increases the profit to £2,005,758 annually. If we deduct the Excise and Customs duties now received by the Commonwealth, less 3 per cent, from the amount in order to allow for the cost of the collection of our Customs and excise duties upon tobacco, we shall derive a profit of £673,454 per annum upon nationalization. These results are based upon a manufacturing price of 2s. per lb. The cost of tobacco production in France is something like 9d. per lb. The sum of is. 3d. per lb. is thus allowed to meet the different conditions which exist in Australia, where better wages are paid to the employes. As evidencing the enormous profits -which are being made in this industry by private enterprise in Australia, I may mention that Senator Clemons has stated that Messrs. Cameron Bros., of Sydney, are clearing £50,000 annually. Of course I recognise that if we nationalize the industry we shall have to deduct from the amount of our profits the cost of nationalization. 1 have already pointed out that under sub-section xxxi. of section 51 of the Constitution, the Commonwealth has power to acquire all the land and buildings necessary for controlling the industry. If we assume that the resumption of the requisite land and buildings, and the purchase of machinery, would involve an. outlay of £1,000,000, it would mean - allowing for interest at 4J per cent. - that £45,000 would require to be deducted from the £673,454 to which I have’ previously alluded. The next question which will be seriously argued has reference to the Government’ control of the industry. I know that the assertion is frequently made that a Government cannot conduct any department of business as economically as can private enterprise. My brief experience of political life has taught me that where some departments are directly under - the thumb of the Legislature, they are not likely to be as successful as they otherwise would be. But I would point out that even in regard to its socialistic legislation, Australia has already recognised the wisdom of vesting control in many instances either in commissioners or- in boards. For instance, the control of the Public Service is in the hands of a Commissioner, and the management of the railways of the States is also undertaken by Commissioners. 1 believe that if we nationalized a huge business such as the tobacco industry, from which we receive’ an annual revenue of more than £1,300,000, it would be incumbent upon us to remove its management from direct political control, and to vest it in a Board of Commissioners. The experience which I have gained during the last few days has shown me the absolute necessity for taking steps to deal as soon as possible with those who are termed by the Constitution our “ invalid and oldaged poor.” The committee which is now inquiring1 into old-age pensions systems, and of which I am a member, were yes.terday informed by the Government Statist of Victoria that there are 206 charitable institutions In the State, from which 114,341 persons received out-door relief, and 70,540 indoor relief during the year.

Mr Crouch:

– Is there a repetition of applications in those figures?

Mr FRAZER:

– The question was asked of the Government Statist yesterday, and his reply was that the outdoor cases were each separate and distinct.

Mr Crouch:

– It does not necessarily follow that so many persons were treated.

Mr FRAZER:

– No ; but we understood that the percentage of persons treated more than once in the year was not large. It appears that within so prosperous a State as Victoria one in every nine of the inhabitants is in receipt of aid from charitable institutions. This is a most unsatisfactory state of affairs, and the sooner the Commonwealth gets rid of the conditions and restrictions which surround the payment of the pitiful dole which is now given under the name of old-age pensions, the better it will be for the fair fame of this country. I have a great deal of material which I have not used, and I would very much have liked to address myself at length to the pension portion of this resolution, but I understand that under the rules of the House the debate must be adjourned before half-past 4 o’clock. I trust, therefore, that the figures which I have presented, and the tale I have told, will be accepted by honorable members as authentic, as they are the result of considerable inquiry, and that we shall nationalize the tobacco industry, appropriatingthe profits thus Obtained inconnexion with the surplus returnable to the -States, in establishing an adequate system of old-age pensions for the support of the aged and deserving poor of the Commonwealth during their declining years.

The CHAIRMAN:

– I wish to point out that it has been discovered that there is a discrepancy between our sessional and standing orders, and that it is the desire of Mr. Speaker to make a statement to honorable members on the subject, so that some action may be taken in the matter. The honorable member for Kalgoorlie will be in order in continuing his speech until half-past 4 o’clock, when it is the desire of Mr. Speaker to take the chair for the purpose I have referred to.

Mr.FRAZER. - I have nothing to add to my remarks at the present time. I hope, however, that I shall have some “ sav “ as to the placing of the order of the day on the business-paper for another occasion, so that, if possible, before the session closes, a vote may be taken on the subject with which it deals.

The CHAIRMAN:

– That matter is entirely in the hands of the honorable member.

Progress reported.

page 6842

QUESTION

POSTPONEMENT OF BUSINESS

Orders of the day No. 2 and No. 3 postponed until Thursday, 24th November.

Mr KNOX:
Kooyong

– I feel that honorable members are weary, and I am not very bright myself. I acknowledge the courtesy shown to me in allowing me to continue the speech in which I moved for the establishment of a Council of Finance for the Commonwealth, and I ask them to grant me the same indulgence on Thursday, 24th inst. I move -

That order of the day No. 4 be postponed until Thursday, 24th November.

Question resolved in the affirmative.

Mr KELLY:
Wentworth

-In view of the long sitting which we have just concluded, I move -

That order of the day No. 5 be postponed until this day week.

Question resolved in the affirmative.

Mr McWILLIAMS:
Franklin

– The officers of the House have now been working for almost an interminable length of time, so that I think the sooner ‘we dispose of our business, by postponing it, and adjourn for the day, the better. It is only reasonable that the officers of the House, and especially the Hansard staff, should be given an opportunity to rest. I therefore shall not move to-day the motion standing in my name on the notice-paper.

page 6842

QUESTION

STATE TAXATION OF FEDERAL AGENCIES

Mr HUTCHISON:
Hindmarsh

– I move -

That, in order that all citizens of the Commonwealth may be placed upon an equal footing with respect to Income Tax, the Government should introduce a short Bill forthe purpose of imposing a Federal Income Tax, to apply to all persons in the Commonwealth, who, by the decision of the High Court, escape payment of State Income Tax.

As honorable members have been here all night, and it is only reasonable that they and the officers of the House should be allowed to obtain some rest, I shall deal with this motion as briefly as I can; but I feel it my duty to speak on it now, because I may not have another opportunity to do so this session. I do not suppose that any honorable member, or any Federal officer, desires to escape his fair share of taxation by being treated differently from other citizens. I have the greatest confidence in the High Court, and it would be presumptuous for me as a layman to criticise its decisions. I regret that some persons, who have no more knowledge of the law than I possess, have expressed themselves in terms of uncalledfor indignation on the subject. I am satisfied that the Justices of the High Court have done their duty in interpreting the Constitution as appeared to them just and right, and I am glad that they have decided that there shall be no appeal to thePrivy Council, because the question involves the interpretation of our Constitution, which I hope will never be referred to any other tribunal than the High Court, which was established to decide such questions. It cannot be denied, however, that the judgment of the High Court on the subject under review will deprive the States of an amount of revenue which, in my opinion, they are justly entitled to. The Prime Minister has said, in regard to the matter, that -

The judgment of the High Court cannot be set aside by any authority within the Commonwealth ; nor can the Government take any action to compel observance of a law which that judgment declares to be unconstitutional and also illegal.

That is not the point. Neither course need be resorted to in order to do justice. This Parliament has the power to remedy the defect of the Constitution. I feel that it is the duty of the House to exercise that powe’r. We ought to resolutely set our faces against class taxation, and I believe that Ave have done so up to the present time. It is contrary to the spirit of the Constitution to discriminate between individuals, or between States. But while Federal members of Parliament and Federal officers are not liable to pay State income tax, there is a discrimination between citizens of the Commonwealth. We have two situations to consider. We have the present situation, under which, doubtless, Victoria would claim income tax on a portion of the salaries of Ministers, members, and the head-quarters staffs of the different Departments, as well as on the salaries of officers who are permanently resident here. But in the near future, when the Seat of Government is established in New South Wales, income tax will not be payable to any State on the salaries earned by the Federal officers or other persons in the Federal territory because it will not then be a portion of New South Wales. It will be seen, therefore, that in imposing an income tax this Parliament is only anticipating what will necessarily have to be done in the course of a few years. It will be quite easy for honorable’ members to find fault with the wording of the motion. Perhaps it may be declared by legal members to be unconstitutional to pass a law which would enable the States to collect an income tax from those officers who are now escaping payment.

Mr Crouch:

– There are other grounds.

Mr HUTCHISON:

– Yes. In Western Australia, for example, there is no income tax, and in the other States the rate varies. But if the honorable and learned member will look at sub-section 11. of section 51 of the Constitution, he will find that power is given to this Parliament to impose - taxation; but so as not to discriminate between States or parts of States.

It is quite clear that the Federal Parliament can impose a Federal income tax, If it should be unconstitutional, or if it should be objectionable - because an income tax is imposed in some States and not in others - to impose a Federal income tax which would cover the public servants, who are now exempted from that obligation

Mr Lonsdale:

– We cannot differentiate in an income tax.

Mr HUTCHISON:

– It would prevent differentiation. At the present time, honorable members who represent Western Australia have not to pay income tax; but the representatives of other States are liable to pay income tax. I would suggest that this Parliament should pass a Federal income tax which would apply equitably to all persons in the Commonwealth, when it would be within the power of each State Parliament to abolish the State income tax. I would suggest ‘the adoption of this plan, in the interests of the States, because the revenue from the Customs House is shrinking considerably, and is likely to greatly embarrass the finances of some States. If we were to impose a. Federal income tax, which would apply equitably to every citizen, we should be able to return a much larger sum to the States.

Mr Crouch:

– Does not the honorable member see that he would have to amend his motion ?

Mr HUTCHISON:

– I am quite willing that it should be amended. This is a very difficult subject for /a layman to deal with, and after drafting the motion, and looking into the matter, I found that it would be far better to impose a Federal income tax. I now propose to deal with one or two alternatives which may be* put forward, and which I hope will be discussed. Undoubtedly, the imposition of a Federal income tax would place every citizen on an equal footing, and there would be no discrimination.

Mr Poynton:

– Is there any obligation to hand back any portion of that money to the States?

Mr HUTCHISON:

– There is no obligation on the Commonwealth Government to hand back to the States more than a fourth of the Customs and Excise revenue; but up. to the present, I am glad to say that more than that proportion has been handed back. I have no doubt that precisely the same thing will be done in the future as in the past. If a Federal income tax be imposed, the States are bound to get more money returned than they are now getting. I feel quite sure that an increased revenue would not lead to any extravagance on the part of this Parliament, and that it would take into consideration the fact that States had Had to abolish their income taxes. It has also been suggested that this Parliament might pass a short Bill to enable the States to collect from members of the Federal Parliament and Federal officers the sums which are claimed under the State Acts.

Mr Maloney:

– Hear. hear.

Mr HUTCHISON:

– That means handing over to the States some of the powers which are vested in this Parliament. It would not be a wise thing to do, and, moreover, I find no authority in the Constitution for taking that step. It looks feasible and simple, but it cannot .be done.

Mr Kelly:

– Could not the honorable member pay his £10, or whatever the amount is, to the State, by way of conscience money?

Mr HUTCHISON:

– If the honorable member has a troubled conscience, let him adopt that plan. This is not a question of conscience money, but a question of equity and right. If we have to pay income taxation, it should be imposed in a legitimate way.

Mr Poynton:

– Does not the honorable member think that it presents a fine opportunity to make a voluntary contribution?

Mi. HUTCHISON. - I have heard some honorable members say that they do not believe in payment for their services; but I have not heard of any one handing back his salary to the Treasurer. Another sug gestion which I discussed with an honorable member before it was published in the Herald, on Tuesday, is that the Treasurer should be empowered to deduct from each salary an amount equal to the State income tax, and credit it to the State.

Mr King O’Malley:

– That is class legislation.

Mr HUTCHISON:

– It seems to me to be a proposal which bristles with difficulty, even if it could be carried out. As the honorable member suggests, it would amount to a discrimination, because the Treasurer could only deduct an amount equal to that which was payable to the State for income tax.

Mr King O’Malley:

– It would be violating the decision of the High Court.

Mr HUTCHISON:

– No. It appears to me that the whole question is bristling with difficulties, unless we adopt the direct method of imposing a Federal income tax. It is becoming quite clear that the Constitution is vexatiously vague in regard to many provisions. This particular defect in the Constitution was not pointed out by any member of the Convention, and even if it had been I suppose that it would have evoked some difference of opinion. I wish to make it clear to the country that there is no desire on the part of any honorable member - and I believe no desire on the part of public servants - to evade any form of tax which they should be called upon to pay. I understand that some honorable members paid income tax to Victoria. But it would not be right for the honorable member for Wentworth to pay income tax here, because his allowance is not earned wholly here. It was not fair on the part of Victoria to claim income tax in respect of the whole allowance.

Mr Johnson:

– Does the honorable member think that there is much margin for taxation ?

Mr HUTCHISON:

– I believe that every honorable member, although he is not willing to move for an increase, is agreed that the allowance is not sufficient ; but I do not think it ought to be increased by the adoption of this method. Whilst the temporary Seat of Government is located in Melbourne, Victoria would derive a larger share of income tax than that to which she would otherwise be entitled. During that period this city will remain the head-quarters of the various Federal staffs, and consequently has no right to complain if the representatives from other States pay income tax to those States. Of course, where persons receive all the advantages of citizenship, they have no right to be relieved of taxation which falls upon other citizens. Our Constitution gives an equal voice in the government of the country to every man and woman, and I am sure that they look to their representatives in the Commonwealth Parliament to remedy any injustice which may be inflicted upon the States under the provisions of that Constitution. If the House desires any steps to be taken in the direction I have indicated, it will be the duty of the Government to devise some means of solving the present difficulty. If no other course be open to them than that of the imposition of an income tax upon all the citizens of Australia, I trust that they will not hesitate to adopt it. I am sure no honorable member desires that any friction which can be avoided shall be created between the Commonwealth and the States, especially upon a matter in which the latter have a just claim. In order that we mav spare the members of our Hansard staff from any further work this afternoon, I shall content myself with submitting the motion.

Mr REID:
Minister of External Affairs · East Sydney · Free Trade

– There is no doubt that this matter has excited a good deal of attention, and that, from the point of view of the States, it may perhaps justly give rise to a considerable degree of irritation. As honorable members are aware, the Premier of Victoria has addressed me upon the subject, and I have invited him to make any suggestion which occurred to him to give practical shape to his communication. However, he seems to repose such unlimited confidence in my capacity to deal with the difficulty that he proposes to leave it entirely in my hands. I am very anxious for many reasons - for great public reasons - to show by practical effort the sincerity of the desire of the Government to cultivate the most friendly relations with the States Governments, and with the people of the States in their capacity as States. I have merely to say that it will be the duty of the Government to very seriously consider this question.

Mr Poynton:

– Would not this be a fine chance to test the value of voluntary effort?

Mr REID:

– If I propose to help the States in connexion with the collection of a tax, I do not propose to mock them by talking of voluntary effort.

Mr Poynton:

– The right honorable gentleman suggested it the other day when replying to a question.

Mr REID:

– In. a certain connexion I suggested that those who had made offers to pay the income tax might make them with greater confidence under the existing circumstances ; but I was then speaking with that degree of seriousness which the ludicrous suggestion which had been put forward demanded. I really do desire - and although there ha9 been no consultation upon the subject in Cabinet, I am sure that my colleagues equally share my desire - to meet any real difficulty or hardship which is entailed upon the States by the working out of our Federal Constitution. I do not wish to throw the slightest doubt upon the correctness of the judgment of the High Court. So far as the Government’ are concerned, we propose to accept that judgment as a correct interpretation of the Constitution. Nevertheless, I must confess that I do see ways of bringing about a practical removal of the difficulty which has arisen, if it be thought fit to adopt them. At this late period of the session I cannot pretend to bring forward a matter of that sort, but I can certainly promise that it will receive the earnest attention of the Government, and that if we arrive at a certain conclusion in reference to it, we shall deem it our duty at the beginning of next session to give effect to that decision. We cannot promise any more than that at this late period of the session. With reference to the motion of the honorable member, I think we all agree that he proposes a step which is quite impracticable.

Mr King O’Malley:

– Does not the motion involve a violation of the interpretation of the Constitution by the High Court ?

Mr REID:

– Very likely it does. But on first principles it proposes an objectionable way of meeting the difficulty. We are not in a position to tax any particular section of the community by means of a general income tax. Of course, it is perfectly easy to understand the object which the honorable member has in view.

Mr Hutchison:

– Cannot we impose an income tax upon the whole Commonwealth ?

Mr REID:

– That would fall upon the incomes of all the citizens of the Commonwealth, and ‘my honorable friend does not desire that.

Mr Hutchison:

– Yes, certainly I do.

Mi. REID. - That is a much larger question than that which we were previously discussing. Under the guise of a particular hardship which has arisen, owing to a legal decision, the honorable member suggests that we should impose a large measure of national taxation which has nothing whatever to do with that decision. I cannot credit him with adopting a very rational method of advancing a policy of that sort. If he is in favour of a national policy in regard to the imposition of an income tax, it should not be confounded with a difficulty which applies only to a small section of the community.

Mr Hutchison:

– I am not committed to a general income tax, if the right honorable gentleman can show me another way out of the difficulty.

Mr REID:

– I wish it to be distinctly understood that my remarks do not apply to a general income tax. The difficulty which has arisen is one which affects (Commonwealth public officers, and persons engaged in the service of the Commonwealth. I confess that I do see ways of removing these hardships without in any way invading the principles of the Constitution. It is a matter which we ought fairly and seriously to consider, and I think it will be considered in that way. But with the arrears of legislation devolving upon us, 1 cannot pretend to bring forward a matter of that sort at the fag-end of the session. After the observations which I have made upon the subject, I suggest that the honorable member should withdraw the motion.

Sir JOHN FORREST:
Swan

– I do not think the proposal of the honorable member for Hindmarsh could be adopted in its present form, or that it would effect the object which he desires. It would merely involve the imposition of a Federal income tax, in addition to the various State income taxes which are now operative.

Mr Hutchison:

– Not necessarily. The States could abolish their income taxes. I understand that in Western Australia there is no such tax.

Sir JOHN FORREST:

– But in all the other States an income tax is operative. Upon the face of it, the payment of taxes in a country in which a citizen has the benefit of its laws is a reasonable proposal. At the same time, a good deal more has been made of this matter than is, I think, justifiable.

Mr McWilliams:

– There is a very strong feeling in reference to it throughout the States

Sir JOHN FORREST:

– There may be a strong feeling. The effect of the decision, will, however, be very much less when the Federal Capital is established. For my own part, I have always paid income tax in Victoria during the time I have been here. At first this State levied income tax upon the whole of the emoluments of Ministers and members of the Commonwealth Parliament. Subsequently, however, the authorities altered their decision, and advised honorable members that they would be charged upon income tax only upon the salary and parliamentary allowance which they derived during the period that they were actually within Victorian territory. I should like to know if that is a reasonable way of treating Federal representatives who are compelled to come here to attend Parliament. We are here only temporarily while Parliament is in session - not as permanent residents. Certainly we have been in Melbourne a good deal longer than we hope to be in the future. For I trust that in future the sessions of Parliament will not be as long as they have hitherto been. If all the States acted in the same way as Victoria is acting, and charged Ministers and members of the Commonwealth Parliament, income tax upon their official salaries and upon their parliamentary allowances, whilst resident within their borders, a Minister or member going to Queensland, or to South Australia, or Tasmania, for a few days, would have to pay income tax upon the proportion of his salary which is earned there. The only State in which he would be exempt is Western Australia. Is that a proper proceeding for the States to adopt? In Victoria, each year I am obliged to send in a statement as to the number of days that I have been resident here, and I am charged income tax upon the amount of my parliamentary allowance during that period. I certainly think that objection should be raised to the practice of the Income Tax Department, in dealing in this miserable way with the members of the Commonwealth Parliament. Of course, my remarks have not the same force in regard to postal or other officials who are permanently resident here. But I certainly think that no attempt should be made to collect income tax from members of this Parliament while temporarily here to perform their parliamentary duties. I always entertained the impression that the High Court would decide in the way that it has done. We know very well that the property of the States cannot be taxed by the Commonwealth, nor can that of the Commonwealth be taxed by the States. There is a great principle involved in that doctrine. If it is admitted that the States have the right to tax a Federal officer, they might impose differential taxation.. Indeed, there would then be nothing to prevent them from levying upon him a tax equal to the amount of his salary. When we consider the proposal, we cannot fail to recognise how unreasonable it is.

Mr Robinson:

– Does the right honorable gentleman mean to say that the States thought their servants who were taken over by the Commonwealth would escape taxation ?

Sir JOHN FORREST:

– There are precedents derived from the United States with which the honorable and learned memtier ought to be familiar.

Mr Robinson:

– But no reference was made to them during the Federal campaign.

Sir JOHN FORREST:

– The more we look into this matter the more it appears to be a storm in a tea-cup. When the Fed era! Capital is established no question of ‘this kind can arise so far as members of Parliament and the officials attached to the central Government are concerned, and it cannot be contended that any great injury is being inflicted upon the States under present conditions. I do not think that the States are displaying a Federal spirit in attempting to levy income tax upon members of Parliament. If the States had the power to tax Federal agencies they might impose differential taxes upon members of this House and Commonwealth officials, which might deprive them of the greater part of their salaries or allowances. I do not see how any other decision could have been given by the High Court, and I think that altogether too much is being attempted to be made of the matter.

Mr ROBINSON:
Wannon

– I am in entire sympathy with the motion, and I think that the difficulty which has been created by the decision of the High Court may be very easily overcome. It would be fully within the competence of this Parliament to deal with the question. We have the power to enact that our officers shall be subject to the income tax payable by the ordinary citizens of the States in which they reside. We could collect from each officer a sum equivalent to the amount of the income taxes imposed by the States, and hand it over to the States Governments.

Sir John Forrest:

– We could not legally receive it.

Mr ROBINSON:

– The Commonwealth has the power to fix the salaries of its officials and to limit or reduce them in any way it thinks fit. . We could reduce the salaries by imposing an income tax upon lines similar to those adopted by the States in which the officers are residing, and hand the money over to the States in the proportions in which they were entitled to it. A small Bill containing a few clauses could be passed through this Parliament without any difficulty. I agree that it is irritating and unfair that individuals should be required to pay income tax levied in States other than those in which they are domiciled. But I think that, speaking generally, Federal officers should pay income tax according to the laws of the State in which they reside. The decision of the High Court has created a great deal of irritation against the Commonwealth, and we should endeavour to escape the difficulty created by it. The sooner we apply the remedy the better for the Federation as a whole.

Mr Tudor:

– The Premier of Victoria stated, in the first instance, that the loss would amount to £25,000 per annum, so far as Victoria is concerned; but he afterwards reduced the amount to £2,000.

Mr ROBINSON:

– I do not care what amount is involved. The question is one of principle. It was never intended that any section of the community should occupy the position of a favoured class. If the decision of the High Court is to hold good, we shall be transferred back to the old days of privilege. No such contingency was even dreamt of at the time of the Federal campaign. This matter is one upon which all the States are united, and I submit that the feeling of irritation which is now uppermost is . justifiable. I thoroughly believe in the preservation of States rights, and this is a matter with which I believe States rights are at stake. I have the greatest pleasure in supporting the motion, because I think the remedy is one that can readily be applied bv this Parliament.

Mr POYNTON:
Grey

– I cordially support the proposal of the honorable member for Hindmarsh. I was pleased to hear the announcement of the Prime Minister to the effect that the whole question would be looked’ into with a view to applying a remedy. I cannot conceive of any honorable member feeling gratified at the position which we occupy as the result of the decision of the High Court. It is an invidious one, because we are looked upon by the public as having practically exempted ourselves from the payment of taxation, whilst others, probably not so well able to pay, have to bear the burden of the expenditure incurred by the States. The amount of money involved has nothing to do with the question, which is purely one of principle. A day or two ago, I submitted a question to the Prime Minister, which I fully anticipated would elicit an announcement similar to that made by the right honorable gentleman to-day. On the former occasion, the Prime Minister seemed to think that there was no way out of the difficulty, but I am glad that he is making further inquiries. Those honorable members who so strongly advocate the application of the voluntary principle to our legislation will now have a chance of putting it to the test. If we wish, we can pay the income tax, but the States authorities have no power to compel us. When I first came into this Parliament, I paid my income tax in South Australia, which I regarded as the proper place. After the decision had been given in the Wollaston case, however, the Deputy-Commissioner of Taxation, in South Australia, told me that I would have to pay the income tax in Victoria, and I handed over the full amount demanded by the Victorian authorities. I consider that the tax should be paid by members to the States in which they reside. There is no doubt that a great deal of feeling -has been aroused by the decision of the High Court, and it is as well that this feeling should be allayed as quickly as possible, in order that the interests of the Commonwealth may not be prejudiced. The anomalies which must arise under present conditions cannot fail to give rise to great dissatisfaction. We may imagine the case of two officers working under the same roof. One may be a State officer and the other a Federal public servant, the latter receiving the larger salary. The fact of the State official being obliged to pay income tax, whilst the Federal officer is exempt, must give rise to a great deal of bad blood. That is not a fair position for officers of the Federal service, or for members of this House, to occupy. The Government should take the first opportunity to introduce some measure which will have the effect of removing the distinction which at present exists between Federal and States officers.

Mr WEBSTER:
Gwydir

– Whilst to some extent agreeing with the remarks of the honorable member for Hindmarsh and those who have supported him, I think that due weight has not been attached to the constitutional aspect of this question. The provisions of the Constitution form the basis of the ruling given by the High Court. They did not consider the question from the point of view of expediency, but pointed out that if the States were to be permitted to indicate what taxation should be borne by officials who were under a different Government altogether, the Constitution would be to some extent abrogated. The Constitution was framed in the anticipation that within a very short time the Parliament would meet at the Federal Capital, and that a large number of Federal officials would be established there. When that time arrives we shall be liable to any taxation that may be imposed by the Federal Government upon the residents within the Federal territory. The framers of the Constitution no doubt had this in their minds, and therefore safeguarded us against State taxation of our agencies. The present position of affairs seems to be an anomaly, and if some years are likely to elapse before the Seat of Government is established in Federal territory, there may be some fairness in the demand that a law shall be passed to extract from members of the Commonwealth Parliament and Federal officials the taxation which, but for the judgment of the High Court, they would have to pay to the Governments of the States in which they live.

Mr Page:

– Cannot any one exempted by the judgment continue to pay income tax if he desires to do so?

Mr WEBSTER:

– Yes, and no doubt the States Treasurers will graciously accept the money. I think, however, that the High Court, in giving its judgment, had in view the time when the Commonwealth Parliament will meet at the Seat of Government in the Federal territory, and Commonwealth officers will be located there, when, of course, they will be subject to the special taxation imposed upon all residing within that territory.

Debate (on motion by Mr. Maloney) adjourned.

page 6848

PAPER. °

Mr. McLEAN laid upon the table the following paper: -

Progress report of the Butter Bonus Commission.’

page 6848

DEFENCE BILL, 1904

Bill presented, and (on motion by Mr. McCay), read a first time.

House adjourned at 5.19 p.m.

Cite as: Australia, House of Representatives, Debates, 10 November 1904, viewed 6 July 2017, <http://historichansard.net/hofreps/1904/19041110_reps_2_23/>.